IOSR Journal of Business and Management (IOSR-JBM)

e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 19, Issue 9. Ver. II. (September. 2017), PP 35-44
www.iosrjournals.org

Major Challenges and Problems of Rural Entrepreneurship in

India
Jayadatta S
Assistant Professor Department of Management Studies Anjuman Institute of Technology and Management
Bhatkal-581320, Karnataka

Abstract: Nowadays Rural entrepreneurship is a major opportunity for the people who necessarily migrate
from rural areas or semi-urban areas to urban areas. It is also a fact on the contrary that the majority of rural
entrepreneurs are facing many problems due to non availability of primary amenities in rural areas especially
in developing countries like India. Financial problems, Lack of education, insufficient technical and conceptual
ability at present it is too difficult for the rural entrepreneurs to establish industries in rural areas. Certainly the
economic development of our country largely depends on the development of rural areas and also the standard
of living in its rural mass. For the economic development of a country and of regions within the country rural
entrepreneur is surely one of the most important inputs. Today entrepreneurs are also driven to achieve success
in their business along with the qualities inherited by them of a dreamer, leader, manager, innovator, continous
learner, and decision maker and most important is to implement all these qualities into the work. Certainly
entrepreneurs set the example of turning their dream into reality. More importantly the story behind to achieve
the dreams into reality is to set massive goals for themselves and also stay committed to achieving them
regardless of the obstacles they get in the way with the unmatched passion and the ambition towards achieving
the goal. Undoubtedly it looks attractive, fascinating and motivating after listening the stories of the
entrepreneurs, but for sure success is not as easy as it looks always. There are certainly some obstacles which
we call challenges to overcome by looking forward the prospects to be a successful entrepreneur. The paper
also makes an attempt to find out the challenges and problems for the potentiality of rural entrepreneurship. It
also tries to focus on the major problems faced by entrepreneurs especially in the field of marketing of products,
other primary amenities like water supply, availability of electricity, transport facilities, required energy and
financial amenities. In the light of this research paper focuses on the major challenges and problems available
in the Indian market by en-cashing the possibilities and prospects of the same to be an able and successful
entrepreneur.
Keywords: Rural entrepreneurs, Innovator, economic development, conceptual ability, continous learner
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Date of Submission: 16-08-2017 Date of acceptance: 08-09-2017
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I. Introduction
Concept of rural entrepreneurship: Today rural entrepreneurship has emerged as a dynamic concept. In
general parlance rural entrepreneurship is defined as “entrepreneurship emerging at village level which can take
place in a variety of fields of Endeavour such as industry, business, agriculture and act as a potent factor for
overall economic development. Compared to earlier days development of rural areas have been linked to
entrepreneurship. Defining entrepreneurship is not an easy task. Entrepreneurship means primarily innovation to
some, to others it means risk taking? To others a market stabilizing force and to some others it means starting,
managing a owning a small business. An entrepreneur is a person who either creates new combination of
production factors such as new products, new methods of production, new markets, finds new sources of supply
and new products and new organizational forms or as a person who is necessarily willing to take risks or a
person who by exploiting market opportunities, eliminates disequilibrium between aggregate demand and
aggregate supply or as one who owns and operates a business.
What is Rural Entrepreneurship?
In simple terms “entrepreneurship” is the act of being an entrepreneur, which can be defined as “one
who undertakes innovations, finance and business acumen in an effort to transform innovations into economic
goods”. The problem is essentially lopsided development which is a development of one area at the cost of
development of some other place, with concomitant associated problems of underdevelopment. For instance, we
have seen underemployment or unemployment in the villages that has led to major influx of rural population to
the cities. At present what is needed is to create a situation wherein the migration from rural areas to urban areas

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 Major Challenges and Problems of Rural Entrepreneurship in India

comes down. Migration per se is not always undesirable but it should be minimum as far as employment is
concerned. Indeed the situation should be such that people should find it worthwhile to shift themselves from
towns and cities to rural areas because of realization of better amenities and opportunities there.

