Organisation Behaviour

RURAL ENTREPRENEURSHIP IN INDIA
PROJECT REPORT ON
EMPLOYEE MOTIVATION
SUBMITTED BY
PRADNYA SHETTY
M.Com Part II- Semester IV
2014-15
PROJECT GUIDE
Prof. SHIBHU
SUBMITTED TO
UNIVERSITY OF MUMBAI
BUNTS SANGHA MUMBAI

ANNA LEELA COLLEGE OF COMMERCE & ECONOMICS
SHOBHA JAYARAM SHETTY COLLEGE FOR B.M.S
Shashi Manmohan Shetty Higher Education Complex,
Buntara Bhavana Marg, Kurla (East), Mumbai 400 070
Certificate
BUNTS SANGHA MUMBAI
ANNA LEELA COLLEGE OF COMMERCE &ECONOMICS
1

SHOBHA JAYARAM SHETTY COLLEGE FOR B.M.S
SHASHI MANMOHAN SHETTY HIGHER EDUCATION COMPLEX,
This is to certify that

Miss. PRADNYA SHETTY of M.Com Part II Semester IV, has undertaken &
completed the project work titled EMPLOYEE MOTIVATION during the
academic year 2014-15 under the guidance of Prof. PRASHANT SHINDE
submitted to this college in fulfilment of the curriculum of Master of
Commerce, University of Mumbai.
This is a bonafide project work & the information presented is true &
original to the best of our knowledge and belief.
PROJECT
GUIDE
COURSE
PRINCIPAL
EXTERNAL
CO-ORDINATOR
EXAMINER
DECLARATION
I, Mrs.PRADNYA SHETTY of Anna Leela College Of Commerce & Economics,
Shobha Jayaram Shetty College For B.M.S, M.Com Part II Semester IV, hereby declare
that I have completed the project on EMPLOYEE MOTIVATION in academic year 201415.
The information submitted is true and original to the best of my knowledge.
Signature of the Student
[PRADNYA SHETTY]
ACKNOWLEDGMENT
I hereby acknowledge all those who directly or indirectly helped me

to draft the project report. It would not have been possible for me to complete
the task without their help and guidance
First of all I would like to thank the principal, Dr. K.S. Cheema and the
coordinator Prof. Prashant Shinde, who gave me the opportunity to do this
project work. They also conveyed the important instructions from the
university from time to time.
Last but not the least; I am thankful to the University of Mumbai for
offering the project in the syllabus. I must mention my hearty gratitude
towards my family, other faculties and friends who supported me to go ahead
with the project.
Table of Contents
1. Introduction to the Rural Entrepreneurship ..........................................................6-9
1.1 Entrepreneur........................................................6
1.2 Entrepreneurship....................................................................6
1.3 What is Rural Entrepreneurship..............................................................7-9

2. Types of Rural Entrepreneurship ..........................................................................10-14
3. Domains of Rural Entrepreneurship ...................................................................15-21
4. Planning Rural Enterprises ..................................................................................22-31
5. Human Resources for Developing Rural Entrepreneurs.....................................32-35
6. Basic Infrastructure for Rural Entrepreneurship..............................................36-38

7. Managing a Rural Enterprises.............................................................................39-51
8. Pitfalls in Managing a Rural Enterprises.............................................................52-53
9. Bibliography.................................................................................................................54
CHAPTER 1
INTRODUCTION TO RURAL ENTREPRENEURSHIP
1.1 MOTIVATION
Motivation is a force that drives people to do things. Employees are normally motivated to
achieve their needs, whatever they may include. Motivation is inside another person's head and heart. It
may be intrinsic or extrinsic. This is what we call motivation. Employees of a company will be motivated
if they associate certain incentives with an activity of work.
Motivation is an important function which every manager performs by assigning the people to
work for accomplishment of objectives of the organization .Issuance of well conceived instructions and
orders does not mean that they will be followed .A manager has to make appropriate use of motivation to
enthuse the employees to follow them. Effective motivation succeeds not only in having an order accepted
but also in gaining a determination to see that it is executed efficiently and effectively. In order to motivate
workers to work for the organizational goals, the managers must
Determine the motives or needs of the workers and provide an environment in which Appropriate
incentives are available for their satisfaction .If the management is successful in doing so; it will also be
successful in increasing the willingness of the workers to work. This will increase efficiency and
effectiveness of the organization. There will be better utilization of resources and workers abilities and
capacities.
1.2 CONCEPT OF MOTIVATION
The word motivation has been derived from motive which means any idea, need or emotion
that prompts a man in to action. Whatever may be the behaviour of man, there is some stimulus behind
it .Stimulus is dependent upon the motive of the person concerned. Motive can be known by studying his
needs and desires.

There is no universal theory that can explain the factors influencing motives which control mans
behaviour at any particular point of time. In general, the different motives operate at different times among
different people and influence their behaviours. The process of motivation studies the motives of individuals
which cause different type of behaviour.
In order to understand the concept of motivation, we have to examine two terms: Motive and motivating
Motive
A motive is an inner state that energizes, activates, or moves and directs behaviour towards
Goals.
Motivating
Motivating is a term which imp lies that one person includes another, to engage in action by
ensuring that a channel to satisfy the motive becomes available and accessible to the individual ual
1.3 DEFINATION OF MOTIVATION

According to Edwin B Flippo, Motivation is the process of attempting to influence others to do
their work through the possibility of gain or reward.
The definition of motivation is to give reason, incentive, enthusiasm, or interest that causes a specific
action or certain behaviour. Motivation is present in every life function. Simple acts such as eating are
motivated by hunger. Education is motivated by desire for knowledge. Motivators can be anything from
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reward to coercion. From the scientific viewpoint, by most accounts, motivation is defined as an inner state
of need or desire. That state of desire creates a movement or activity towards satisfying that desire. In my
never-ending quest to spread the word about turning ideas into action, I view inspiration as the state of mind
that primes us to come up with great ideas, and motivation as the state of mind that spurs us to action.
Dubin has defined motivation as;
Motivation is the complex force starting and keeping a person at work in an
organization. Motivation is something that moves the person to action, and continues him in the course of action
already initiated
According to McFarland;
Motivation refers to the way in which urges, drives, aspirations, strivings, or needs direct,
control, or explain the behaviour of human being.
CHAPTER 2
NATURE AND NEED OF MOTIVATION
NATUR E OF MOTIVATION
1) Based on Moti ves:

Motivation is based on individuals motives which are internal to the individual. These
motives are in the form of feelings that the individual lacks something. In order to overcome this feeling,
he tries to behave in a manner which helps in overcoming this feeling.
2) Goal di rect ed Behavi our:
Motivation leads to goal-directed behaviour. A goal-directed behaviour is one which
satisfies the cause for which behaviour takes place.
3) Affect ed by Moti vati ng:
Motivation is affected by way the individual is motivated. It can also activate the latent needs
in the individual, that is, the needs that are the less strong and somewhat dormant, and harness them in a
manner that would be functional for the organization.
4). Rel at ed t o Sati sfacti on:
Satisfaction refers to the contentment experiences of an individual which he
derives out of need fulfilment. Thus satisfaction is a consequence of rewards and punishments
associated with past experiences.
5). Compl ex Process:
Motivation is a complex process; complexity emerges because of the nature
of needs and the type of behaviour that is attempted to satisfy those needs.
6).
Person Moti vat ed i n Tot al it y:

A person is motivated in totality and not in part. Each individual in the
organization is a self-contained unit and his needs are interrelated. These affect his behavior in
different ways.
Nee d of moti vation

