INTRODUCTION:

An entrepreneur is an economic agent who plays a vital role in the economic development of a country. The economic development of a country refers to steady growth in the income levels. This growth mainly depends on its entrepreneurs. An entrepreneur is an individual endowed with knowledge, skills, initiative; drive a spirit of innovation, and firm determination to realize his objectives. An entrepreneur identifies opportunities and seizes them for economic benefits¹. It is interesting to learn the evolution of the meaning of ‘entrepreneur’.

J.B Say, the French economist, as early as 1800, said that “theentrepreneur shifts economic resources out of an area of lower productivity into an area of higher productivity and greater yield.”

The word ‘entrepreneur’ is taken from French language and the term originally referred to an organizer of music or other entertainments. The Oxford English Dictionary (1897) defines the entrepreneur as “the director or manager of a public musical institution, one who ‘gets-

up’ entertainment, especially musical performance.” In the early 16^th century, it was applied to those who were engaged in military expeditions. Its meaning was extended to include civil engineering activities such as construction and fortification, in the 17^th century. It was only in the beginning of the 18^th century that the word was used in an economic context². Thus the evolution of the meaning of the word ‘entrepreneur’ has had a long history. Since then, it has taken on various shades of meaning in the course of its semantic evolution. The most predominant of these meanings refer to risk bearer, organizer and innovator.

Small-scale industries were subject to policy reforms in the year 2006 through the passing of the Micro Small and Medium Enterprises Development Act, 2006. From this year, micro small and medium enterprises were brought under one head. Before proceeding with the study, there is a need to understand the history of industrialization in India.

Concept of Entrepreneurship:

Like other economic concepts, entrepreneurship has been a subject of much debate and discussion. It is defined differently by different authors. While some evaluate entrepreneurship as ‘risk bearing’, others look upon it as innovation and yet others consider it thrill-seeking. Some important definitions of entrepreneurship are the following:-

In a conference on entrepreneurship, held in the United States, the term ‘entrepreneurship’ was defined as follows:

“Entrepreneurship is the attempt to create value through recognition of business opportunity, the management of risk-taking appropriate to the opportunity, and through the communicative and management skills to mobilize human, financial and material resources necessary to bring a project to fruition.^”3

According to Arthur H. Cole, “entrepreneurship is the purposeful activity of an individual or a group of associated individuals, undertaken to initiate, maintain or aggrandize profit by production or distribution of economic goods and services.”⁴

In all the above definitions, entrepreneurship refers to the functions performed by an entrepreneur in establishing an enterprise. Just as management is regarded as what managers do, entrepreneurship may be regarded as what entrepreneurs do. Entrepreneurship is a process involving various actions to be undertaken to establish an enterprise. It is, thus, a process of giving birth to a new enterprise.

Small-Scale Industries in India and MSME–An Overview

Before 1943, the Indian business scene was completely dominated by British companies. Apart from a few Parsi families, notably the Tatas in steel and the Wadias in shipbuilding, and scattered Gujarati and Bohri Muslim businessmen, Indians had to be content with the crumbs. Manufacturing was almost closed to all. Trading was the only viable option. In such a bleak scenario, the Birla Jute Mill, which was started in 1919, marked the entry of the Birla family, essentially traders, into industrial manufacturing⁵.

In small-scale industries, India has a glorious tradition. The fine textile fabrics of India, like Dacca muslin and Kashmir shawls, were known to the outside world as far back as 2000 BC. Handicrafts of all sorts, such as metal working, shields manufacture, enamelled jewellery, stone carving, gold and silverwork, thread work, etc. were also done in India. Along with cotton textile, India had attained world renown in the case of iron manufacturing. But, during the British rule, the industrial structure of our country including small scale units was in a sick stage⁶But, during the freedom struggle, Mahatma Gandhi’s views gave a facelift to the village and cottage industries. But only with the introduction of India’s five year plans, the real significance of small- scale industries emerged. Small-scale industries constitute the back-bone of a developing country like India.

