Impacts Of Small Business On The Economy Commerce Essay


The whole report contains information and data's on the topic of small business. Impacts of small business on the economy of India, globalization and small business etc. the reports works as a guide for opening a new business it tells why to start a ne business and its pros and cons, it also tells about the ways of opening a small business and suggest it with some

Employment: Small scale industries use labour intensive techniques to produce and manufacture therefore they are highly capable of giving employment to people. There are almost 2 to 3 workers working in small scale industry with respect to a single worker in large industries. Micro, small and medium business are the most popular occupation for people in India after the agriculture industry, while small business also provide part time jobs to agriculturists during there off season. Several empirical studies shown that small scale industries have capability of growing employment lot times more than large scale industries hence the healthy growth of small businesses can be a good measure for India to come over the problem of unemployment

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Balanced Regional Development: The small scale industries in India can promote the decentralized development and will help to remove the regional disparities of industrialization. As India has a lot of rural sector which is yet to be developed Decentralized development will contributes to the process of optimum growth and will avoids focus of industries in fewer areas. It will provide employment in rural areas and avoid migration of people towards urban areas which will help in development and reconstruction of rural areas through small firms and will lead to a better standard of living for people in backward regions of India.


Optimum utilization of Capital: As the Small scale firms require less capital to produce the output they are able to generate a greater output with small investment. The Annual Surveys of industries revealed that fixed capital per person in small scale industry was Rs. 3,706 as compared to Rs. 27,757 in large scale industry. Small firms also help in providing quick returns after their establishment as they

have short period of buying raw material and sell the product. In India as the rate of capital formation is low, small businesses are very suitable.

Mobilization of Local Resources: Small scale industries help to build out entrepreneurs for the country it facilitates Mobilization and utilization of local resources like family skills which might be talented but remain unutilized. The small enterprises help in bringing talent resources like entrepreneurial skills and small savings especially in rural areas. Small business helps in protecting the culture of India which is handicrafts etc.

Export import Earnings: The balance of payment of country is reduced by small scale industries in two ways. Firstly, small industries do not require highly technological machines and equipment so no imports. Secondly, these industries can earn fair returns from exporting their products. The exports data of small scale industries shows that from Rs. 637crores export in 1975-76 to Rs. 2785crores export in 1985-86.

Equality in Society: the promotion of small scale industry helps in division of economic power amongst wider range. It helps in equal distribution of wealth and national income amongst people which helps to people living below poverty line to come up. Small scale industry reduces monopoly and exploitation of consumers as a large part of earning is divided amongst the workers.

Feeder to Large industries: Small scale industries play there as complementary industries for large industries they manufacture spare parts, accessories, tools and various other components which are required by the large scale industries


Social Advantage: Small scale industries provides an opportunity to people to live there life independently with better means. It provides many benefits in social overheads like educating people, housing facility, medical facilities etc. by taking industrialization nearer to the people and it helps to raise income and standard of living in the country. Hence it plays a wide role in the process of economic development of people as well as country. It also helps in building democracy, socialism and self-government.



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Globalization is a process in which various economies of the world come together and there is free flow of goods and services and very less trade barriers

The small scale industries have played a very significant role in boosting up of the economy the small scale industries have been set up by entrepreneurs in different states and union territories of India which has increased the overall production and development in country. But as and when the liberalization and globalization entered to India it has captured the growth of small scale industry on the parameters of employment, growth, production etc which are shown as

As annual average growth rate for number of units before globalization was 9.3% whereas it is 4.07% after globalization.

As annual average growth rate for production before globalization was 19.45% whereas it is 13.57% after globalization.

For annual average growth rate for employment it was 7.25% before globalization whereas it is 4.26% after globalization and now the employment generation takes plays in MNC's itself.

As annual average growth rate for exports before globalization was 18.66% whereas it was 17.56% after globalization.




Starting a business is one of the world's most thrilling and rewarding experiences because u never know whether the business would be a success or a failure. It requires a lot of risk taking, perseverance, guts and a lot of preparation to go on. Starting a new business has lot of pros and cons within


OWN BOSS while Starting a business the person himself is the boss, no need to answer anyone, having the control of your own destiny, making big decisions, employing people under and this lets you know your leadership and communication skills

NO LIMIT Own business has no limit you can invest your capital according to your will and have an opportunity to become the next bill gates or warren buffet. Earn more money than u would have working for someone else. The risk is greater but potential rewards are greater as well.

