Solution:

Meaning of Project:

• Gittinger defines a project “as the whole complex of activities involved in using resources to gain benefits”.

• An entrepreneur implements a project by overcoming various hurdles, to get some benefits - mainly monetary rewards.

• The entrepreneur originates the idea, makes a detailed study of the various aspects of the project to be implemented estimate the profit that would accrue from the project, and finally implements it.

Project classifications:

• Projects have been classified in various ways by different authorities. Little and Mirrorless divide the projects into two broad categories, viz., quantifiable projects and non-quantifiable projects.

• The planning commission has accepted the sectoral criteria for the classification of projects. Projects can also be classified based on techno-economic characteristics.

• All Indian financial institutions classify the projects based on the nature of the projects and their life cycle. The project classification is explained below :

1. Quantifiable and non-quantifiable projects:

• Quantifiable projects are those in which a plausible quantitative assessment of benefits can be made. Non-quantifiable projects are those where such an assessment is not possible.

• Projects concerned with industrial development, power generation, and mineral development are forming put of quantifiable projects.

• The non-quantifiable projects category comprise health, education, and defense.

2. Sectoral Projects:

According to the Indian Planning Commission, a projects may fall into the following sector:

• (a) Agriculture and Allied Sector

• (b) Irrigation and Power Sector

• (c) Industry and Mining Sector

• (d) Transport and Communication Sector

• (e) Social Services Sector

• (f) Miscellaneous Sector

3. Techno-Economic Projects:

• Techno-economic projects classification includes factors intensity-oriented classification, causation-oriented classification and magnitude-oriented classification.

• These three groupings are narrated as under :

(a) Factor intensity oriented classification:

• The factor intensity is used as a base for classification of projects such as capital-intensive or labor-intensive which depends upon the large scale investments in plant and machinery or human resources.

(b) Causation oriented classification:

• The causation-oriented projects are determined based on its causes namely demand-based or raw material-based projects.

• The non-availability of certain goods or services and consequent demand for such goods or services or the availability of certain raw materials, skills or other inputs are the dominant reason for starting the project.

(c) Magnitude-oriented classification:

• The size of investments forms the basis for magnitude-oriented projects. Projects may thus be classified based on their investment such as large-scale, and medium-scale projects.

• Techno-economic characteristics-based classification is useful in facilitating the process of feasibility appraisal.

• United Nations and its specialized agencies use the International Standard Industrial Classification of all economic activities (SIC) in collection and compilation of economic data.

• Since this classification covers the entire field of human economic endeavor, it forms a useful basis for classification of projects.

• Economic activities under this classification are grouped into ten divisions, which are subdivided into ninety sub-divisions.

• The divisions are:

• Division 0 Agriculture; Forestry, Hunting, and Fishing

  Division 1 Mining and Quarrying

  Division 2&3 Manufacturing

  Division 4 Construction

  Division 5 Electricity, Gas, Water, and Sanitary Services,

  Division 6 Commerce

  Division 7 Transport, Storage, and Communications

  Division 8 Services

  Division 9 Activities not adequately described

4. Financial Institutions Classification:

• All India and State Financial Institutions classify the projects according to their age and experience and the the purpose for which the project is being taken up.

• They are as follows :

  • (i) New projects

  • (ii) Expansion projects

  • (iii) Modernization projects

  • (iv) Diversification projects

• The projects listed above are generally profit-oriented and the services oriented projects are classified as under:

  • (i) Welfare Projects

  • (ii) Service Projects

  • (iii) Research and Development Projects

  • (iv) Educational Projects