Performance of Micro, Small & Medium Enterprises (MSME) sector is assessed by conduct of periodic All India Census of the Sector. The latest census conducted was Fourth All India Census of MSME. The Census was conducted with reference year 2006-07, wherein the data was collected till 2009 and results published in 2011-12. Fourth All India Census of MSME is the first census conducted post implementation of Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. Prior to implementation of MSMED Act, 2006, the sector was defined, as per the provision of Industries Development and Regulation Act 1951, as Small-Scale Industries (SSI) sector and its constituent tiny and auxiliary units as per periodic revision of criteria for defining such units. Third All India Census of SSI was conducted with coverage and concepts as prevailing during 2001-02.

The scope and coverage of the MSME sector was broadened significantly under the MSMED Act, 2006, which recognized the concept of “enterprise” and to include both manufacturing and services sector, besides defining the medium enterprises under MSME sector. Thus the entire non-agricultural sector of economy was brought under the coverage of MSME sector subject to the revised criteria prescribed for defining Micro, Small and Medium Enterprises separately for manufacturing and services sectors.

The census adopted different methodology for Registered and Unregistered Sectors. While complete enumeration of enterprises was adopted in Registered Sector, sample survey was resorted to in Unregistered Sector. However, activities under wholesale/ retail trade, legal, educational and social services, hotel & restaurants, transports and storage and warehousing (except cold storage) were excluded from the coverage of sample survey.

For these activities, data was extracted from Economic Census, 2005 (EC, 2005) conducted by Central Statistics Office of Ministry of Statistics and Programmeme Implementation (MOSPI) for estimation of MSME relevant enterprises⁷.

Definition:

What is small-scale industry? The definition of small-scale industry varies from country to country and from time to time, depending upon the pattern and phases of development, government policy and administrative set up of the particular country. As a result, there are at least 50 different definitions of SSIs reached and realized in 75 countries. We trace here the evolution of the legal concept of small-scale industry in India.

The Fiscal Commission, 1950, for the first time, defined a small-scale industry as one which is operated mainly with hired labour, usually with 10 to 50 hands. In order to promote small-scale industries in the country, the Government of India set up the Central Small Industries Organization and the Small Industries Board in 1954 – 55. The SSI Board, at its first meeting held on January 5^th and 6^th, 1955, defined small-scale industry as a unit employing less than 50 employees if using power, and less than 100 employees without the use of power and with a capital asset not exceeding Rs. 5 lakh.^8.

Broadly, the term ‘Small-Scale Industries’ has been defined in three ways-the conventional definition, the operational definition and the definition in relation to national income.

The conventional definition includes cottage and handicraft industries which employ traditional labour and adopts intensive methods to produce traditional products, largely in village households. They employ hardly any or only a few hired hands. The handloom textile industry is an example. Though once famous, this sector has been steadily declining.

The operational definition of the SSI unit relates to the investment in fixed assets. The third definition relates to national income accounting. This includes all manufacturing and processing activities, including the maintenance and repair services undertaken by both household and non-household small- scale manufacturing units, which are not registered under the Factories Act, 1948⁹.

The definitional change of Small Scale Industry over the period in India is presented in the Table1

Table 1 Definition of Small-Scale Industry: An Overview¹⁰

Year		Investment Criterion			Employment
Year	SSI Unit		Ancillary Unit		Criterion
Up to 1958	Fixed Capital investment up to Rs. 5 lakh		Same as SSI units		Employment up to50 workers if using power or up to 100 if not using power
1959	The value of machine was taken as the original price paid irrespective of new or old machinery		Same as SSI units		Employment up to50 workers if using power or up to 100 if not using power
1960	Gross value of fixed asset up to Rs. 5 lakh		Gross value of fixed asset up to 10 lakh		Employment criterion dropped
1966	Plant and Machinery worth up to Rs. 7.5 lakh		Plant & Machinery worth upto Rs 10 lakh		Employment criterion dropped
1975	“	Rs. 10 lakh	“	Rs. 15 lakh	“
1980	“	Rs. 20 lakh	“	Rs. 25 lakh	“
1985	“	Rs. 35 lakh	“	Rs. 45 lakh	“
1991	“	Rs. 60 lakh	“	Rs. 75 lakh	“

As per Abid Hussain Committee’s recommendations on small-scale industries, the Govt. of India, in March 1997, further raised the investment ceiling to Rs. 3 crore for Small-Scale Industries and to Rs. 50 lakh for tiny units. Then, during 1999-2000 the investment limit for small-scale and ancillary undertakings was reduced from existing Rs. 3 crore to Rs. 1 crore¹¹ An important definitional change in respect of small-scale industries occurred with the enactment of MSMED Act 2006.