Rural Entrepreneurship in India:

Who should necessarily be capable of making use of the government schemes and policies for the
betterment of rural people? Some individuals who happen to be NGO‟s and local leaders and also who are
committed to the cause of the rural people have certainly been the catalytic agents for development. Though
their efforts need to be recognized and lauded, yet much more needs to be done to reverse the direction of
movement of people i.e., to attract people to rural areas which means not only stopping the outflow of rural
people but also attracting them back from towns and cities where they had migrated. This can be made possible
only when young people consider rural areas as places of opportunities. Despite all the inadequacies and in
competencies in rural areas one should assess their strengths and also build upon them to make rural areas
places of opportunities. This is much more to do with the way one sees the reality of the rural areas. The way a
job seeker or survivor would see things would certainly be different from those who would like to do something
worthwhile and are also ready to go through a difficult path to achieve their destined goals. It isn‟t that there is a
dearth of people with such a mindset. But due to various compilations they change their minds and join the
bandwagon of job seekers. Enabling the public to think positively, creatively and engaging them purposefully in
entrepreneurship activities is most important for the development of rural areas. Young people with such
perspective and also with the help of rightly channelized efforts would certainly usher in an era of rural
entrepreneurship.
Some of the basic principles of entrepreneur which can be applied to rural development are:
 Optimum and full utilization of local resources in an entrepreneurial venture by rural population –Better
distributions of the farm produce results in rural prosperity
 Entrepreneurial occupation opportunities for rural population to reduce discrimination and also providing
alternative occupations as against the rural migration
 To activate such system as to provide basic „6M‟- Manpower, money, materials, management, machinery
and market to rural population

Rural entrepreneurship in changing environment:

The changing global environment raises many questions about the ability of traditional, small scale
businesses in rural areas to share the potential benefits which is offered by the changing environment. The rapid
(though declining) population growth which is coupled with even faster urbanization, creates increasing
demands. In India semi urban and urban populations in general grow about twice as fast as the overall total
population and by 2020 they may exceed the size of rural populations. Such a major demographic trend
challenges the capacities of some traditional small scale businesses to cope up with the increasing demands and
supply.

Rural Entrepreneurship and development of villages:

Rural entrepreneurship certainly implies entrepreneurship emerging in rural areas. In other words
establishing the industry in rural areas is referred to as rural entrepreneurship. This means that rural
entrepreneurship is synonymous with rural industrialization. Many such examples of successful rural
entrepreneurship can already be found in literature. Diversification into non-agricultural uses of available
resources such as blacksmithing, catering for tourists, carpentery, spinning etc as well as diversification into
activities other than those solely related to agricultural usage like use of resources other than land such as water,
woodlands, buildings, local features and available skills all fit into rural entrepreneurship. The entrepreneurial
combinations of these resources are for example tourism, sport and recreation facilities, professional and
technical training, retailing and wholesaling, industrial applications (engineering, crafts), servicing
(consultancy), value added (products from meat, milk, wood etc)and the possibility of off-farm work. Equally
entrepreneurial are new uses of land resources that which enable a reduction in the intensity of agricultural
production, for example, organic production. Some of the major opportunities in rural entrepreneurship are:
A. Better distribution of farm produce which results in rural prosperity
B. Entrepreneurial occupation for rural youth resulting in reduction of disguised employment opportunities and
alternative occupations for rural youth
C. For optimum and maximum utilization of farm produce formation of big co-operatives like Amul
D. Optimum utilization of local resource in entrepreneurial venture by rural youth
On the contrary, Indian agriculture is characterized by low productivity, flood, and exposure for
vagaries of nature like drought, other natural disasters and weaknesses like mismatch between agricultural and
cash crops, inadequate infrastructure to provide for value addition, wide disparity which exists between public-
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 Major Challenges and Problems of Rural Entrepreneurship in India

