(a) (i) Small-scale industries are facing tough challenges in India. Elaborate the factors responsible for this. (10 marks) (ii)…

(a)(i) Challenges faced by small-scale industries in India (10 marks)

Small industries, now micro and small enterprises under the MSMED Act, 2006, face tough challenges from several factors:

• Finance: limited access to institutional credit, high collateral demands, high interest and a lack of equity and working capital; delayed payments by large buyers lock up funds, despite the 45-day payment rule in the MSMED Act.
• Technology: obsolete machinery, low R&D, inadequate quality and design capacity, and difficulty in adopting digital technology.
• Marketing: weak branding, distribution and market information, and dependence on large buyers or middlemen.
• Raw materials and infrastructure: high input prices, irregular supply, unreliable power, transport and testing facilities.
• Competition: after liberalisation and the removal of product reservation, they face large firms and cheap imports.
• Regulation and compliance: many laws, tax compliance (GST) and inspections burden small units, with information gaps about schemes.
• Skills and management: shortage of trained labour and professional management; family-run units lack planning.
• Sickness and informality: many are unregistered, so they are outside formal credit and support, and inadequate working capital leads to sickness and closure.

(a)(ii) Consumer rights under the Consumer Protection Act and voluntary organisations (10 marks)

The Consumer Protection Act, 2019 (Section 2(9)) confers six rights: (1) the right to be protected against the marketing of goods and services hazardous to life and property (safety); (2) the right to be informed about the quality, quantity, potency, purity, standard and price of goods and services, so as to protect against unfair trade practices; (3) the right to be assured, wherever possible, of access to a variety of goods and services at competitive prices (choice); (4) the right to be heard and assured that the consumer's interests will receive due consideration at appropriate forums; (5) the right to seek redressal against unfair or restrictive trade practices or unscrupulous exploitation; and (6) the right to consumer awareness.

Role of voluntary organisations: they educate and create awareness through publications and campaigns; test and compare products and publish results; give advice, legal aid and help in filing and pursuing complaints; represent consumers before the consumer commissions, since the Act allows a recognised consumer association to file complaints, and have seats on the Central and State Consumer Protection Councils; act as watchdogs against adulteration and misleading advertising; and press for policy change. Examples are Consumer Guidance Society of India, VOICE and CERC. Limits: shortage of funds and trained staff, urban concentration, and dependence on grants.

(b)(i) Management of strategic change and why it happens (3 + 4 = 7 marks)

Management of strategic change is the process of planning, implementing and controlling changes in an organisation's strategy, structure, technology, processes and culture so that it adapts to its environment; it includes creating readiness, overcoming resistance and embedding the change (Lewin's unfreeze-change-refreeze, Kotter's steps).

Why it happens: external forces, such as technological change, new competitors, globalisation, regulation and policy shifts, changing customer preferences and economic or social change; and internal forces, such as poor performance, a new leadership or vision, growth and size, new products, changing employee expectations and resource constraints. Organisations that do not change lose fit with the environment.

(b)(ii) Growth strategy and its types (4 + 4 = 8 marks)

A growth strategy aims to raise the organisation's sales, market share, profit or scope beyond its present position, by expanding existing business or entering new ones.

Types (Ansoff and others): (1) market penetration, selling more of existing products in existing markets; (2) market development, taking existing products to new markets or segments; (3) product development, new or improved products in existing markets; (4) diversification, new products in new markets, related (concentric) or unrelated (conglomerate); (5) integration, backward or forward (vertical) and horizontal; and (6) external routes, through mergers, acquisitions, joint ventures and strategic alliances, in contrast to internal growth.

(c) FDI and FPI: difference and impact on the economy (7 + 8 = 15 marks)

Difference. Foreign direct investment is investment in a business in another country that gives the investor a lasting interest and a degree of control or influence over management, typically 10% or more of equity in India's rules, through greenfield projects or acquisitions; it is long-term, brings capital, technology and management, and is not easily withdrawn. Foreign portfolio investment is the purchase of shares, bonds and other financial securities without control, below 10% of a company's paid-up capital in India; it is short-term or speculative, highly liquid, and can be withdrawn quickly ("hot money"). Under FEMA, 1999 both are regulated, FPIs by SEBI registration.

Impact of FDI: it adds capital and fills the savings gap; transfers technology and management skills; creates jobs and infrastructure; raises exports and integrates the country into global value chains; increases competition and productivity; and gives a stable source of balance-of-payments finance. Drawbacks include profit repatriation, crowding out of local firms, dependence on foreign firms, and environmental or sector-control concerns.

Impact of FPI: it deepens and adds liquidity to stock and bond markets, improves price discovery and corporate governance, reduces the cost of capital, and helps finance the current account. Drawbacks: volatility and sudden outflows can trigger currency depreciation and market crashes (as in the 2013 taper tantrum and 2020), asset bubbles and monetary-policy constraints; and it creates no productive assets directly. Hence FDI is preferred for development, while FPI needs careful regulation.