Table 2 Classification of Enterprises¹²

Type of Enterprises	Manufacturing Enterprises (in terms of gross investment in plant and machinery)	Service Enterprises. (in terms of gross investment in equipment)
Micro Enterprises	Not exceeding Rs. 2.5 mn (Rs. 25 lakh)	Not exceeding Rs. 1.0mn (Rs. 10 lakh)
Small Enterprises	Above Rs. 2.5 mn and up to Rs. 50 mn (RS. 25 lakh – 5 crore)	Above Rs. 1 mn and up to 20 mn (RS. 10 lakh – 2 crore)
Medium Enterprises	Above RS. 50 mn and up to Rs. 100 mn (RS. 5-10 crore)	Above 20 mn and upto Rs. 50 million(Rs. 2-5 crore)

Micro, Small and Medium Enterprises Development Act 2006 (MSMED Act)

The MSMED Act was passed by Parliament of India, on 16.06.2006 and it came into force on 2^nd October 2006.

It provides the first ever legal framework for the recognition of the concept of enterprise (the earlier concept was industry) comprising manufacturing and services and the integration of the three tiers of these enterprises, viz, micro, small and medium. With the enactment of the MSMED Act 2006, the practice of SSI registration was done away with and the new system of filing of Entrepreneurs Memorandum (EM – Part I & Part II) introduced.

Under the Act, enterprises have been categorized broadly into those engaged in (i) manufacturing and (ii)those providing/ rendering services. Both the categories have been further classified into Micro, Small and Medium enterprises, based on their investment in plant and machinery (for manufacturing enterprises) or in equipment (in the case of enterprises providing or rendering services)¹³

Definition – MSME:

(i) Registered Sector: Enterprises registered with District Industries Centres in the State/ UTs., KVIC/ Khadi and Village Industries Board, Coir Board as on 31.03.2007 and factories under the coverage of section 2m(i) and 2m(ii) of the Factories Act 1948 used for Annual Survey of Industry having investment in plant and machinery upto Rs 10 crore were considered to belong to registered sector.

(ii) Unregistered Sector: All enterprises engaged in the activities of manufacturing or in providing/rendering of services, not registered permanently or not filed EM with State Directorates of Industries/District Industries Centers on or before 31-3-2007 are called unregistered enterprises. Those enterprises that are temporarily registered on or before 31-3-2007 as also the units that are temporarily or permanently registered or filed EM after 31-3-2007 till the date of Sample Survey, conducted as part of Fourth All India Census of MSME, 2006-07 were treated as unregistered enterprises for the purpose of this survey. Enterprises found forming part of registered sector as defined above were excluded from the coverage of unregistered sector.

(iii) Small Scale Industrial Unit: An industrial undertaking in which the investment in fixed assets in plant & machinery, whether held on ownership terms, or on lease, or by hire purchase, does not exceed Rs. 100 lakhs as on 31-03-2001 is to be treated as a Small Scale Industrial Unit.

(iv) Micro Small Medium Enterprises (MSME): MSME Sector consists of any enterprises, whether proprietorship, Hindu undivided family, association of persons, co-operative society, partnership or undertaking or any other legal entity, by whatever name called, engaged in production of goods pertaining to any industry specified in the first schedule of Industries Development and Regulation Act, 1951 & other enterprises engaged in production and rendering services, subject to limiting factor of investment in plant and machinery and equipment respectively as noted below:

A. For manufacturing sector, an enterprise is classified as:

a) Micro enterprise, if investment in plant and machinery does not exceed twenty five lakh rupees;

b) Small enterprise, if investment in plant and machinery is more than twenty five lakh rupees but does not exceed five crore rupees; or

(c) Medium enterprise, if investment in plant and machinery is more than five crore rupees but does not exceed ten crore rupees;