Managements basic job is the effective utilization of human resources for achie vements
of organizational objectives. The personnel management is concerned with organizing human
resources in such a way to get maximum output to the enterprise and to develop the talent of people
at work to the fullest satisfaction. Motivation implies that one person, in organization context a
manager, includes another, say an employee, to engage in action by ensuring that a channel to
satisfy those needs and aspirations becomes available to the person. In addition to this, the strong
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needs in a direction that is satisfying to the latent needs in employees and harness them in a manner
that would be functional for the organization.
Employee motivation is one of the major issues faced by every organization. It is the
major task of every manager to motivate his subordinates or to create the will to workamong the
subordinates. It should also be remembered that a worker may be immensely capable of doing some
work; nothing can be achieved if he is not willing to work. A manager has to make appropriate use
of motivation to enthuse the employees to follow them.
CHAPTER 3
SIGNIFANCE OF MOTIVATION
Motivation involves getting the members of the group to pull weight effectively, to give
their loyalty to the group, to carry out properly the purpose of the organization. The following
results may be expected if the employees are properly motivated.
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1. The workforce will be better satisfied if the management provides them with Opportunities to
fulfil their physiological and psychological needs. The workers will Cooperate voluntarily with
the management and will contribute their maximum towards the goals of the enterprise.
2. Workers will tend to be as efficient as possible by improving upon their skills and Knowledge so
that they are able to contribute to the progress of the organization. This will also result in increased
productivity.
3. The rates of labours turnover and absenteeism among the workers will be low.
4. There will be good human relations in the organization as friction among the workers
themselves and between the workers and the management will decrease.
5. The number of complaints and grievances will come down. Accident will also be low.
6. There will be increase in the quantity and quality of products. Wastage and scrap will be less.
Better quality of products will also increase the public image of the business.
Motivation is the activation or energization of goal -oriented behaviour;
Intrinsic
Extrinsic
From a practical standpoint, we can dig into our motives in order to get better results, and move
ourselves from point A to point B. For example, if you know what motivates you, you can use those
motives to get yourself to do things that you wouldn't do otherwise. These same principles can be applied
to motivating others as well. Motivational techniques, therefore, are useful to teachers, leaders, parents,
employers, and really, almost anyone. The key is in understanding that you are not motivating someone
else. Instead, you are simply providing a circumstance that triggers that person to be motivation.
Intrinsic and Extrinsic Motivation
Intrinsic Motivation
Intrinsic motivation comes from rewards inherent to a task or activity itself - the enjoyment of
a puzzle or the love of playing. This form of motivation has been studied by social and educational
psychologists since the early 1970s. Research has found that it is usually associated with high
educational achievement and enjoyment by students. Intrinsic motivation has been explained by
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Fritz Heider' attributional theory, Bandura's work on self effeciency,and Ryan and Deci's cognitive
evaluation theory. S tudents are likely to be intrinsically motivated if
they:
Attribute their educational results to internal factors that they can control (e.g. the amount
of effort they put in),
Believe they can be effective agents in reaching desired goals (i.e. the results are not determined
by luck),
Extrinsic motivation
Extrinsic motivation comes from outside of the performer. Money is the most obvious example,
but coercion and threat of punishment are also common extrinsic motivations.
While competing, the crowd may cheer on the performer, which may motivate him or her to do well.
Trophies are also extrinsic incentives. Competition is in general extrinsic because it encourages the
performer to win and beat others, not to enjoy the intrinsic rewards of the
activity. Social psychological research has indicated that extrinsic rewards can lead to over
justification and a subsequent reduction in intrinsic motivation. In one study demonstrating this
effect, children who expected to be (and were) rewarded with a ribbon and a gold star for drawing
pictures spent less time playing with the drawing materials in subsequent observations than
children who were assigned to an unexpected reward condition and to children who received no
extrinsic reward.
Motivation starts with you! As you aspire to be more successful in life, your attitude towards
yourself and others will play a huge role. Positive people learn how to handle life's challenges
differently and use these opportunities to grow. So can you!
Self Motivation
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The self-control of motivation is increasingly understood as a subset of emotional intelligence; a
person may be highly intelligent according to a more conservative definition (as measured by
many intelligence test), yet unmotivated to dedicate this intelligence to certain tasks. Yale School
of Management Professor Victor Vroom's "expectancy theory" provides an account of when
people will decide whether to exert self control to pursue a particular goal.
Drives and desires can be described as a deficiency or need that activates behavior that is aimed at a
goal or an incentive. These are thought to originate within the individual and may not require
external stimuli to encourage the behavior. Basic drives could be sparked by deficiencies
such as hunger, which motivates a person to seek food; whereas more subtle drives might be
the desire for praise and approval, which motivates a person to behave in a manner pleasing to
others.
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CHAPTER 4
PLANNING A RURAL ENTERPRISE
P lanning is the foremost function in decision making to set up a rural enterprise.
Project planning aims at formulation of all the future project activities well in advance, determine the
quantum of resources required for the purpose and coordinate various activities to complete the activities as
per schedule at the right time. The first and foremost step to initiate the planning process is the identification
of a suitable project followed by information accessibility, market assessment, preparation of feasibility
report, etc. Besides, one has to know the registration procedure of the enterprise and various legal aspects of
business.
PROJECT IDENTIFICATION
For identifying a new project, there are many institutions/agencies such as Entrepreneurship
Development Institutes (EDIs)/Centers, Small Industries Service Institute (SISI), Technical Consultancy
Organizations (TCOs), etc. at State level and District Industries Centers (DICs), private consultancy
organizations, etc. usually located at the district headquarter or in a nearby town which can provide
effective counseling services in planning the enterprise and also in the subsequent activities.
Once one decides to set up own business, one has a wide choice before her/him. In other words, one has
a choice of starting
a) Manufacturing unit - Setting up an industry means one has to organize many things like planning,
arranging for technical know-how, buying and installing machinery, building a factory, managing several
departments like production, sales, quality control, personnel and administration, finance and so on and so
forth.
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b) Trading - Trading involves planning, purchase, sale, stock control and financial management. A retail
grocery shop, compared to an industry, is a simpler business. A large departmental store, however, is not so
simple.
c) Service enterprise - A service enterprise can either be simple or complex. For instance, setting up a
photocopying centre and managing it may be simple but inspection of offshore oil-gas lines is a rather
complex business.
To set up an industry or a service enterprise, one can start an enterprise in sectors like chemical,
pharmaceuticals, basic metal industries, metal products, machinery other than electrical machinery, electrical
machinery, electronics, transport equipments, textile, rubber, plastic, food, mineral-based industries,
ceramics, agro-based but non-food industries (e.g. making briquette from agricultural waste), paper, or
glass.
INFORMATION ACCESSIBILITY
One needs various types of information about several aspects such as opportunities, market,
technology, finance, policies, location, etc. The different sources of information could be:
i) Similar enterprise owners/producers
ii) Raw materials suppliers
iii) Machineries suppliers
iv) Packing materials suppliers
v) Customers
vi) Dealers
vii) Consultants
viii) Employees of similar enterprises
ix) Bank officials
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x) Promotional agency and regulatory agency officials
xi) Association of similar product(s) manufacturers and so on.
Information on Business Ideas - There are numerous directories, handbooks and databases published by
the Govt. of India, Associations and other agencies for obtaining information on opportunities.
These are information in the following forms:
Feasibility studies
Project profiles
Industry studies
Area development studies
The organizations in possession of information on business opportunities are are:
1) District Industry Centres (DIC) - (one in each district)