private partnership in agricultural development. Land being limited is unable to absorb the entire labour force
throughout the year leading to large scale underemployment and unemployment. Rural people, in search of jobs
and better livelihood opportunities often migrate to urban centers creating unwanted slums and also live in
unhygienic conditions of living. In the above mentioned trend if employment opportunities are made available
in rural areas along with basic amenities of life.
Peter Drucker had proposed that „entrepreneurship‟ as such is a practice. He says entrepreneurship is
not a state of being not is it characterized by making plans that are not acted upon. Entrepreneurship certainly
begins with action and creation of new organization. This organization in the long run may or may not become
self-sustaining and in fact, may never earn significant revenues. But, when individuals create a new organization
they have truly entered the entrepreneurship paradigm. Balanced and sustainable development is certainly the
need of the hour and it can be made possible only when rural areas flourish. Growth of rural entrepreneurship
may lead to reduction in poverty, pollution in cities, growth of slums and ignorance of inhabitants. It also helps
in improving the literacy rate and improving standard of rural people. Rural industries include traditional sector
and modern sector. Former consists of khadi and village industries, sericulture, handloom and coir industries
while the latter includes power loom and small scale industries.

Major objectives of study:

1. To analyze the roles of rural entrepreneurs in economic development
2. To know the major benefits from rural entrepreneurship
3. To study the problems in rural entrepreneurship
4. To suggest some remedial measures to solve the problems faced by rural entrepreneurs
5. To analyze the effect of globalization on rural entrepreneurship
6. To study the major challenges faced by rural entrepreneurship in India
7. To analyze some of the major management problems for rural entrepreneurs
8. To suggest some of the major remedies to solve problems in rural entrepreneurship

Role of rural entrepreneurs in economic development

The entrepreneurs with their ability to scan, identify and analyze opportunities in the environment
transform them into business proposition through creation of major economic entities there by channelizing the
resources from less productive to more productive use create wealth. Through effective and efficient utilization
of natural and national resources, they act as catalysts for economic development and also agents of social
change and transformation. According to Joseph Schumpeter, the rate of progress of any nation depends upon its
rate of innovation which in turn also depends on the rate of increase in the entrepreneurial talent in the
population. According to Meir and Baldwin, development does not occur spontaneously as a natural
consequence when economic conditions and consequences in some sense are right.
A catalyst is certainly needed which results in entrepreneurial activity to a much considerable extent.
The diversity of activities that which characterizes rich countries can be attributed to the supply of
entrepreneurs. They play a vital role for the economic development of a country in the following ways:
1. Formation of capital: Entrepreneurs as such by placing profitable business proposition do attract investment
to ensure private participation in the industrialization process. The otherwise idle savings are also
channelized for investment in business ventures in turn provides return. Again the savings are invested
giving a multiplier effect to the process of capital formation.
2. General Job creators and job providers and not the job seekers: With the globalization process the
government jobs are shrinking thus leaving many unemployed. In these circumstances, the entrepreneurs
and their enterprises are the only source and hope of direct and indirect employment generation.
Employment is generated directly by the requirement of the large enterprises and also indirectly by
ancilliariation and consequential developmental activities.
3. Balanced regional development: Entrepreneurs always look for opportunities in the working environment.
They capitalize on the opportunities of governmental concessions, facilities and subsidies to set up their
enterprises in undeveloped areas. Classic example is setting up of steel plant at Tata Nagar, Reliance
Petrochemicals at Jamnagar (Gujarat) which have resulted in the development of Good Township and
peripheral regional development. Thus entrepreneurs reduce disparities and imbalances in development
among regions where they operate.
4. Improvement in the standard of living: Entrepreneurial initiatives taken by entrepreneurs through
employment generation leads to increase in income and also purchasing power which is spent on
consumption expenditure. Certainly increased demand for goods and services boost up industrial activity.
Large scale production with technological advancements will result in economies of scale and low cost of
production. Modern concept of marketing involves creating demand and then filling it. New innovation