B. In case, enterprise is engaged in providing or rendering of services, it is classified as:

(a) Micro enterprise, if investment in equipment does not exceed ten lakh rupees;

(b) Small enterprise, if investment in equipment is more than ten lakh rupees but does not

exceed two crore rupees; or

As per the results of Fourth All India Census of Micro, Small and Medium Enterprises (MSME), the sector contributes significantly to the number of enterprises, employment and output of the country. Based on the data sets of Third and Fourth All India Census of SSI/MSME, augmented with data sets of EC, 2005 and growth rate observed during Fourth (1998) and Fifth (2005) Economic Census, the performance of SSI/MSME Sector is summarized as below: It may be noted that for both the Third and Fourth All India Census of SSI/MSME, unregistered sector was assessed by conduct of sample survey of the sector¹⁴

Table 3 MSMEs Total Working Enterprises, Employment and Exports¹⁵

Year	Total Working Enterprises (in Lakhs)	Employment (in Lakhs)	Exports
1990-91	67.87	158.34	9664
1991-92	70.63	165.99	13383
1992-93	73.51	174.84	17784
1993-94	76.49	182.64	25307
1994-95	79.6	191.4	29068
1995-96	82.84	197.93	36470
1996-97	86.21	205.86	39248
1997-98	89.71	213.16	44442
1998-99	93.36	220.55	48979
1999-2000	97.15	229.1	54200
2000-01	101.1	238.73	69797
2001-02	105.21	249.33	71244
2002-03	109.49	260.21	86013
2003-04	113.95	271.42	97644
2004-05	118.59	282.57	124417
2005-06	123.42	294.91	150242

Analysis:

Over time, definitions redefined and rejigging by MSMEs broadens the horizons for the entrepreneurs. The corollary of widening and redefining the definition is the augmentation of the number of existing and new entrepreneurs inclusion, attaining the eligibility criterion for any scheme or benefit and positively impacting on the MSMEs exports, resulting in growth of total exports.

Figures from the table 3 suggests growth in exports, not exponentially envisaged, given to the amendments and redefinition by MSME.

Table 3 suggests, from 1991-92 to 2005-06, the number of working enterprises inclusion has been between 4.05% to 4.07%, indicating a constant and consistent trend, neither dwindling or escalating figures are observed noteworthy.

Intended towards a prodigious performance in exports, which realized in 42.30% in 1993-94 and in the following consecutive years, a perennial fall till 10.66% in 1999-2000 was noticed, and further a steep increase to 28.78% in 2000-01 was noticed.

The year 2001-02 experienced the slowest growth in exports with 2.07%, subsequent years faced an increased exports in the range of 20.73% to 20.76%.

Aimed at achieving a stupendous employment trend by redefining and expanding the scope further, terminally resulting in poverty alleviation measures. However, employment stood at polarity ranging from 3.47% being the least generated employment in the year 1998-99 and the highest recorded in 1992-93, heralding the concomitant effects of the new economic policy 1991.

The sequel to the redefinition by MSMEs hasn’t witnessed remarkable progress, but a consistent growth certainly, not to omit the fact.

Types of Investment:

1. Autonomous Investment:

Autonomous Investment remains constant irrespective of income level. This means even if the income is low, the autonomous investment remains the same. It refers the investment made in homes, roads, public buildings and other parts of infrastructure. The government normally makes such a type of investment.

2. Induced Investment:

Induced Investment is positively related to the income level. This is, at high levels of income entrepreneurs are induced to invest more and vice-versa. At a high level of income, consumption expenditure increases this leads to an increase in investment in capital goods, in order to produce more consumer goods.

3. Financial Investment:

However, the money used for purchasing existing financial instruments such as old bonds, old shares, etc., cannot be considered as financial investment. It is a mere transfer of a financial asset from one individual to another. In financial investment, money invested for buying of new shares and bonds as well as debentures have a positive impact on employment level, production and economic growth.

4. Real Investment:

Real Investment in new machine tools, plant and equipments purchased factory buildings, etc. increases employment, production and economic growth of the nation. Thus real investment has a direct impact on employment generation, economic growth, etc.