2) Technical Consultancy Organizations (TCO) - (one each in most States)
3) Centres for Entrepreneurship Development (one each in many States)
4) Small Industry Service Institutes (SISI) (one in each of many large cities)
5) Lead Bank (one in each district)
6) Industrial Extension Bureaus (these exist in several States) and are known as INDEXTB, Udyog
Mitra, Udyog Sahay and so on).
7) National Industrial Development Corporation (NIDC), New Delhi
8) Khadi and Village Industries Commission (KVIC)
9) Commissioner of Cottage Industries (one in each State)
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10) Entrepreneurship Development Institute of India (EDI), Ahmedabad
11) National Institute of Entrepreneurship and Small Business Development (NIESBUD), New Delhi
12) National Institute of Small Industry Extension and Training, Hyderabad
13) Small Industries Development Bank of India (SLDBI), Lucknow
14) Industrial Consultancy Firms
Ideas
An ability of a business idea among various alternatives being considered is a
must.
The key questions in settling down to a viable business idea are as under:
Uses/applications of the product or service
Possible scales of production or operation for which economies of scale is to be looked into
Investment for a given scale and the sources of funds and related expenses there on
Market prospects
Unit sale price
Technical arrangements
Expected annual turnover
Expected profit and break-even analysis
Success determinants, etc.
Capital Organization
Capital is the prime requirement for any project. Term lending institutions such as State
Financial Corporations (SFCs), State Industrial Development Corporations (SIDCs), State Industrial
Investment Corporations (SIICs), Commercial Banks, etc. are the prime sources for meeting the project
cost such as :
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Land cost and land development charges,
Construction of buildings,
Purchase of plant and machinery,
Acquiring technical know-how,
Procuring miscellaneous fixed assets,
Margin of working capital,
Contingencies, etc.
While sanctioning loans, the financial institutions consider the credit worthiness of the project beside the
payback capacity of the project. Hence assessment of financial viability is a must before releasing the
funds.
Support System
Information about supp ort system is a must for an enterprise. In short-term it is the
information which helps in-sound decision making. The information could be on infrastructure
facilities, incentives available, financial tie-ups, availability of raw materials, tax concessions, etc.
Information on various infrastructure facilities such as availability of land, power, and water, facilities for
effluents or wastes disposal should be available from the District Industries Centre of the District or from
the concerned State Directorate of Industries. For financial tie-ups the State Financial Corporation and its
branches which are located at various districts of the State can effectively guide. Even commercial banks
of the locality could be approached. Also proper analysis has to be done by comparing relevant facts and
figures so that the best term or package is available to the entrepreneur.
There are tax concessions and other allowances available from time to time by the
Central Government or the concerned State Governments in the form of tax holidays, sales tax incentives,
etc. for which the concerned District Industry Centre (DIC) shall guide. They can also advise as to how to
meet various provisions of income tax, sales tax, excise duty, etc. depending upon the nature of the product.
MARKET ASSESSMENT
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For sound market assessment three things are important such as
Analysis of Market Dema nd
Market demand for a product is the total volume that would be bought by a defined customer group, in a
defined geographical area, in a defined time period, in a defined marketing environment, under a defined
marketing programme. Hence, there are eight elements of variables which must be analyzed in order to
determine market demand.
The Competition
For a particular product of different brands, the competitive situation could be assessed by analyzing the
market share, price, product features, product age, discount to dealers, credit terms, major customers, etc. of a brand
vis-a-vis the other.
Trading Practices
An Entrepreneur must try to understand the trade practices that are relevant to her/his
product. The intermediaries in the channel, prevailing sales tax, legal implications, etc. have to be
understood properly for assessing market. In selection of a product of service, there is the need to analyze
the market through primary and secondary data. These data can help to assess the current demand, the
forecast and the potential of a particular product or service besides the opportunities and risks available to
it.
Primary Data & Secondary Data
It is the information which is collected first-hand through field work or survey by various
methods such as Questionnaires, Personal Interviews, etc. There are various methods of collecting primary
data i.e. observation method, experiment method and survey method.
Secondary Data: Information which already exists in documented form. Such sources can be
a) Annual reports of the companies
b) Trade publication and records
c) Libraries and trade information centers
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d) Directories of manufacturers
e) Newspaper, business magazines, etc.
f) Govt. publications (e.g. DCSSI profiles)
g) Data agencies, consultancy firms, etc.
h) Information from dealers, various agencies
Market Research (MR)
It helps to collect primary data. The more accurate and fresh the data, the greater are the benefits. The
American Marketing Association defines marketing research as "The systematic gathering, recording and
analyzing of data about problems related to the marketing of goods and services".
There are five steps in marketing research process which are:
1. Problem definition
2. Research design
3. Field work
4. Data analysis
5. Report presentation and implementation
FEASIBILITY REPORT
It is very essential to prepare a feasibility report covering all the activities and the resources
needed for the project. The feasibility report broadly contains the following:
a) The background of the entrepreneur i.e. the educational background, family background and
professional exposure
b) Market potential and marketing strategy
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c) Selection of location of the project which should be on the basis of proximity to the source of raw
materials and/or markets, availabilities of labour, infrastructural facilities, incentives, etc.
d) Requirements of land and building. It is to be ensured that the land is free from any legal
encumbrances
e) Requirement of plant and machinery including their installation
f) Manufacturing process
g) Requirements of utilities such as water and electricity
h) Requirements of raw materials and sources of supply
i) Estimated cost of the project
j) Means of finance
k) Cost of production, taxes and profitability
h) Break-even point
m) Cash flow statement
n) Internal rate of return and
o) Economic viability
A feasibility report must provide a base-technical, economic and commercial-for an
investment decision on any industry/entrepreneurial project. It should define and analyze the critical
elements that relate to the production of a given product together with alternative approaches to such
production. Such a report should provide a project of a defined production capacity at a selected location,
using a particular technology or technologies in relation to defined materials and inputs, at identified
investment and production costs, and sales revenues yielding a defined return on investment. It must
consider all aspects of business right from project background and history, location and site to
conclusion covering its advantages, drawbacks and implementation of the project.
REGISTRATION PROCEDURE
As a small-scale unit it should be registered with the District Industries Centre (DIC) of the
district in which project is to be proposed to be located. It has to obtain No Objection Certificate from the
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State Pollution Control Board. Depending upon the nature of the product or service, it has to be registered
for Sales Tax, Service Tax, and other statutory purposes.
LEGAL ASPECTS OF BUSINESS
An entrepreneur must be aware of various legal and statutory obligations affecting labour
related regulations of the business. These are covered under various Acts/legislations as under the
Factories Act, 1948; Industrial Disputes Act, 1947; social legislations and wage legislations.
1. The Factories Act, 1948
This Act is applicable where the number of employees is ten or more and where power is
used and twenty or more where power is not used. Under this Act the entrepreneur has to take necessary
measures for health, safety and welfare of the workers as per the Act besides taking necessary
precautionary measures against fire. Further, necessary records have to be maintained for working hours,
annual leaves, overtime, advances, wages, deductions, etc. The adherence to various provisions of the Act
shall be regulated by the Chief Inspector of Factories.
2. The Industrial Disputes Act, 1947
Thus Act is applicable to every trade, business, service, etc. which is also considered as
an industry under this act. Industrial disputes are common in a workplace. Such disput es may arise
between employers and employees or among the employees. This dispute may be related to employment
or non-employment or terms of employment or the conditions of labour of any person. The Authorities
under the Act are Works Committee, Conciliation Officer, Board of Conciliation, and Courts of
Inquiry, Labour Court, Industry Tribunals and National Tribunal. An entrepreneur has to follow
necessary procedures in case such a dispute arises
3. Social Legislation
Social security is a need for any employee. The Employees Provident Fund and Miscellaneous
Provisions Act, 1952 are applicable to any establishment employing 20 or more employees. Under this Act,
the minimum contribution payable by the employer towards provident fund is 8.33% of the salary. The
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employee has to make an equal contribution. The details and modalities could be obtained from the
Regional Provident Fund Commissioner. Various other schemes which are covered under this Act are
a) Employee Family Pension Fund and
b) Deposit Linked Insurance Scheme.
4. Wage Legislation
It covers the following Acts:
i) Payment of Wages Act, 1936,
ii) Payment of Gratuity Act, 1972,
iii) Payment of Bonus Act, 1965, and
iv) Minimum Wages Act, 1948.
i) Payment of Wages Act, 1936 - This Act is applicable to establishment where ten or more workers are
employed on any day of the preceding 12 months with the aid of power and twenty or more workers
without the aid of power. Wages mean basic pay, dearness allowance, city compensatory allowance,
overtime wages and production incentives. As per the norms, necessary registers for wages and other
related matters have to be maintained.
ii) Payment of Gratuity Act, 1972 - It is applicable in all establishments in which 10 or more persons are
employed. Gratuity shall be payable to an employee who has put in uninterrupted service for a minimum
period of five years.
iii) Payment of Bonus Act, 1965 - The Act applies to establishments employing ten or more persons.
Under the Act the employer is liable to pay bonus to employees as an annual statutory payment
irrespective of profits. This Act includes all employees drawing wage or salary up to Rs. 3500 per month.
To become eligible for bonus, every employee must have worked for 30 working days in the
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establishment in the relevant accounting year. A minimum 8.33% of wages actually earned during the
financial year subject to minimum of Rs. 1,0001- is payable to each eligible employee irrespective of
profit or loss.
iv) Minimum Wa ges Act, 1948 - This is applicable in 44 scheduled industries. Basic wages are fixed for
different industries and special allowances are announced by the labour commissioner every six months.
Necessary registers have to be maintained.
CHAPTER 5
HUMAN RESOURCES FOR DEVELOPING
RURAL ENTREPRENRURS
Human Resources are amongst the most essential resources that are required for fostering
rural entrepreneurship. The importance of human resources cannot be over emphasized, for it is this
resource alone that makes the greatest impact on socioeconomic development of rural areas. Achievement
motivation is a key to entrepreneurship development. This is achieved in many ways: childhood reading,
upbringing, exposure to challenging situations, self study, apprenticeship, coaching and training, all
contribute to achievement motivation.
Training for Entrepreneurship Development
Development of entrepreneurs through systematic training namely Entrepreneurship Development

