Why are Small Businesses Important to the Community?

. 6 min read
Why are Small Businesses Important to the Community?

How do small businesses impact the community?

Why Is It Important To Support Small Businesses?

  1. Right after gaining Independence, India’s mission for revival and development was on the able shoulders of young, smart, and business-oriented citizens.
  2. They laid the foundation of business and industrialisation in India, which because of their sharp and strategic mindset are now an MNC with investors and shareholders all around the world.
  3. These business houses back then were nothing but a small venture that operated locally from a small space and with minimum human resource and capital.
  4. But, the dreams to grow bigger and bigger of a few thriving entrepreneurs helped in their business expansions after which it was the history that was created in India.
  5. This way, the foundation stone of small businesses in India was established.
  6. Some started with a small business, but went on to make a presence pan India as well as globally.
  7. At the same time, some restricted themselves (mainly as a personal choice) and chose to carry on their small business with its popularity expanding worldwide.
  8. This restriction was mainly because they did not want to share their unique and distinctive talent with other sellers by sharing their ideology or through collaboration as their talent is their true legacy, goodwill, and net value.
  9. Small businesses may be small in size, employability, sales, and earnings.
  10. However, the amount of money these businesses add to the country’s economy is exceptionally high.
  11. One particular reason that makes small businesses important for the Indian community is its capability to generate employment opportunities per unit of capital.
  12. Just like, million little parts of a car make it look complete and lavish, thousands of small businesses make the Indian economy and the local community complete and progressive.

Importance of Small Business

  • From infrastructure to manufacturing to technology, small businesses are widely spread in India, acting as the spine not only for its local economy but the Indian economy as a whole.
  • Statistics say that out of all the innovations in India, 65% to 75% is contributed by the small businesses houses.
  • Reducing unemployment in India by supporting neighbourhoods, uplifting the country's economic growth in smaller geographical regions, circulating the local money within the community, and more, small businesses are always a boon for any country.
  • Bringing up the soil on which they have grown, small business houses in return give back vitality and sustenance to its motherland.
  • Nicole Snow has rightly quoted - “A small business is an amazing way to serve and leave an impact on the world you live”.
  • And to support her quote we have explained the importance of small-scale business in our country.
  • Read it thoroughly and be inspired to start yours soon.

What Makes Small Businesses Important for the Indian Economy?

Small Businesses shoots up Production Capacity

  1. Being the world’s fastest-growing economy, India has an excellent production output rate, and the contribution of small businesses in India’s gross industrial value is near to 40%.
  2. For every Rs. 10 Lakh invested in small businesses, the production of goods and services by such business houses crosses Rs. 40 Lakhs with value addition of over 10% in this output.
  3. At the moment, the small and medium business sector in India is worth Rs. 75 million, which is anticipated to climb to 105 million in the coming five years.
  4. With Indian government phenomenal initiatives of “Make in India'' and “Vocal for Local'', small businesses are only set to touch the sky shortly.

Growth in the Employment Rate

  • It is the small scale businesses in India that stand second highest recruiting industry after the agriculture sector.
  • If an investment of Rs. 10 Lakhs is made by the fixed assets of small businesses, four people, if not more, will be getting full-time opportunities to work.
  • As the small company operates and functions, both in urban and rural areas, employment opportunities will be created in both arenas.
  • Thus, distributing employment chances nation-wide and curbing the unemployment rate significantly.

The Rise in Indian Exports

  1. Of India’s total exports, the share of small business houses is as fair as 50%.
  2. Out of this, direct exports by small businesses amount to 35%, and indirect exports total to 15%.
  3. It is also the helping hands and constant assistance of the merchants and trading houses who help small enterprises export their goods and services to other countries.
  4. Like this, small business houses can earn valuable foreign exchanges and lower the country’s balance of payments pressure.