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 Major Challenges and Problems of Rural Entrepreneurship in India

oriented and varying quality products at most competitive prices make common man‟s life smoother,
comfortable and easier which are also contributions of entrepreneurial initiative.
5. National Self- reliance: Entrepreneurs are certainly the corner stores of national self-reliance. They help to
manufacture indigenous substitutes to imported products which reduce the dependence on foreign countries.
There is also wide possibility of exporting the goods and services to earn foreign exchange for the country.
Hence, the export promotion and import substitution ensure economic independence and the country
becomes self-reliance.
6. Increase in per capita income: Entrepreneurs convert the latent and idle resources like labour, land and
capital into goods and services resulting in increase in the national income and in turn wealth of a nation.
The increase in national income is thus an indication of increase in net national product and per capita
income of the country.
7. Planned Production: Entrepreneurs are considered and best judged as economic agents since they unite all
means of production. All the major factors of production i.e., land, labor, capital and enterprise are all
brought together to get the desired production. This will help to make use all the factors of production with
perseverance, proper judgement and knowledge of the world of business. The least combination of factors
is possible avoiding unnecessary wastage of resources.
8. Equitable distribution of economic power: The modern world is dominated by economic power. Also
economic power is the natural outcome of business and industrial activity. Industrial development may lead
to concentration of economic power in few hands which results in the growth of monopolies. The
increasing number of entrepreneurs helps in the dispersal of economic power into the hands of many
effective and efficient managers of new enterprises. Hence setting up of large number of enterprises
certainly helps in awakening the evil effects of monopolies. Thus, the entrepreneurs are key to the creation
of new enterprises that energies the economy and also rejuvenate the established enterprises that which
make up the economic structure.

Major benefits from rural entrepreneurship

Some of the major benefits of rural entrepreneurship can be described below as follows:
1. Provide employment opportunities: Rural entrepreneurship as such is mainly labor intensive and certainly
provides a clear solution to the growing problem of unemployment. Mainly the development of industrial
units in rural areas through rural entrepreneurship has high potential for income creation and employment
generation.
2. Balanced regional growth: Rural entrepreneurship can dispel the concentration of major industrial units in
urban areas and also promote regional development in a balanced way
3. Check on migration of rural population: Rural entrepreneurship can fill the lacunae and big gap and also
disparities in income for rural and urban people. Rural entrepreneurship will bring in or develop
infrastructural facilities like roads, power, bridges etc. It can help to check the migration of people from
rural to semi urban and urban areas in search of jobs.
4. Promotion of artistic activities in rural areas: The age-old rich heritage of rural India is preserved by
promoting and protecting handicrafts and arts through rural entrepreneurship
5. Check on social evils existing in society: The growth of rural entrepreneurship can reduce social evils like
growth of slums, poverty, pollution in cities etc
6. Awaken the rural youth: Rural entrepreneurship can awaken the rural youth and also expose them to various
avenues to adopt entrepreneurship and promote it as a career
7. Improved standard of living: Rural entrepreneurship will also increase the literacy rate of rural population.
Their education and self employment will also prosper the community, thus increasing their standard of
living.

Problems in Rural Entrepreneurship

Entrepreneurs certainly play very important role in the development of economy thus contributing to overall
Gross Domestic Product of the nation. They face various problems in day to day life and work. As thorns are
part of roses, in the same way flourishing business has its own kind of problems. Some of the major problems
faced by rural entrepreneurs are as under:
1. Financial Problems: Some of the major financial problems faced by rural entrepreneurs as follows:
a. Paucity of funds: Due to absence of tangible security and credit in the market most of the rural
entrepreneurs fail to get external funds. Also the procedure to avail the loan facility from the banks is too
time consuming that its delay often disappoints the rural entrepreneurs. Lack of finance available to rural
entrepreneurs is by far one of the biggest problems faced by rural entrepreneurs nowadays especially due to
global recession. Some of the major difficulties faced by rural entrepreneurs include low level of purchasing
power of rural consumer so sales volume is insufficient, reduced profits due to competition, lack of finance