Programmes (EDPs) has emerged as an important strategy for development of human resources for
promoting small business enterprises in rural areas. India has come a long way since the idea of creating
an entrepreneur through training was first mooted over 40 years ago.
The focal point of all entrepreneurship development programmes is the entrepreneur, the person who
matters in the process of development. The entrepreneur should be seen in the social context and also in
the context of the needs of rural societies. The conceptual framework of the development of rural
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entrepreneurship should be made the starting point so that the various strategies used in developing
entrepreneurs can be properly understood and planned.
Entrepreneurial motivation is the most important factor in contributing to the development of
entrepreneurship in a society. So, various aspects that help in developing achievement motivation
need to be included in the EDP training courses. These skills have to be properly emphasized.
In order that the potential entrepreneurs succeed in their entrepreneurial ventures, they need to be
thoroughly prepared, rather pained, to imbibe and nurture the key traits like taking initiative,
perseverance, self-confidence, ability to identify and grab opportunities, information seeking ability,
planning, problem solving, persuasive and influencing competencies, risk taking willingness, hard
working, quality consciousness, sense of efficacy, openness to feedback, learning from experience, time
orientation, concern for society, competition and collaboration, dignity of labour, respect for work,
need for independence and need for outstanding performance, etc.
Normally the above traits or qualities are not found in the majority of rural people since they are not
oriented to an entrepreneurial culture. The environment, in which they live, and the lack of opportunities for
entrepreneurial encounters, etc. restrict them. It is, therefore, necessary to create an atmosphere for
promoting potential entrepreneurs. Entrepreneurship Development Centres being run in each State, and
national level institute like EDII, NISIET, NIESBUD, IIED, ICECD, have designed several training courses
for training potential entrepreneurs on various aspects of enterprise development. In addition, several
agricultural universities, research institutes, KVIC, Krishi Vigyan Kendras have provided adequate training
opportunities on the subject matter and technologies for enterprise development. RUDSET institutes also
provide training for potential entrepreneurs under PMRY scheme.
In addition, the network of SISIs located all over the country provides technical guidance and support
for small enterprise development
Training and Development of Rural Entrepreneurs
A brief sketch of the training and support programmes launched by the government is given to enable the
reader get a comprehensive view of the efforts of human resources development for rural
entrepreneurship.
Training of rural Youth for Self Employment (TRYSEM):
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Training of Rural Youth for Self Employment was launched by the Government of India in 1979 as
a facilitating component of Integrated Rural Development Programme (IPDP). In this programme, the
selected rural youth are put through a period of training, either with a training institution or a master
craftsman to provide necessary technical and entrepreneurial skills. On completion of training, the
identified youth receive a combination of subsidy and institutional credit under IRDP for acquisition of
an income generating asset. The syllabus for each trade under TRYSEM should include training in job
skills, as well as management skills. The latter may include elements of bookkeeping, simple knowledge
of marketing, product costing, familiarization with entrepreneurial assistance agencies and with project
financing by banks.
Prime Minister's Rozgar Yoja na (PMRY):

Prime Minister's Rozgar Yojana was launched on 2nd October 1993 to assist educated unemployed
youth to set up self-employment ventures. It relates to the setting up of the self employment ventures in
all economically viable projects (except direct agricultural operations). The Scheme also seeks to associate
reputed non-governmental organisations in implementation of PMRY Scheme especially in the selection,
training of entrepreneurs and preparation of project profiles.
The scheme targeted for setting up of nearly 7 lakh enterprises and consequent
employment generation to more than one million educated unemployed youth in the last four years of the
Eighth Five Year Plan. The target for the year 2004-05 & 2005-06 under the Yojana has been enhanced
from 2.20 lakh beneficiaries to 2.50 lakh beneficiaries per annum for creation of additional
employment opportunities in the rural non-farm sector.
Swaranjayanti Gram Swarozgar Yojana (SGSY):
Swaranjayanti Gram Swarozgar Yojana (SGSY) was launched by Government of India in 1999
with a focus on providing effective self employment through self help group approach and activity cluster
approach for rural poor families below poverty line. The self help groups are motivated through training
and capacity building for taking up thrift and credit activity and start their own small rural enterprises
through the financial assistance of Revolving Fund Assistance.
26

The Scheme also seeks to associate reputed non-governmental organisations in implementation
of SGSY Scheme Rural Employment Generation Programme (REGP): On the basis of recommendation of
the High Power Committee submitted in May 1994, headed by the then Prime Minster of India, the KVIC
launched Rural Employment Generation Programme (REGP) with effect from 1st Nov 1995, for
generation of two million jobs under the KVI sector in the rural areas of the country.
The main objectives of REGP are a) to generate employment in rural areas, b) to
develop entrepreneurial skill and attitude among rural unemployed youth, c) to achieve the goal of
rural industrialization, And d) to facilitate participation of financial institutions for higher credit flow to
rural industries. The REGP scheme is applicable to all village industries project set up in rural areas. The
eligible agencies under the scheme are (i) individuals (rural artisans/entrepreneurs) ii) institutions
cooperative societies, Trusts & SHGs for projects up to Rs. 25.00 lakhs. Under the scheme, the borrower is
required to invest her/his own contribution of 10 percent of the project cost. In case of SC/ST and other
weaker section borrowers, the beneficiary's contribution will be 5% of the project cost. Banks will
sanction 90 percent of the project cost in case of general category borrowers and 95 percent of the
project cost to the weaker section beneficiaries/institutions and disburse full amount of the loan. After the
sanction of the credit facility by the Bank branch, eligible amount of Margin Money will be kept in Term
Deposit of two years in the account of the borrower at the leading bank branch, which will be credited
to the borrower's loan account after a period of two years from the date of first disbursement of loan.
27
CHAPTER 6
BASIC INFRASTRUCTURE FOR RURAL
ENTREPRENEURSHIP
Infrastructure plays a significant role in providing and enabling encouraging atmosphere for
the growth and spread of rural enterprises and small industries. The achievement of an 8 percent growth
rate envisaged in the Five Year Plans will require industry sector growth of over 10 percent, with at least a
corresponding growth in demand for infrastructure. In India, serious problems have been building up in
the infrastructure sector for many years: in transport rail efficiency is low, there has been underinvestment and freight rates are high in order to subsidize passengers. The basic infrastructure includes
transport, utilities and communication including railways, roads, ports, power, and telecommunication
services. Additional infrastructure facilities that are also required are drinking water, housing, healthcare,
among others.
Transport, Power and Communication: A well knit and coordinated system of transport plays an
important role in the sustained economic growth of a country. Transport system forms the major basic
28

infrastructure required for harnessing the potential of rural entrepreneurship. Among the transport
systems' several modes, rail and road are important while ports also play a major role in some cases.
Railways: Railways provide the principal mode of transportation of freight and passengers. Railways with
its vast network spread all over the country play a vital role in the economic, industrial and social
development of the country. The revenue freight traffic, being at 5 18.7 million tonnes in 2002-03 and
increasing substantially from then on, is the backbone of industrial growth and caters to improving the
performance and profitability of small industries.
Roads: India has one of the largest road networks in the world aggregating to about 3.32 million
kilometers by 2004-05. The country's road network consists of national highways, state highways,
major/other district roads and village/rural roads. National Highways, comprising only 1.7% of the
highway network, carry 40% of the traffic, and another 40% is carried on State Highways and major
district roads comprising 12% of the system. But it is connectivity at local levels which has the
greatest impact on rural development and poverty alleviation. Over one-third of the villages in the country
are not connected by all-weather roads.
The expected share of roads in total traffic would be 65 percent of freight traffic by the end of 2007,
which can be achieved through the national highways development programme. Rural roads are also
given their due importance through special programmes like PMGSY, whose objective is to link with a
population of more than 500 with all-weather roads by the end of 2007. A Central Road Fund was created
through a Central Road Fund Act enacted in December 2000.
Pradhan Mantri Gram Sadak Yojana (PMGSY) was launched to provide all weather basic access to about
1.72 lakh habitation of populations of 500 or more. PMGSY roads are constructed to high technical
standards and backed by 5 year maintenance contracts. The objective of rural connectivity is to provide
basic access and the continuity of linkage up to the market/service centre in a cost effective manner. In a
recent study it has been found that the Indian government's expenditure on road construction
contribut ed more to poverty reduction than did the other investments. Roads helped farmers transport
their goods to markets, gave them better access to higher-wage employment opportunities in the rural
non-farm sector, and increased consumers' access to food markets.
Investment in infrastructure in general (roads, electricity, and communications) also reduced poverty by
enhancing agricultural, productivity growth, thus increasing farm incomes and expanding the nonagricultural sector.
29