Small Businesses are the Gateway to New Opportunities

  • Small businesses are a great medium of investment for people who are willing to invest.
  • Apart from high income earning opportunities by allowing a share in the profits, investors also get attractive tax benefits and rebates from the government for investing in small businesses and for promoting them.
  • As small enterprises are less capital, intensive, receiving financial assistance is relatively easy for them.
  • This promotes residents to channelize their savings and accept high returns as interest.
  • Such businesses can procure business loans at low rates from banks and NBFCs and easy terms and conditions.

Circulating the Local money within the Local Community

  1. One of the best features of a small business is it keeps the local community’s money within the boundaries of the community.
  2. The tax money of both the company and its employees stays local that is put into use for the community's benefit by supporting the local municipal service provider, schools, and other utility vendors.
  3. Similar to the strategy of employing residents, small businesses also prefer to support their nearby small and local business owners by purchasing regular supplies, collaborating in marketing and advertising efforts, and more.
  4. In this manner, they effectively utilise local resources and incur shared benefits.
  5. Small enterprises are a medium to pass on the age-old traditional family skills and business to the incoming generations.  

Small Businesses Promotes a Shared Community Identity:

  • Small business houses keenly work towards uplifting the region to which it belongs and towards bringing forward its residents in front of the whole nation.
  • For them, it's always about “US” and “WE.”
  • They proactively get involved in local cultural life and celebrations and sponsor various local events to boost its community’s identity.
  • They also aggressively work to encourage young talents to be entrepreneurs by imparting the right entrepreneurial knowledge and guiding them on the same path.
  • Hence, it can be put in this way that ‘small businesses work with the community, for the community, and by the community.’
  • That is why they are always rooted tightly to their soil while making its name popular all around the world.

You might also be interested in:

10 Best Ways to Promote Your Small Business

How To Get Small Business Loan From Government?

Best Tips for Small Business Owners


Q. What problems do small businesses in India largely face?

Ans: The common problems that small businesses in India usually face are company registration, maintenance of accounts, procurement of special raw materials, digital presence due to lack of technology, marketing, and advertising, infrastructure, inadequate planning, skilled labour, working capital, and a few others.

Q. How to start a small business in India?

Ans: Starting a small business in India is quite simple. Start by selecting a distinguished product or service you want to sell, choose your business location accordingly, fix your business pattern, prepare a project appraisal, and lastly register your business with the relevant authorities.

Q. With respect to small businesses in India, what does the price & Purchase Preference Policy mean?

Ans: As a part of the Government's initiative to provide marketing avenues to small businesses, the Price & Purchase Preference Policy has been designed under which the Director-General of Supplies & Disposals offers numerous facilities and assistance to small business houses under its Government Stores Purchase Programme.

Q. Define the Credit Guarantee Fund Trust developed for small enterprises by the Indian government?

Ans: The Credit Guarantee Fund Trust has been jointly set up by the Government of India, The Ministry of MSME, and SIDBI to help small enterprises get credit without keeping any collaterals or third party guarantees. Here, the primary motive of the scheme is to ask the lender to give weightage to the small business’s project viability and make the credit facility available only based on primary security in respect of the assets financed.

Q. What type of business are the most successful small businesses in India?

Ans: There are various types of businesses that are the most successful small businesses in India. They are accounting services, Legal firms, Cleaning services, Delivery Services, Mobile Grooming services, Tutorial services, Repair & Maintenance services, Web Designing, Courier services, Mobile Food services, and a few more.    

Q. What makes small businesses stand out in comparison with big businesses?

Ans: A small business’s agility, flexibility, and adaptability make it stand out when compared to a big business. It is also the flat hierarchy and simplified structures in small business houses that make it easier to work in, which is the opposite in big business houses where everything flows through a designed system and level of the hierarchy. Because of its large scale operation, size structure, various branches, big businesses find it hard to be in touch with their customers regularly. Whereas in small enterprises, closer relationships and contact is seen as their scale of operation and size of functioning is minimal and limited.