The Commissionerates or Directorates of Industries are the nodal agencies in different States which assist and guide new entrepreneurs in starting up an industrial unit in the concerned State. They provide an interface between industry and other agencies for industry inputs and enable the entrepreneur to get different industrial approvals and clearances from various departments at a single point-Single Window. They sanction incentives to eligible industrial undertakings and create a transparent and automatic system of allotment of scarce raw materials to industrial units. Hence, a new entrepreneur must approach the concerned commissionerate while setting up a business firm.
BUSINESS FINANCING
Business finance refers to the funds and monetary support required by an entrepreneur for carrying out the various activities relating to his/ her business organisation. It is needed at every stage of a business life cycle. For instance, in starting a business, it is essential for acquiring fixed assets, such as land, building, plant and machinery, etc as well as for meeting the day-to-day expenses (working capital) in the form of payment of wages and salaries, purchasing raw materials, etc. In order to successfully operate and expand the business, funds are necessary for promoting and marketing the product; distributing it to the prospective consumers; as well as for managing the firm's human resource base. Further, in the changing business environment marked by increasing competition, additional funds are desirable for continuous modernisation and upgradation of the business unit.
Though the amount of the capital needed by an enterprise depends upon the nature and size of the business, but its timely and adequate supply is indispensable for any form of industrial set up (whether small, medium or large). Recognising this fact, the Government of India has evolved a well developed financial system in the country. The financial system refers to an institutional arrangement through which the savings in the economy are mobilised and effectively allocated among the ultimate borrowers/ investors. It operates through a network of financial markets and institutions, which are broadly categorised into money market and capital market. The former market deals in short-term funds, while the latter deals in long-term funds. For regulating the operations of money market, the Reserve Bank of India (RBI) is the supreme authority. Whereas, the Securities and Exchange Board of India (SEBI) supervises the functioning of the capital market.
The major constituents of the Indian financial system are banks, financial institutions, non-banking financial companies and venture capital companies. Banks are the most important source of institutional credit in India and consist of nationalised banks; regional rural banks; co-operative banks; private sector banks including foreign banks. A wide variety of financial institutions have been set up both at the national and the State level, which cater to the diverse financial requirements of the industry. They include all-India development banks; specialised financial institutions; investment institutions; State financial corporations as well as State industrial development corporations. Besides, the non-banking financial companies are a group of institutions which perform financial intermediation in various forms, like accepting deposits, making loans and advances, leasing, hire purchase, etc. On the other hand, venture capital is an important source of funding for the formation of small and medium enterprises in their early stages of development.
Given this financial set up, the Central and the State Governments have been making all efforts for meeting the financial requirements of the entrepreneurs. These are in the form of several financial schemes and funding options offered by the ministries, public and private banks, small industries development organisation, national small industries corporation limited, state financial corporations, etc. Thus, India has a sound financial structure which is capable of providing a strong base for setting up of business units in the country.
LEGAL ASPECTS
Legal aspects are an indispensable part of a successful business environment in any country. They reflect the policy framework and the mind set of the Governmental structure of that country. They ensure that every company is functioning as per the statutory framework of the country. Every enterprise must take into account this legal set up while framing the basic aims and objectives of its company. This is because, it is necessary for efficient and healthy functioning of the organisation and helps it to know about the rights, responsibilities as well as the challenges that it may have to face.
In India, the most important law which regulates all aspects relating to a company is the Companies Act,1956. It contains provisions relating to formation of a company, powers and responsibilities of the directors and managers, raising of capital, holding company meetings, maintenance and audit of company accounts, powers of inspection and investigation of company affairs, reconstruction and amalgamation of a company and even winding up of a company.
The Indian Contract Act,1872, is another legislation which regulates all the transactions of a company. It lays down the general principles relating to the formation and enforceability of contracts; rules governing the provisions of an agreement and offer; the various types of contracts including those of indemnity and guarantee, bailment and pledge and agency. It also contains provisions pertaining to breach of a contract.
The other major legislations are:- the Industries (Development and Regulation) Act 1951; Trade Unions Act; the Competition Act, 2002; the Arbitration and Conciliation Act, 1996; the Foreign Exchange Management Act (FEMA),1999; laws relating to intellectual property rights; as well as laws relating to labour welfare.
TAXATION
In the wake of economic reforms, the tax system in India has under gone a radical change, in line with the liberal policy. Some of the changes include:- rationalization of tax structure; progressive reduction in peak rates of customs duty ; reduction in corporate tax rate; customs duties to be aligned with ASEAN levels; introduction of value added tax ; widening of the tax base; tax laws have been simplified to ensure better compliance. Tax policy in India provides tax holidays in the form of concessions for various types of investments. These include incentives to priority sectors and to industries located in special area/ regions. Tax incentives are available also for those engaged in development of infrastructure.
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