Power: Generation and distribution of electricity from various sources has a catalytic role in development
of rural enterprises. Accelerated Rural Electrification Programme (AREP) envisages at providing supply
of electricity for production oriented activities like rural industries, minor irrigation and electrification of
villages. To give impetus to rural electrification, the Government is paying special attention to creation
and augmentation of Rural Electricity Distribution Backbone and Village Electricity Infrastructure so as to
cover all the un-electrified villages and rural households in five years. Rural Electricity Supply
Technology Mission (REST) has been set up to oversee the implementation of schemes under AREP.The
Electricity Act, 2003 enacted with a progressive outlook has envisaged a provision of license-free
generation and distribution in the rural areas and regulation of power supply throughout the country.
The Rural Electrification Corporation Limited (REC)'s current mission is to facilitate availability
of electricity for accelerated growth and for enrichment of quality of life of rural and semi urban
population and to act as a competitive, client-friendly and development oriented organization for financing
and promoting projects covering power generation, power conservation, power transmission and power
distribution network in the country. Adequate and uninterrupted regular power supply will augment the
growth of small industries and enterprises in rural areas.
Telecommunication: The telecommunications services form the core area of infrastructure development
today with the thrust on e-governance up to district, tehsil and Gram Panchayat levels. Telephones have
become omnipresent with installation of more than 37000 electronic telephone exchanges by the
government.The results have been dramatic. After decades of constraints, tele-density rose from 1.57 per
100 persons in 1991-2 to 4.4 in 2002 (including mobiles). The target for direct exchange lines in the Ninth
Plan was achieved. Capacity grew by 22% p.a. sufficient to sustain new telecoms-based industries such
as call centres - and costs fell. Contractual and regulatory constraints on the private sector were eased in
the light of experience. There is still a marked difference between rural and urban areas, with tele-density
being 1.14 in rural areas against 10.16 in urban. One third of villages have no phone lines. Computerization
of Land Reforms (CLR) was started as a centrally sponsored scheme in 1988 -89 on a pilot basis in eight
districts in eight states to remove the problems inherent in the manual system of maintenance and
updating of land records and to meet the requirements of various groups of users people, planners and
administrators. The CLR scheme is extended to about 365 districts and 35 19 tehsils or taluks.
Scheme of Fund for Regeneration of Traditional Industries (SFURTI):
Government has recently launched
the Scheme of Fund for Regeneration of Traditional Industries (SFURTI) under which 100 traditional
30

industry clusters (of khadi, village industry and coir) would be taken up for comprehensive development
over 5 years. The KVIC and the Coir Board are the nodal agencies for the Scheme, which will be the first
comprehensive initiative for regeneration of the khadi and village industries sector, based on the cluster
development methodology.
CHAPTER 7
MANAGING A RURAL ENTREPRISE
A rural entrepreneur attempts at managing his enterprise through three sets of enterprise
management functions: primary, production management and financial management functions. After
launching a rural enterprise, various entrepreneurial activities are taken up by the entrepreneur for
optimizing resource use, maximizing profits and enhancing the efficiency of running the enterprise.
So he engages himself in producing and marketing products. He has the simple goal of making the unit
economically viable and sustainable.
Hence managing the enterprise assumes greater importance to achieve efficiency and to
make profits on a continuous basis. So managing a rural enterprise becomes the top priority of the
entrepreneur. Organizing resources -men, money and materials for production, processing, packaging,
and marketing of goods is the essence of managing an enterprise. Choosing and upgrading appropriate
technology is also a key factor for the success of the enterprise.
31

In managing a rural enterprise, following aspects are considered as constituents of the
unit: scale of operation, de-risking through trials, sourcing supply of inputs, working capital,
operating cycle, adopting a gradual growth of production, supervising cash flows and quality control,
using available idle capacity, managing waste, and checking pilferage.
Enterprise management is the process of planning, organizing, controlling and budgeting
of the works of a rural enterprise. Enterprise management comprises various management practices planning for long-term and short-term goals, organizing production or services, arranging working
capital for operating cycles, coordination of all enterprise activities, marketing, decision-making,
delegating, controlling, monitoring and supervising, managing cash flows and finance management,
bookkeeping including writing balance sheet and income statement for budgeting.
a. PRIMARY MANAGEMENT FUNCTIONS
Whenever a new entrepreneur attempts at launching a new venture - a

small industry or an enterprise or business in rural areas, she needs to understand the key functions of
running and managing enterprise to attain entrepreneurial success.
The new entrepreneur has to have a clear vision for his enterprise and plan for achieving long-term
goals. So planning is the most essential of all the primary management functions. The decisionmaking about the choice of product line and technology to be used is also very important. Then organizing
production /services is another essential aspect that the entrepreneur has to think of. Organizing
involves resourcing the enterprise, which includes arranging for men, money and material resources for
starting production work. Staffing, i.e., recruiting and selecting suitable manpower to run the enterprise,
is yet another primary aspect for the entrepreneur-manager.
The primary management functions include most essential functions, such as planning, decisionmaking, organizing and staffing.
Planning
Planning is a process of setting goals and a suitable course of action for achieving the enterprise goals.
Planning is done at two levels: strategic and operational levels. Strategic Planning: When an entrepreneur
adopts a clear long-term goal with a clear vision and well expressed and articulated mission statement for
his enterprise, the entrepreneur is said to be practicing strategic planning. In the small-scale industries and
rural enterprises, there is very limited scope to adopt systematic planning and adherence to strategies. The
32

management process is essentially adaptive in nature. Like in medium and large-scale industries, they
cannot afford to adopt a predictive management process, which involves setting objectives, formulating
policies, drawing up strategies to realize the set objectives. However, a rural entrepreneur is advised
to adopt a strategic planning process at least to set long-term goals. The small scale units with their need
to adopt an adaptive process of management perhaps have to depend on primary relationships like close
friendships or kinship ties for their management functions. Because of the adaptive nature of
management, small-scale units do not permit professionalism to a great extent.
Operational Planning:
R ural entrepreneurs usually adopt operational planning process in achieving their
enterprises' short- term goals. Since the daily activities related to enterprise are within their immediate
control, the rural entrepreneurs plan them well and also execute their plans quite satisfactorily.
Since a rural entrepreneur usually starts an enterprise for which he/she has quite adequate knowledge,
skills, and competencies, she successfully follows her/his daily operational plans in running the rural
enterprise.
Decision-Making:
Usually every rural entrepreneur takes several decisions, on a regular basis, for handling
daily operations of production, assessing the sale volumes for production, assessing working capital
requirements, maintaining quality of\products or services, reducing costs, increasing profits, etc.
Appropriate decision-making is the hallmark of successful entrepreneurs. An element of risk taking
willingness of an entrepreneur plays a key role in taking right decisions. Usually the decisions taken
would prove to be right or wrong only after the results start coming and after assessing the consequences.
Product Choice:
Entrepreneurs make several decisions about product choice. When an entrepreneur attempts
to make a difficult or complex product, say an electric mains switch, marketing it is relatively easier
than the items which can be easily produced. Running around marketing of simple and easy
products consumes more time and pays fewer dividends. Moreover, with difficult products in hand,
the entrepreneur can even monopolize the market, while with simple products he/she faces heavy
competition due to many players in the market.
33