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to start business, pricing of goods and services. Today financial statements are also difficult to be
maintained by rural entrepreneur due to stringent tax laws, lack of guarantees for rising up of loans, major
difficulty in raising capital through equity, dependence on small money lenders for loans for each they
charge discriminating interest rates, huge rent and property cost. These all problems create a difficulty in
raising money through loans.
Some banks have not ventured out to serve rural customers because banks are expensive to be reached by
rural customers and once reached are quite often too poor to afford bank products. Poor people are often
excluded from traditional financial market as they often have insufficient established forms of collateral or
physical assets to offer. The government is providing subsidies to rural areas but due to high cost of finance,
these subsidies are not giving fruitful results. Some of the major sources of finance in rural areas are loans
from regional rural banks or from zamindars but their rate of interest is usually very high. The government
has various institutions for this purpose but certainly the results are not up to the level expected. Industrial
credit and Investment Corporation of India (ICICI), Industrial Finance Corporation of India (IFCI), and
Small Scale Industry Development Bank of India (SIDBI) are some of the major national level (SFC)
institutions that are helping out rural entrepreneurs. Some State level institutions are also working like State
Financial Corporation and State Industrial Development Corporation (SIDC). These institutions also
provide assisting for setting up of new ventures and side by side for expansion and modernization of
existing ones but their terms and conditions are very strict to be handled. Various schemes like tiny unit
scheme, composite loan scheme, scheme for technical entrepreneurs etc, had started but they are unable to
meet the expectations of rural entrepreneur. Raising funds through equity is much more difficult for rural
entrepreneurs because of lack of financial knowledge and also because of financial corpus which is low, so
loans are the primary source of finance for them which proved to be a great obstacle in developing rural
entrepreneurship. Various policies of RBI regarding priority sector lending have failed to achieve its
objectives. Micro financing movements started in India well. Self help groups form the basic constituent
unit of micro finance movement in India. Self help groups constitute a group of few individuals who pool
their savings into a fund from which they can borrow as and when necessary.
b. Lack of Infrastructural facilities: In spite of efforts made by government the growth of rural
entrepreneurs is not very healthy due to lack of proper and adequate infrastructural facilities.
c. Rise Element: Rural Entrepreneurs have very less risk bearing capacity due to lack of financial resources
and external support.
2. Marketing Problems: Some of the major marketing problems faced by rural entrepreneurs are as follows:
a. Competition: Rural entrepreneurs face stiff and severe competition from large sized organizations and
urban entrepreneurs. They incur high cost of production due to high input cost. Problem of standardization
and competition from large scale units are some of the major problems faced by marketers. They face the
problem in fixing the standards and then sticking to them. For the survival of new ventures competition
from large scale units also creates difficulty. New ventures have limited financial resources and hence
cannot afford to spend more on sales promotion and advertising. These units are not having any standard
brand name under which they can sell their products. New ventures surely have to come up with new
advertisement strategies which the rural people can easily understand. Literacy rate is one among many
major problems faced by rural entrepreneurs and they should device strategies and remedies to solve it.
Also printed media has limited scope and coverage in the rural context. Traditionally bounded nature,
cultural barriers and cultural backwardness all add to the difficulty of communication. English and Hindi
are not understood by many people as people in rural areas mostly communicate in their local dialects. It
has been seen in the recent past that in spite of enough food stocks with government warehouses, people
have died of starvation. This indicates a major problem with the public distribution system. The producers
too are not collective in their approach for marketing their products because they are too widely scattered
and uneducated.
b. Middlemen: Middlemen exploit rural entrepreneurs. Rural entrepreneurs are heavily dependent on
middlemen for marketing of their products who necessarily pocket large amount of profit. Poor means of
transportation facilities and storage facilities are also other marketing problems in rural areas. In most of the
villages, farmers store the produce in open space, in earthen vessels, in bags etc. So these indigenous and
traditional methods of storage are not capable of protecting the produce from weevils, dampness etc. The
agricultural goods are not standardized and graded.
3. Management Problems: Some of the major management problems are as follows:
a. Lack of Knowledge of I.T: Information technology as such is not very common in rural areas.
Entrepreneurs rely on internal linkages that which encourage the flow of services, goods, ideas and
information. The intensity of family and personal relationships in rural communities can sometimes be very
much helpful but they may also present obstacles to effective and efficient business relationships. Business
deals may receive less than rigorous objectivity as well as intercommunity rivalries may reduce the scope

