Why It’s Difficult to Start a Small Business in India

Indian economy is claimed as fast growing economy. Every giant multinational is willing to establish their business in India. Government also has liberalized laws, terms and conditions to establish any business in India for MNC companies.

But on other hand many small Indian business owners face tough conditions. Many laws have changed in favor of small business industries but still far behind from other countries.

small business problems india

There are many hurdles through which one has to go through to start small business like central government clearances, state government, and local body authorities’ clearances etc. They all have their own rules and regulations to go through.

There are many complicated laws to follow like labor, P.F., factory acts etc following are the main hurdles.

Below are some key challenges which an entrepreneur faces to start a small business in India:

A) Land acquisition: For starting any business first we require a land, a place to establish firm. To get it, lot of efforts and investment is required. It takes a lot of time to get clearance; so many titles are to be cleared. Documentation is also taking much time.


B) Getting Construction Permits: Once the land is acquired. Lot of time is consumed in getting permission for construction. To pass the building plan by local authorities sometimes you have to deal with unwanted practices, without which it is very difficult to move your plan to next level.

C) Getting Electricity: You cannot imagine a world without electricity. It is equally important for any business in the world. Scarcity of electricity is the major drawback in many states.

Getting approval for new power connection becomes very difficult. A long procedure is to be followed to get an electrical supply. Sometimes you have to push very hard for getting power connection where there is a power shortage in the state. Same things has to be followed for getting Water, Drainage etc.

D) Labor laws: Main difficulty to start a business is the Labor trouble. It is very difficult to satisfy the new Laws like food, safety and standards act. Govt. labor laws are such that one cannot compromise on that.

There are many small business group which started has to shut down either for labor troubles. Micro and small enterprises are afraid of making any new investment and new recruitment.

E) Getting Finance: A small business man needs finance to run smoothly. They find very difficult to get credits from banks or any other financial institutions. Even if they get, they have to pay high rate of interest.

F) Efficient Workforce: Building effective labor force is another challenge an entrepreneur faces to start his business. India is the youngest country of the world but the difficulty is skill power of the people is very poor. It is difficult to build skilled labor force which is important for fast and quality production.

G) Survive in competition: With the increase in multi-national companies coming in India. A small business find difficult to compete with them, as they have huge money power. Many small companies closed down due to lack of poor sales.

H) Legal Security: Small business man finds very difficult in finding solutions for any problem related with labor, govt. formalities, tax formalities. Etc. They can not afford to hire a special person for this work.

I) Communication: Business is all about building good relationship and trust. For this effective communication is very important factor that you have to be considered while dealing with customers and co-workers. For this knowledge of local language is crucial for any small entrepreneur.

There are 14 major languages plus English as widely accepted language in metro cities. Local language knowledge becomes essential for effective communication and co-ordination. By which you can create a trustworthy atmosphere between labors, management and customers as well.

In India if you want to start a business than you have to have lot of money, lot of patience and courage to deal with any situation.

Thought establishing small business is difficult in India, owning a business is a great feeling for any entrepreneur minded person. Nothing is difficult for self-motivated person.

This article is not for demotivating you to start the business. There are many success stories that started from small business and now giant business empires.

Every business is a challenge on its own way. So, if you have decided to start business don’t step back, take this article as a precaution measure and start planning your business. Wishing you a great success in business.


  1. says

    Good information. In facts rules and laws related to jobs or business are various among countries. Those are challenges which must be faced if someone wants to run business. Don’t give up easily. Success is the result of hardwork.

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