DEVLOPMENT OF SKILLS You have an opportunity to use your skills, abilities, creativity etc. to do the things your way there is full utilization and recognition of your efforts and high level of satisfaction by the work

ENJOYING ALL ASPECTS OF BUSINESS While working for someone else you had your own area of responsibility and expertise. While owning a business you need to work in each field with full potential from funding to financing, and purchase of raw material to sale of finished goods.

DECISION MAKING In your business you have authority to decide the location of business, the logo of company, marketing strategy, development planning and future plans .


NO GAURANTEED RETURNS There is always financial risk involved in the business. You may not be able to earn for some period of time and may be have to put own money in to business. Depending on the type of business it may take 1 year 3 year or more to bring back the returns.

ALL BURDEN TOGETHER As you being the boss all decision are under your hand which may lead to fun decisions as well as tough decisions. Heavy schedule of work and knowledge of each field being required which also main cause to sleepless nights working all together for 24x7.

PLEASING EVERYONE When you work for someone you only need to please thrill and perform for your boss and the company but while owning a business you have to please every employee motivate them getting them the atmosphere of work in all situation which may not be possible every time for every worker.

GROWING PAINS some businesses work very smooth while some get stuck. There are times when the business gets shut or stopped it may be due to market, industry or economy slowing down, sometimes the competions heats up and MNC's take over. You must be ready to take over all situations.



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There are basically three ways of starting a new business. These ways are starting you own, buying an existing one, or invest in franchise of any company. There are good reasons for each choice, each has its own benefits and risks.


6.1. STARTING FROM SCRATCH starting from scratch is starting your own business. Starting from scratch generally costs less than starting from buying and existing or franchising. You can chose your own location and policies, and style of business. Most people start a business of what they are good at, their best skills and creative ideas help a lot to choose.

While it also has some inherent risks which is starting from scratch one need to decide the structure of the business, the location and needs to develop a new record keeping system. Govt. policies and regulation also cause certain restriction and license permit is also an issue. But starting from scratch helps to develop in field your interest lays and it may increase your chance of success.

6.2. BUYING AN OLD BUSINESS buying and existing business may lead to have a good location for business, it ,may save your time money and work which you would have done in starting of business development, you would also be able to use the owners invested capital for development, the business already has it organizational and accounting plans

While there may be some issues like a new business field , cash flow mechanism ,base consumer market, debt of previous owners high cost involvement etc. as well while buying an existing business the cost will be valued by its asset and liablities


the alternative way of buying some one's business is to take a franchise. This helps buyer to own the name and trademark of the company and sell the products by its name. The franchiser has to pay a initial start up fee and royalties according to sell done.

Its benefits franchiser as brand recognition, quality products, approved formula, technical assistance, market research etc

It also has some drawbacks which same business format, no creativity, little control over decisions, work according to franchise. (Bovee and Thill, 2008)

There are lot of examples of a successful franchisor as there is lot demand of MNC's in new and developing cities so to point out some a successful franchisor is to point a the franchisee eg: McDonald's, pizza hut etc


Franchiser also has to choose from sole proprietorship and partnership

SOLE PROPRITERSHIP its one of the oldest form of business in which there is a single person who owns, controls and manages the business.

ADVANTAGES easy to form maximum incentive secrecy in business powerful and quick decisions


Limited capital liability is unlimited owner's life managerial inefficiency


PARTNERSHIP when two or more people come together and share there profits, losses, assets, liabilities and management responsibilities they are known to be partners and a partnership is formed.

ADVANTAGES Share in profit and losses starting cost is divided high resources, strengths, abilities easier management

DISADVANTAGES visions towards business personal disputes no own decision losing secrecy

7. CONCLUSION From the whole report it is understood that small business [lay a major role in developing a country especially like India where there are lots of under developed areas. A small business has its own pros and cons which help choosing which type of business to start and the ways to start a small business are from scratch, buying an existing or taking a franchise of it.