Technology Choice:
Appropriate choice of technology plays a significant role in getting better product quality and
market share. A spice manufacturer had installed an imported machine that enabled him to powder the
spices at low temperatures so that the quality is not affected, which otherwise normally happens with the
indigenous machines because of heat generated in the grinding process. Costs may increase in such cases
but it is the quality of final product that gets an entrepreneur the money back.
Successful entrepreneurs usually end up taking decisions that yield desired results and may prove to be
right in retrospect. So, practicing appropriate decision-making in their enterprises may be one of the
reasons for their entrepreneurial success.
Organizing Production/Services
A rural entrepreneur needs to organize the production process or service operations for
achieving entrepreneurial success. So he/she starts installing the equipment and machinery, organizes
space and sets up the enterprise according to the project proposal.
Managing a rural enterprise involves looking after production processes to ensure quality control and
wastage reduction. So, technically trained entrepreneurs spend more time in close and direct supervision
of the production process. Those people who bad prior experience of working in a product line also give
special emphasis to production process. So, they assume that production is crucial part of small-scale
enterprises and feel that time devoted to .production never goes waste.
The entrepreneur-manager also takes care of raw material supplies and studies the raw
material market, explores for new dealers and spends a lot of time for getting better raw materials
and components for the enterprise. The organizing function of managing a rural enterprise evolves into an
expertise and specialized field for entrepreneurs because this is one area of enterprise control where costs
can be controlled.
Adequate experience and enough knowledge about all the raw material components required and
their sources to get them at competitive prices is another essential feature of successful management of an
enterprise. Getting to know the reliable supplier of raw materials does not happen in a day or two. It
involves many trials and tests and is quite painstaking. A good manager believes in simple truths: "No
pains, no gains!"
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Staffing
An entrepreneur, in an attempt to launch a new enterprise, creates employment not only for
himself but also for many others - skilled as well as unskilled labour. The staff including workers,
technicians, mechanics, foremen, supervisors, managers, etc., is the most essential of all resources for
running the production process and realizing the dream project of the enterprise.
Recruiting and selecting t he staff: This is most critical aspect for the entrepreneur who has to select only
those people who not only provide necessary skills and competencies for the enterprise and but also share
her/his dream, values, standards of excellence and quality products or services. But getting the required
people is always a difficult task for the entrepreneurs.
Managerial Staff: They usually take in a few of their own family members in management cadre for
many reasons, such as convenience, familiarity, understanding and being less risky. But the
experience has shown that this has yielded mixed results. In some cases, the relatives managed to
cooperate with each other, while in others, tensions caused even closure of the enterprises. Most of the
entrepreneurs depend on the primary relationships because they adopt an adaptive mode of management,
which may not allow for professionalism to a great extent. Retired government officials or middle-aged
persons offer their services for managerial jobs in small industries, but usually prove to be misfits due to
unrealistic expectations and mismatched performance standards. Most of the managerial staffs possess
very little
experience as
the
entrepreneurs
of small-scale industries find it difficult to attract
experienced managerial personnel. They often learn their job according to the exigencies without much
prior practical training. Due to shortage of management staff, it is imperative for the entrepreneur-owner to
also handle other's jobs to ensure that the work does not get held up in case someone is absent. Managers
have also to be recruited suiting their abilities and temperament. A good manager diagnoses the problem
objectively and does not get carried away by emotions and tempers. Similarly the capable and competent
supervisors and foremen on the shop floor make a great difference in production performance and quality
control.
Training the unskilled labour : Getting the skilled labour may become difficult as the better skilled people
may not opt for working in a rural industry. But the unskilled labour may take long time as they learn
everything on the job and through experience may acquire necessary skills. In such cases, where skilled
labour are hired from outside, they may soon quit for better opportunities elsewhere. So when these
people leave the enterprise, the lower level unskilled labour may take over operations with mixed results.
In the process, the enterprise slows down and suffers. The lower skilled or unskilled labour force are
usually not provided any technical training for the fear of losing them as they may leave for better options
35

after acquiring the training. Adequate specialized training needs to be given to the employed man power
for running the machinery in order to develop masters of some specific tasks. Employed staffs need to be
observed critically for their competencies and weaknesses and they need to be assigned tasks accordingly,
and developed appropriately to become experts in a particular field. Otherwise, the employee may
become jack-of-all-trades but master of none.
b. PRODUCTION MANAGEMENT FUNCTIONS

The production management functions include those functions in running the enterprise, such
as production management, arranging working capital for operating cycles, assessing the break-even
point, and marketing of products/services.
Production Management
Production management is the process of arranging and allocating work, men, money, and
material resources in such a structured manner to achieve the twin goals of an enterprise - reducing costs
and increasing profits. Once an enterprise is set up, i.e., once the entrepreneur has organized space,
machinery, equipment, and other fixed assets, and also recruited and selected required work force, she
would start production. She/he is ready and set to start operations of her/his enterprise. The entrepreneur
needs working capital for starting production. She tries to understand the operating cycles of production
assesses working capital requirements and sets about producing goods. So s/he needs to understand
operating cycle, Working capital, etc. Then the new entrepreneur would make attempts at production,
engages in trial production- and adopts a pricing policy based on the costing of making the products
Working Capital: An entrepreneur needs finance for various operating expenses. She needs to buy raw
materials, consumables, packaging materials, etc., and needs money for salary and wages, rent,
premium and other services. So, in order to cover all these, expenses she would need money, which is
known as the working capital. This money can be recovered once the entrepreneur sells the finished goods.
Till that time, the funds gets locked up in the production process. So, working capital can be defined as the
amount of capital perpetually locked up in the form of current assets viz. raw materials, work-inprogress, finished goods, credit may lead to wrong decisions and result in a chaos in the enterprise, which
tin be easily avoided given and cash required to sustain a specified level of activity in terms of
36

production and sales. To find out the requirement of working capital, one needs to understand the
concept of operating cycle.
Operating Cycle: One needs to buy and maintain the stock of raw materials for a certain minimum period.
This will depend upon various factors like nearness of the market, cost of procurement, availability of the
raw materials and their shelf life. The stocking period will vary from a day to even 5-6 months. To
convert the raw material into finished products will also take certain time. This will depend upon the
process involved and timely availability of all the needed resources. Once the product is ready it has to
reach the buyers and in return the sale proceeds are to be collected. This also takes some time depending
upon the demand and terms of sales. The time taken for all the three stages above, i.e., the stocking
period, production time and sales realization time put together constitute an operating cycle of the
business. The working capital is the total funds required to meet all the expenses of one operating cycle.
Usually, the small entrepreneurs consider the production expenses only as working capital. They
neither consider the stocking period nor presume the sales realization time. So it is very important to
understand the concept of operating cycle and calculate the working capital required for the entire period.
And working capital is the sum total of all operating expenses for the period of one operating cycle.
Working capital management is the most dynamic concept of financial management in an enterprise.
Effective working capital management would lead to:
a) Lower investment of finance in working capital for a given activity level.
b) Effective management of cash, which is an idle investment.
C) Reduction in cost of production as a result of lower investment of finance in working capital. Operating
cycle should be as fast as possible so that the working capital is required for only a short period of time
as it incurs interest costs. Faster operating cycles also enable more number of operating cycles and greater
volume of production.
Marketing Management
Marketing is perhaps the most crucial of all management functions in rural enterprise
management. If the entrepreneur can understand the preferences of customers and adopts an effective
strategy for marketing and selling, distributes products and services directly or through agencies to
customers, then probability of success is very high. A good entrepreneur makes prior agreements for
assured marketing and adopts an effective marketing strategy and thus earns profits through marketing.
37