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for regional cooperation. Lines of authority and decision making process are mostly blurred by local politics
in rural areas.
b. Legal formalities: In complying with various legal formalities and in obtaining licenses rural entrepreneurs
find it extremely difficult due to ignorance and illiteracy. Also procurement of raw materials is really a
tough task for many rural entrepreneurs. They may also end up with poor quality raw materials, which may
also face the problem of storage and warehousing.
c. Lack of technical knowledge: Rural entrepreneurs to a major extent suffer a severe problem of lack of
technical knowledge. Lack of training facilities and other extensive services create a hurdle for the
development of rural entrepreneurship.
d. Poor quality products: Another important problem is growth of rural entrepreneurship is the inferior
quality of products produced due to lack of availability of standard tools and other equipments as well as
poor quality of raw materials.
4. Human resource Problems: Some of the major human resource problems found in organization are as
follows:
a. Low skill level of workers: Most of the entrepreneurs working in rural areas are unable to find workers
with high skills. In this case turnover rates are also high. They have to be provided with on the job training
and their training too generally is a serious problem for entrepreneur as they are mostly uneducated and the
training should be imparted in local language which they can understand easily. The
Industries in rural areas are not only established just to take advantage of the cheap labour but also to bring
about an integrated rural development. Rural entrepreneurs should not look at rural area as their market;
instead they should see the challenges existing in urban areas and also be prepared for them. Rural
entrepreneurs are generally believed to be less innovative in their thinking. Youths in rural areas have very
little options and they are made to believe this. This is the reason as to why many of the youths either prefer
to work at farm or else migrate to urban areas.
b. Negative attitude: Sometimes environment in the family, society and support system is not much
conducive enough to encourage rural people to take up entrepreneurship as a career. It may be certainly due
to lack of awareness and knowledge of entrepreneurial opportunities. Young and mostly well educated
youths mostly tend to leave. As per circumstances, rural people by force may be more self-sufficient and
capable when compared with their urban counterparts, but the culture of entrepreneurship tends to be weak.
Continous motivation is needed in case of rural employee whom is sometimes very much difficult for an
entrepreneur to impart with.

Remedial measures to solve the problems faced by rural entrepreneurs

Different organizations like IFCI, SIDBI, ICICI, NABARD etc are trying to sort the major problems faced
by rural entrepreneurs. Marketing problems are mainly related with pricing, distribution channels, product
promotion etc. In order to make the rural entrepreneurs to state the business venture, following measures
may be adopted:
a. Creation of finance cells: Banks and financial institutions which provide finances to entrepreneurs must
create special cells for providing easy finance to rural entrepreneurs
b. Concessional rates of Interest: On easy repayment basis and at concessional rates of interest the rural
entrepreneurs should be provided finances. The cumbersome formalities should necessarily be avoided in
sanctioning the loans to rural entrepreneurs.
c. Offering training facilities: Training is essential for the overall development of entrepreneurships. It also
enables the rural entrepreneurs to undertake the venture successfully as it certainly imparts required skills to
run the enterprise. At present the economically weaker entrepreneurs of the society are necessarily offered
such training facility by government of India regarding skill development of the existing entrepreneurs so
that rural entrepreneurs can indeed generate income as well as employment opportunities in rural area
especially in north east and south India region
d. Power supply of raw materials: Rural entrepreneurs should be surely ensured of proper supply of scare
raw materials on a priority basis. Subsidy may also be offered at times to make the products manufactured
by rural entrepreneurs reasonable and cost competitive.
e. Setting up marketing co-operatives: Proper assistance and encouragement should be provided to rural
entrepreneurs for setting up marketing co-operatives. These co-operatives shall help in getting various
inputs at reasonable rate and they are helpful in selling their products at remuneration prices. Thus
comprehensive training, proper education, setting up of separate financial
Institutions, development of marketing co-operatives to a large extent help to flourish the rural
entrepreneurs in India.
Effect on Globalization on Rural Entrepreneurship