5. Planned Investment:

Planned Investment can also be called as intended Investment because investors while making investment make a concrete plan of his investment.

6. Unplanned Investment:

In unplanned type of Investment, investors make investment randomly without making any concrete plans. Hence it can also be called as unintended investment. Under this type of investment, the investor may not consider the specific objectives while making an investment decision.

7. Gross Investment:

it is the total expenditure made on new capital assets in a period.

8. Net Investment:

Net Investment is Gross Investment less Capital Consumption during a period of time, usually a year.^[16]

Concern regarding FDI in retail

The impact of local incumbents on domestic and unorganised sectors has resulted in the unfair competition and has ultimately resulted in the exit of large scale industries. It has mostly affected the small family managed outlets.

This has also disintegrated the supply chain of global retailers which results in the control from both the ends. It ignored consumer’s welfare because of the prices dictated by the big retail companies on account of their position in the market. Non remunerative prices affect the farmers which they source it from various corporate companies.

Various political parties, trade unions and associations have criticised FDI in retail out rightly. It is argued on the grounds that Indian retail market is still needs to be evolve and needs time to consolidate their position in the market and relatively not prepared for the competition from these big retailers.

Indian retailers have argued that since lending rates are much higher in India, small retailers thus are at disadvantageous position with foreign retailers who have access to funds at lower interest rates.^[17]

In this research study, it is strongly evidenced that both snakebite and house money effects are existing on individuals in investment decision making. The risk attitude of an investor appears to be variable depending upon different sets of experiences.^[18]

The investment in fixed assets has tremendously increased over the study period which primarily captures the economic reforms era of Indian economy. The results have been robust and majorly in line with the pre-established hypothesis. Accelerator (change in output), cash flow from operating activities, flow of equity, flow of borrowings and trade credit have been found as highly and positively significant as postulated. At the same time as stipulated initially, change in inventory has been found as negatively significant. The analysis showed that corporate investment has exhibited impressive growth rate during the study period. As for the financing patterns from 1994-95 to 2008-09, some changes have been observed from the past studies. ^[19]

Five factors emerged from the principal component analysis that the investors feel important to invest in art. The factors include entry barriers, maintenance costs, market regulations and profitability, awareness and risk mitigation with entry barriers emerging as the most important factor explaining around 35% variance. ^[20]

Major Economic Reforms:

The economy of India had undergone significant policy shifts in the beginning of the 1990s. This model of economic reforms is commonly known as the LPG model or Liberalization, Privatization and Globalization model. The primary objective of this model was to make the economy of India as the fastest developing economy on the globe with capabilities that helps it match up with the biggest economies of the world. The chain of reforms that took place with regards to business, manufacturing, and financial services industries targeted at lifting the economy of the country to a more proficient level. These economic reforms had influenced the overall economic growth of the country in a significant manner.^[21]

Therefore the policies should be framed in such manner that these households are willing to part away with their consumption for a longer period of time. The tax incentives should be designed in manner that the middle class are encouraged to save. This would also help in achieving the objective of financial inclusion which may be defined as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost^.[22]

On the contrary, it can be concluded in a study in the Kabirdham District of Chhattisgarh State that the employment generation in the district is positive, but is below expected. The rate of employment generation per year in the district is near sluggish and needs to be immediately addressed to solve the problem of unemployment. ^[23]

In another study it was found that: (1) the dropping/shelving of investment projects are increasing; (2) share of aggregate value of projects under implementation in education, irrigation and commercial complexes sector, in the total project investment, indicates a decline; and (3) new investment announcements are declining.

The study established the relation between Gross Domestic Product and monetary value of projects under implementation by carrying out a linear regression analysis. The significance level of the t-test is 0.00. Therefore, the stagnation in project completion of investment projects can affect the development of manufacturing and service sectors and subsequently employment, income and aggregate demand and thereby the faster rate of growth of the economy. Even otherwise, if the infrastructure development is at a slow pace, the manufacturing can get affected. An elevated demand for goods and the failure of the producing sectors to pick up the demand through increase in supplies will result in a higher consumer price index, i.e., a higher level of inflation which can become detrimental to the growth and development of the country.^[24]

CONCLUSION:

Further with the inception of MSMED Act, and other schemes the number of MSMEs gradually increased rather significantly contributing much on MSMEs Exports, Employment and on the GDP. Possibly the redefinition has been advantageous to the entrepreneurs individually in receiving the benefits from MSME, rather the entrepreneurs contribution towards Exports and creation of employment. Nevertheless, the objectives of the Ministry of MSME to accelerate the growth of exports, employment and GDP was achieved consistently.