Marketing involves assessment of the needs of customers, a good pricing policy, promotional and
advertising approach and distribution system, and finally good profit.Hence, a customer is the focus point of
all marketing management and strategies. The customers decide:
a) What they want and need,
b) What they will pay for the product or service to satisfy that need, and
c) Where and from whom they will buy it.
Hence the customer is focused in marketing and promotion strategies. The entrepreneur needs to
understand that marketing is the backbone of one's enterprise as this alone can bring in cash for
further production and sustenance. Since marketing is assumed to be crucial to entrepreneurial success,
marketing management needs to be taken up ardently by the new entrepreneurs.
c. FINANCIAL MANAGEMENT FUNCTIONS
The financial management functions include those functions that deal with handling
cash and finances, costing, pricing, break-even analysis, managing cash flows, accounting and bookkeeping, writing a balance sheet and income statement for budgeting.Financial management is a very
important area of control. It involves management and long-term finance for establishing enterprise,
expansion and growth; as well as short-term finance for getting working capital. Proper estimation and
management of finances for the enterprise are necessary for the success of any enterprise.
Costing
An entrepreneur needs to understand the role of both these costs in fixing prices for finished goods.
While the direct costs for each product unit increase proportionately, the indirect costs will generally
decrease with increase in number of product units manufactured. Care should be taken to include the costs
incurred in production wastages, loss in handling and transit, customer rejections, after sales service, loss
in man-hours, transportation costs, distribution and sales costs, local taxes, etc., as these directly affect the
price of finished products. An entrepreneur-manager needs to calculate these costs carefully in order to
arrive at reasonable profits.
Pricing
The process of setting a price for the finished products poses a great challenge to a new
entrepreneur. Price of the products or services depends a great deal on the cost of doing business. The cost
of sales tells what to charge to stay in business. This is known as setting the floor price; or the minimum
38

price. The competition will set the ceiling price, or the maximum price. The entrepreneur needs to charge
enough for the product or services so that both fixed costs and variable costs will be covered by sales and a
small profit is also derived. If prices are set too high, it may not be possible to attract sufficient business to
cover fixed-costs; if prices are too low, the larger number of customers attracted may not still generate
enough revenue to cover all costs.
Break-even Analysis
A break-even analysis can and should be done to check the reasonableness of the prices fixed.
Break- even helps to take fixed costs and variable costs into account when fixing the prices. Initially, in the
first and second operating cycles of production, it may not be possible for the entrepreneur to break- even
but over time the entrepreneur moves beyond break-even point and starts making profits. It is always better
to reach break-even point sooner than later. The break-even point is a valuable tool to analyze how much
one needs to sell to make profits. If the entrepreneur knows approximately how much they needs to sell,
they can order the proper amounts of stock of raw materials, produce, and find way to sell that much. Once
these basic elements are identified and estimated, one can calculate the break-even point. Breakeven
analysis determines the point at which sales revenues equal production costs. The break- even point can
also be defined in terms of physical units sold, or the level of capacity utilization at which sales revenues
and production costs match each other. So entrepreneurs always attempt to utilize maximum capacity of
their equipment, machinery and labour and reduce idle capacity utilization.
Cash Flows Management

The new entrepreneurs need to know as to what amount of money has come in and how money
has gone out in a certain period. It will give them an idea whether the business is likely to yield profits
and enable them to realistically forecast money movements. The money movement into and out of business
is a matter to be controlled by the entrepreneur. Cash flow refers to the actual movement of cash into and
out of an enterprise. A cash flow statement is prepared for a few years, and it is usually sub-divided into
the cash movements on a monthly basis for first two years and even on a daily basis in the initial stages.
Cash inflow from sales depends on the method of payment to be expected. This is because credit trading
has the effect of shifting cash flow into a later period than the date of actual sales. In cash outflow the
actual payment is considered, depending on the credit terms arranged with the material suppliers, as this
will allow payment some time after the delivery of raw material. If a business is to keep out of trouble, it
must have enough cash inflow to pay day-to-day expenses like wages, suppliers, rent and electricity,
39

etc. Monitoring cash flows and ensuring smooth flow of cash forms one of the healthy practices of an
entrepreneur. A healthy cash flow and finance management would ensure healthy enterprise and thereby
entrepreneurial success.
Accounting and Book-keeping
Every new entrepreneur is advised to form a system of maintaining books of accounts
and records from inception. Recording all accounts regularly is a routine work that may be
monotonous and boring but its worth can only be seen in its absence. Absence of a system of accounting
is one of the important reasons of failure. Accounts are eyes of business and show the economic condition
and financial health of the business very clearly.
Book-keeping or maintaining a record of all accounts of the enterprise - the expenditure
incurred, the wages, the payments due and the overall income-expenditure-profit details help the
entrepreneur to assess the financial health and financial discipline of the enterprise. If an entrepreneur is
keeping all records of vouchers, bills, account slips, etc. in various cash books and registers, then she is
practicing book-keeping for her/his enterprise and also running the enterprise in a systematic manner.
Successful entrepreneurs resort to regular counting and book-keeping of their enterprises which provides
ready data on finances and may guide them in making appropriate decisions and running their
enterprises efficiently.
Balance Sheet: Balance Sheet describes the enterprise's financial condition at a given point in time, in
terms of its assets, liabilities and net worth. The successful entrepreneurs usually write their balance
sheets on a regular basis and may turn out to be good enterprise managers and hence achieve success in
their entrepreneurial ventures. The unsuccessful entrepreneurs, more often than not, do not prepare any
balance sheet whatsoever.
Income
Statement :
Income
statement
summarizes
the
enterprise's
financial
capability.
An
entrepreneur, after all, works to earn an income from her/his enterprise. If she is not aware of how much
she had earned over a period of time, she is not in a position to decide whether to continue or stop or
change the course of action. Through an income statement, the entrepreneur will have a fair idea of the
operational costs, cost of products sold, administrative expenses; taxes and interests paid, and the net
income earned. The income statements of over; a period of years or cycles of production will also help the
entrepreneur to actually know whether there are incremental gains or losses in her/his enterprise.
Effective financial management practices form the core of managing a rural enterprise. The rural
40

entrepreneurs need to grasp the intricacies of costing, pricing and breakeven analysis in order to attain
entrepreneurial success
SOURCES OF FUNDS
Normally an entrepreneur tries to meet at least part of the funds requirement from ones own
sources, which we call as capital of the promoter. He/she arrange this fund either from friends,
family members or from own saving. In most cases it is founds that this funds is quit insufficient to run the
business. Therefore he approaches various agencies for meeting the requirements.
The credit and landing agencies operating rural areas can be divided into two types:-
1) Institutional
2) Non- Institutional
The former comprise commercial banks, co-operative societies, development banks, regional
rural banks
and
non banking
financial companies. These institution operate in regulated
environment and observe fixed norms & guidelines enumerated by the government. Since they are
more amenable to policy prescriptions of government authorities they have fixed criteria on rate of
interest, primary & collateral securities & selection procedures. The non institutional agencies are lending
agencies operating in non formal manner. They are mostly money lenders operating in rural areas. They
are only lending agencies before the entry of institutional agencies. Rural people have easy access to
these sources of finance, as there are no Rules & regulations guiding their activities. They charge
very high rate of interest and many of them take away the entire property of the poor people which is
pledge by them for granting loans of even very small amount.
Institutional financial is of three types:-
1) Banking Institutional:- Commercial banks, co-operative societies, Regional Rural Bank.

2)
Development banks:- Small industries development bank of India(SIDBI)
, National Bank of
Agricultural and Rural Development Bank (NABARD), National Housing Bank (NHB)
3) Non banking financial companies
41

