CLASSIFICATION OF BUSINESS ACTIVITIES

BUSINESS

INDUSTRY

COMMERCE

CONCEPT OF INDUSTRY

Industry is a group of Firms, engaged in production of similar Goods or Services. For example: Cement, Power, Automobile, Pharmaceutical Industries.

CHARACTERISTICS OF INDUSTRY

1. ECONOMIC ACTIVITY

Industrial activities are Economic activities, because they are undertaken with a motive to earn money and make economic gain.

2. Creation of Form Utility

Industry creates Form utility by converting raw materials into useful products which can be used to satisfy human wants.

3. ECONOMIC DEVELOPMENT

Industrial activities generate employment, increases national income, earns foreign exchange; through the productive use of available resources.

Industries are the Engines of growth.

4. CATALYTIC TO OTHER BUSINESS ACTIVITIES

Industrial activities gives rise to Trade, Transportation, Banking & Finance, Warehousing, Insurance, Advertising, etc.

5. CONSUMER & PRODUCER GOODS

Industry involves the production of both Consumer goods and Producer goods.

TYPES OF INDUSTRIES

INDUSTRY

GENETIC

EXTRACTIVE

MANUFACTURING

CONSTRUCTION

MANUFACTURING

ANALYTICAL

SYNTHETIC

PROCESSING

ASSEMBLING

SCALE OF OPERATIONS

MICRO

SMALL

MEDIUM

LARGE

MICRO UNITS

MANUFACTURING ENTERPRISES

Investment in Plant & Machineryis up to Rs 25 lac.

SERVICE ENTERPRISES Investment in Plant & Machinery is up to Rs 10 lac.

SMALL UNITS

MANUFACTURING ENTERPRISES Investment in Plant & Machinery is more than Rs 25 lac but does not exceed Rs 5 crore.

SERVICE ENTERPRISES Investment in Plant & Machinery is more than Rs 10 lac but does not exceed Rs 2 crore.

MEDIUM UNITS

MANUFACTURING ENTERPRISES Investment in Plant & Machinery is more than Rs 5 crore but does not exceed Rs 10 crore.

SERVICE ENTERPRISES Investment in Plant & Machinery is more than Rs 2 crore but does not exceed Rs 5 core.

LARGE UNITS

MANUFACTURING ENTERPRISES Investment in Plant & Machinery exceeds Rs 10 crore.

SERVICE ENTERPRISES Investment in Plant & Machinery exceeds Rs 5 crore.

ROLE OF SMALL BUSINESS IN INDIA

1. OPTIMISATION OF CAPITAL

Greater output can be obtained with small investment, because Small scale units require less capital per unit of output.

Fixed capital per employee is less as compared to that in Large scale units.

Quick returns due to short gestation period

Small scale units need to be encouraged in the context of Low rate of Capital formation in India.

2. FEEDER TO LARGE INDUSTRIES

Majority of Large scale units do not manufacture basic inputs for their finished products.

Small scale units manufacture various types of components, spare parts, tools, etc and supply to these Large scale units.

3. MOBILISATION OF CAPITAL, ENTREPRENEURIAL SKILL, AND OTHER RESOURCES

A number of Entrepreneurs are spread over small towns & villages of the country.

Large scale units cannot utilize them as effectively as the small scale units distributed over the entire length & breadth of the country.

Large scale units cannot mobilise the savings done by people in areas far flung from the urban centres.

It can be effectively done by setting up a network of small scale units.

In addition, other resources spread over the country can be put to effective use by small scale units.

4. CONTRIBUTION TO EXPORTS

With the establishment of large number of modern small scale units, contribution in export earnings has increased by leaps and bounds.

Bulk of the exports of small scale units (around 93%) consists of non-traditional items like readymade garments, leather products, woollen garments & knitwear, processed foods, chemical & allied products and large number of engineering goods.

These has added to Foreign Exchange Reserves, thereby reducing Balance of Payment Deficits.

5. EQUITABLE DISTRIBUTION OF NATIONAL INCOME AND EGALITARIAN SOCIETY

Small scale units ensure more equitable distribution of national income & wealth.

Ownership of small scale industries is more widespread than that of large scale units.

Small scale units possess larger employmnt potential.

They help in raising the standard of living of people living in rural areas.

Benefits can be distributed over wider population.

6. EMPLOYMENT

Given the acute unemployment problem in India, creation of employment opportunities will depend on the development of small scale units.

It has been estimated that labour intensity in micro and small enterprises sector is four times higher than the large enterprises.

Promote self-employment among the educated and professional class.

Rural non-farm sector accounting for 22% of rural employment can play a crucial role in in employment generation.

7. BALANCED REGIONAL DEVELOPMENT

Small scale units promote decentralised development, thereby helping to remove regional disparities in industialisation.

Development of small scale units leads to industrialisation in rural areas.

Development of decentralised sector improves the standard of living in back- ward regions.

Ensures balanced development with Self- Sustained Growth.

8. SOCIAL ADVANTAGE

Requires less capital investment and therfore, people with limited capital can start their business.

Through diffused ownership, there is wider participation of people in the process of economic development.

Helps in raising per capita income and standard of living in the country.