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 Major Challenges and Problems of Rural Entrepreneurship in India

It is quite very difficult to establish casual linkages or to quantify the specific effects of globalization on
rural entrepreneurship since globalization is a macro concept and rural entrepreneurship is a micro concept
occurring in a very limited area. However, it is quite possible to identify a range of different channels
through which various aspects of globalization can be certainly expected to change the welfare of rural
entrepreneurship in India. Some of the major effects of globalization on rural entrepreneurship which is
seen in recent years are as follows:
1. Productivity and efficiency effect: Due to its access to global markets, abilities to specialize and also to
take advantages of economies of scale and scope globalization is often said to result in higher productivity.
Indeed exposure to global competition can certainly result in high levels of productivity and efficiency.
However, it is less crucial for large economies like India. Because globalization enhances countries abilities
to exploit comparative advantages arising from differing natural and ecological conditions, the potential
gains to rural entrepreneur are also large. At the level of national policy these arguments certainly seem to
favour globalization. There are many other factors which place rural entrepreneurs at a disadvantage. Most
of them lack access to the technologies and market information that which would enable them to comply
with quality requirements and specifications and also effectively respond to emerging opportunities. To
compete in the modern world they rarely have access to credit and other financial services. Many
entrepreneurs also face high transportation and input costs that which further reduce their ability to sustain
and compete. Additionally, there are some entrepreneurs whose culture plays greater value on the
maintenance of traditional ways of life, rather than on the material success in a much more competitive
world. Apart from the above mentioned disadvantages, there is a wider question of whether the economic as
well as institutional infrastructural facilities and structure of policies are favourable for small enterprises to
succeed in the international competition. In short, Globalization as such presents real dangers to the rural
entrepreneur, to set against the possible advantages for the wider economy.
2. Economic growth effect: Currently the argument in favour of globalization is the positive link between
globalization and rural entrepreneurship in India. Because potential benefits certainly include improved
access to managerial expertise and foreign technology. There have been varied views concerning the
connection which exists between trade openness and rural entrepreneurship growth and this has also given
rise to a large body of empirical literature, suggesting a positive relationship between trade openness and
rural entrepreneurship growth. Edwards (1998) in his paper concludes that greater openness accelerates
economic growth and that large departures from free trade dampen it. Michael et al (1991) in his findings
based on the evidence suggests that liberalizing countries outperform those who failed liberalization
attempts. In contrast, Helleiner (1986) has suggested that a certain level of national development is very
much necessary before the objective of export-led growth can be realized.
Series of deliberations and emergence of the WTO under the Uruguay round have changed the
world economic order. Indian government has shelved the earliest protectionist policies and opened up the
economy to the world market. Undoubtedly, this has also helped the Indian economy to recoup its strength
with the flow of international technology and capital resulting in a robust economic position. The economy
is moving steadily with more than 6 percent GDP growth rate for the last two decades or so. However, new
economic policies have posed severe challenges to the rural and agricultural sectors of the economy.
Overall, analyzing the above facts it indicates that openness promotes faster growth. Still the question
remains unanswered as to what this might do for the rural entrepreneurs and enterprises, particularly as little
FDI flows into agriculture. The evidence from various studies also suggests that the rural entrepreneurs
overall are substantially included as beneficiaries from economic growth. However, the extent of inclusion
varies internationally. As discussed earlier, openness and free trade results in faster growth. Growth might
be expected to specifically benefit the rural entrepreneurs to such an extent that the agricultural sector is
very much included in the economic expansion. In fact, there is very little evidence that trade expansion in
India has actually taken this form.
3. Technological effect: Today one of the prominent features of globalization and one of the major reasons
for predicting improved growth is transfer of technology. Formerly many small rural entrepreneurs saw
major improvements in their businesses, but to a certain extent improvements were in a very limited area
and also to a very limited number of entrepreneurs.
The focus as such today is on the potentials and dangers of biotechnology. In Principle, the
benefits here too may be large. The benefits may be from raising productivity, lower food prices as well as
reduced risks of pests and droughts. Biotechnology research has been much more relevant to the problems
of high-income countries. The benefits certainly tend to be specific to conditions or markets, particular
environments. A small number of multinational corporations too are carrying out much of the research in
rural areas. There has been a general focus upon the problems faced by rural entrepreneurs in rich countries
with very little attention being paid to underdeveloped and developing countries like India‟s basic food
crops and the problems of their small farmers.