TYPES OF CREDIT FACILITIES AVAILABALE TO RURAL ENTREPRENEUR
Credit facilities can be fund based or non fund based. In case of non fund based facilities
bank do not lend funds directly. They issue Letter of Guarantee and letter of Credit (LC), which are simply
commitments on the part of the bank to pay for the borrower in case of contingencies. Fund based
facilities are those where banks have to land funds directly. It include
1) Cash Credit (for Working capital Requirement)
2) Term Loan (for appearing Fixed Assets)
3) Bridge Loan (short term finance)
d. SUSTENANCE MANAGEMENT FUNCTIONS
Once the production process is on, the rural entrepreneurs need to concentrate their energy and
efforts on sustaining the activities of the enterprise. The major management functions that would help
sustain the enterprise are coordination, controlling, delegating and supervising.
Coordination
An entrepreneur is the technician, worker, manager, financer and the boss - all in one. S/he
has to take care of all the activities involved in the raw material supply, production, quality control,
packaging, marketing, budgeting, recycling funds and managing the enterprise, among others. So the
likelihood of an entrepreneur being successful depends, on the way he or she coordinates all the activities
of the enterprise. Thus, coordination is the process of integrating enterprise works in order to pursue
entrepreneurial goals effectively.
Controlling
An entrepreneur takes steps to ensure that the actual activities of running enterprise conform to
the plans and goals already set for the enterprise. If a production target is set, it has to be met within the
specified time frame. Otherwise, delays may prove very costly. Thus the production process is
monitored. This management practice is called 'controlling', which helps managers to monitor the
effectiveness of their planning, organizing, decision-making, and actions. An essential part of controlling
process is taking corrective actions, as and when needed, to achieve the entrepreneurial goals. In fact, it is
the constant close supervision of the enterprise owner that helps in steering the enterprise in the right
direction. In case, the enterprise is not being run in desired direction, the entrepreneur controls it, i.e.
she sees if the enterprise goals are in sight and if not, changes the direction towards the set goals. To
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enable better controlling of the enterprise, the enterprise follows the simple practices of monitoring the
cash flows to and from the enterprise. Strict financial management practices help attain better control of
the enterprise. Even close supervision and monitoring of production process helps in quality control.
Delegation
In the tiny units, the owner has to manage almost everything. Or she may have one of her/his
family members or relative to help as an assistant. As the size of the unit grows the need for delegation of
responsibility increases. When the scale of operation of an enterprise gets enlarged, the entrepreneur
usually has to attend to various activities of the enterprise and is hard pressed for time. In such cases, she
usually hands over some specific work to one of her/his
employees
or family members for
monitoring and completion. This act of assigning work related to management coupled with formal
authority and responsibility is called delegation. Entrepreneurs delegate work to others in order to manage
the enterprise efficiently and successfully. In this process, the entrepreneur personally handles some of the
most essential jobs and gets other less critical jobs done under her/his instruction and supervision.
Usually many entrepreneurs learn something about all the tasks of their enterprise. An entrepreneur who
can handle all operations of one's unit is more likely to succeed only because she pays equal attention
to all aspects of managing the enterprise. Moreover, she can easily diagnose what went wrong and
where. Time management also assumes significance as proper distribution of time proportionately among
all aspects of enterprise ensures success. Many of the successful entrepreneurs, even though they delegate
some specific works to supervisors in their enterprises, are not entirely happy with the process of
delegation. They would insist that the responsibility still rests with them in ensuring the completion of
some works and quality of products/services. To give an example, the poultry farmers rarely delegated the
technical tasks like vaccination of birds at regular intervals as it involves high level of skill and its poor
performance may result in high losses. On the other hand, a low skill task with low risks like 'daily feeding
of birds' was often delegated to the workers.
Supervising
Supervision may be defined as the art of directing the effort or harnessing the energy of human
resources of the enterprise for the attainment of enterprise goals. Supervision involves directing, delegating
and controlling functions of a manager, Close and direct supervision is essential for maintaining
quality control.
Quality Control: Quality conscientiousness is another aspect that fetches more monetary returns.
Improving quality of products by redesigning and using better components is possible only when the
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entrepreneur herself/himself spends adequate time with workers on shop floor, diagnosing problems and
immediately correcting them, and by getting directly involved in the manufacturing process. To ensure
quality, mid-way in the process of manufacturing various components, the entrepreneur conducts various
tests, because improper components may not be useful to assemble better final products.
CHAPTER 8
PITFALLS IN MANAGING A RURAL ENTREPRISE
A promoter of a rural enterprise faces a plethora of problems, usually called 'teething
troubles' when he/he sets up her/his enterprise. First, arranging working capital becomes the major task
as she runs out of money to buy raw materials though she may not yet have earned any reputation in the
market to get raw materials on credit. Similarly, she makes several production trials, refines the
finished products, improves quality, attempts to set a price for her/his products, etc. In the process, she
learns from the customers and distributors about the preferences and prices.
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Common Pitfalls
A person who does not believe in long-term strategic plans but gets entangled in daily
chores of running the enterprise usually meets with failure for lack of preparedness for future eventualities.
Among rural entrepreneurs, the practice of strategic planning is found to be quite inadequate. Since the
rural people, in general, have often fallen victims to vagaries of monsoons, prices and other uncertainties,
they seldom venture to think of future plans and are usually ill-prepared for any contingencies. They
were also found to be confusing the term strategic planning with daydreaming. The usual dictum is "Do
not count your chickens before they are hatched!" But successful entrepreneurs believe in "Hope for
the best, but prepare for the worst", and hence success. Most of the managerial staffs recruited have very
little experience. They often learn their job according to the exigencies without much prior practical
training. However, the scope for specialization is limited. Due to shortage of managerial staff, it is
imperative for one to handle other's jobs to ensure that work does not get held up in case someone is absent.
The managerial jobs are plural in nature to a greater degree in the small-scale sector than in the medium and
large-scale industries.
In cases where the scale of operation of an enterprise has increased, small-scale industries are
also started as joint ventures with two-or more partners. But partnerships may yield mixed results. While
some units survive because of committed partnerships, others have failed due to lack of understanding
between partners. A good deal of mutual faith, maturity and complementary support are essential for
successful partnership in enterprises. An entrepreneur needs to look beyond into future with long-term goals
in mind. A narrow outlook, inferiority complex and lack of patience and lack of exposure will be great
impediments for enterprise development. Merely thinking of limited gains will not make a successful
entrepreneur. Suspicion and jealousy may not find place in a partnership venture.
Most of the rural entrepreneurs are not serious with the practice of organizing resources for
production/services for their enterprises. Usually, they take it for granted this crucial issue of
organizing inputs, money and other key resources because they take up only familiar entrepreneurial
activities on which they have adequate command and knowledge. They find organizing of resources as an
easy and routine affair and conduct themselves in a 'business as usual' manner. Most of the entrepreneurs
supervise their production work by themselves. However, they have to learn to delegate various
responsibilities to their partners and subordinates. Otherwise, they tend to get bogged down in one aspect of
production at the cost of ignoring some other crucial aspect of managing the enterprise and so productivity
may decline. The small entrepreneurs usually do not prepare long-term plans. They often believe that their
ideas cannot be implemented for want of resources. However, it is the inadequate understanding of the
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intricacies of business and lack of proper planning which hampers their dreams. Usually they learn the
basic principles of financial management from their own mistakes. In the process, many of them bum their
fingers and get disheartened in the beginning.
Even if they know their job and business skills, they are not able to reflect upon the mistakes of
the past. Quite often in the absence of records, the access to formal credit facilities is also denied. So it is
important for them to learn and adopt the principles of financial management as well as maintain the
necessary records. Managing cash flows poses a great challenge for the entrepreneurs. Delayed cash flow is
a big pitfall which may not be avoided by even the best of entrepreneurs. Similarly large gaps are seen in
the understanding the operating cycle and working capital requirements by the new entrepreneurs. An
effective manager-entrepreneur will take special care of cash flows in running one's enterprise.
CHAPTER 9
BIBILOGRAPHY
http://www.scribd.com
http://www.google.com
http://en.wikipedia.org/wiki/preference
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RURAL ENTREPRENEURSHIP IN INDIA

BUNTS SANGHA MUMBAI

RURAL ENTREPRENEURSHIP IN INDIA

This is to certify that

RURAL ENTREPRENEURSHIP IN INDIA

The information submitted is true and original to the best of my knowledge.

Signature of the Student

I hereby acknowledge all those who directly or indirectly helped me

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6. Basic Infrastructure for Rural Entrepreneurship..............................................36-38

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1.2 CONCEPT OF MOTIVATION

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1.3 DEFINATION OF MOTIVATION

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Person Moti vat ed i n Tot al it y:

Nee d of moti vation

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Area development studies

The organizations in possession of information on business opportunities are are:

1) District Industry Centres (DIC) - (one in each district)

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Uses/applications of the product or service

Unit sale price

Expected annual turnover

Expected profit and break-even analysis

Success determinants, etc.

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Land cost and land development charges,

Purchase of plant and machinery,

Acquiring technical know-how,

Procuring miscellaneous fixed assets,

Margin of working capital,

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1. The Factories Act, 1948

2. The Industrial Disputes Act, 1947

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Training for Entrepreneurship Development

Development of entrepreneurs through systematic training namely Entrepreneurship Development

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Training of rural Youth for Self Employment (TRYSEM):

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Prime Minister's Rozgar Yoja na (PMRY):

Swaranjayanti Gram Swarozgar Yojana (SGSY):

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a. PRIMARY MANAGEMENT FUNCTIONS

Whenever a new entrepreneur attempts at launching a new venture - a