REFERENCES:

1. Anilkumar, S., Poornima, S.C., Abraham, Mini K. and Jayasree, K. (2006), Entrepreneurship Development, New Delhi: New Age International Publishers, p. 1.

2. Khanka, S.S. (2007), Entrepreneurial Development, New Delhi: S. Chand and Co. Ltd, p.1.

3. Ibid., p.8.

4. Cole, Arthur H. (1959), Business Enterprise in its Social Settings, Cambridge: Harward University Press, p.44.

5. Desai, Vasant (2006), Small Scale Industries and Entrepreneurship, Mumbai: Himalaya Publishing House, p.394

6. Ambilikumar, V. (1989), Working of Small Scale Industries in Kerala with Special Reference to Thiruvanathapuram District, Unpublished Ph.D. Thesis: Thiruvanathapuram: University of Kerala, pp. 16-17.

7. MSME Annual Report 2012-13

8. Khanka, S.S. op.cit . pp. 71-72.

9. Aswathappa, K. (2010), Essentials of Business Environment, Mumbai: Himalaya Publishing House Ltd, p.280.

10. SS Khanka, Entrepreneurial Development, S. Chand & Co. New Delhi, Edition and reprint 2010, P. 72.

11. Khanka, S.S. loc. cit.

12. Icfai Journal of Entrepreneurship Development Vol. V. No.1 March 2008 P.7.

13. Krishnamurthi, S. (2008), Guide to Micro, Small & Medium Enterprises, New Delhi: Oriental Publishing Co, P.60.

14. MSME.loc.cit

15. Tabulated from MSME Annual Reports.

16. Mahendra Kumar Ikhar. Investor's Attitude towards the selection of investment option with special reference to derivative investments. Asian J. Management 5(2): April-June, 2014 page 145-149.

17. Ankush Bhargava, Rajanikant Verma. Foreign Direct Investment and Retailing – A New Way Forward. Asian J. Management 5(2): April-June, 2014 page 117-120.

18. Udayan Das, Shakti Ranjan Mohapatra. Behavioural Biases in Investment Decision Making: A research study on snakebite and house money effects on Indian individuals. Asian J. Management; 2017; 8(3):460-470. doi: 10.5958/2321-5763.2017.00074.9

19. Sucheta Gauba. Financing of Corporate Investment: Panel Data Evidence from Indian Manufacturing Firms. Asian J. Management; 2017; 8(3):471-478. doi: 10.5958/2321-5763.2017.00075.0

20. Lakshmi B, Aruthra R, Sanjay Sunny Otta. An Exploratory Study on the Factors Affecting the Acceptance of Art as an Alternative Form of Investment by the Potential Investors. Asian Journal of Management. 2018; 9(1):373-382. doi: 10.5958/2321-5763.2018.00058.6

21. Somya Choubey. Make in India: A Ray of Hope for Indian Economy. Int. J. Ad. Social Sciences 3(2): April-June, 2015; Page 61-65.

22. Sanjay Kanti Das. Investment Behaviour of Middle-class Households: An Empirical Analysis. Asian J. Management 3(3): July-Sept., 2012 page 123-133.

23. Madan Gopal Patle, A.K. Pandey. Analysis of rate of investment, upcoming industrial units and associated new employment generation in Kabirdham District of Chhattisgarh State. Asian J. Management; 2017; 8(2):151-154.

24. J. C. Edison. An Analysis of Project Investment in Construction Sector of India. Int. J. Tech. 5(2): July-Dec., 2015; Page 285-290 doi: 10.5958/2231-3915.2015.00037.1

Received on 10.09.2020 Modified on 16.10.2020

Asian Journal of Management. 2021; 12(1):28-34.

DOI: 10.5958/2321-5763.2021.00005.6