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4. Distribution effect: It is not possible to gauge the overall effect of globalization on the level of inequality;
the effect and aftermaths on women entrepreneur in rural area is less ambiguous. Many rural women
entrepreneurs are to a certain extent hampered from benefiting from the changes arising from globalization.
They also have less access than men to education and training, less command over important resources such
as credit, land and capital, less time to devote to productive activities.
5. Transformational and insecurity effect: Rural entrepreneurship as such is not always directly related to
income. It can also refer to an intense level of insecurity. Many times those who have managed to improve
their position are pressed back down again by natural disasters, inflation, deflation and other shocks. Some
aspects of globalization increase such problems. Globalization is generally associated with increased
competitive pressures and accelerated pace of change in economic life. This requires a speedy adaptation,
which may simply be outside the range of those with few modern skills or certain other assets.
Globalization as such is linked to increased specialization, but this for all its advantages increases risks for
rural entrepreneurs by pushing them to „play all their cards.‟ These factors are further compounded by the
insecurity and transformational effect due to volatile environment.
Also greater financial interdependence amongst national economies, resulting from globalization has
certainly affected transferring or spreading shocks from one nation to another. This can be seen from the
financial crisis which has affected the world, leading to a global slowdown. The enormous cross border
movements of highly mobile financial capital and the difficulties of regulating this have resulted in the
tendency for financial shocks to spreading around the world as such. Many of these shocks coming from the
rest of the world have hit the urban sector hardest. Still, there are a number of channels through which the
effect has been transferred to the rural enterprises.
6. Policy: Government of India has in a sense, discriminated against agriculture and all those enterprises that
which depend on it. This discrimination has typically taken the form of overvalued exchange rates, state
trading monopolies for domestic as well as external marketing of agricultural commodities. Additionally,
the revenues from commodity exports have been certainly used for the growth of urban development and
civil services, rather than reinvestment in agriculture.

Major Challenges faced by rural entrepreneurship in India

Some of the major challenges faced by rural entrepreneurship in India can be described below as follows:
1. Family challenges: Convincing to opt for business over job is certainly not an easy task for an individual.
The first thing compared is- will you make more money in the business of your choice or will you work as a
successor of family business. This is certainly a stage where it becomes almost impossible to convince that
you can generate more cash with your passion than doing what your dad is doing.
2. Social challenges: Even tough family challenges are always at the top because as it matters the most but at
times social challenges also are very important. Let us consider an example wherein say you and your
friend graduated at the same time. You opted for entrepreneurship and your friend opts for a job. After few
years he now has a flat, car and what not because he could easily get those with a bank loan but you still
have nothing to show off and this is where the challenge comes in
3. Technological challenges: Indian education system certainly lags too much from the job industry as a
whole but then it lags even much more when it comes to online entrepreneurship. What technology would
be ideal and how to use that technology effectively and efficiently is the question which needs to be
answered by entrepreneur
4. Financial challenges: This necessarily refers to difficulty in borrowing fund. For online entrepreneurs
financial challenges are a lot different in India. When you are starting as an entrepreneur you don‟t opt for
venture funding but definitely try to go to funding for small to medium business people. Many non-
technical business people don‟t understand the online business models as a whole and so getting an initial
business funding from them becomes very much challenging. Other option what entrepreneurs can think of
is a loan but bank loan as such is not at all an option in India for new online entrepreneurs.
5. Policy challenges: Now and then there are not of changes in the policies implemented by the government.
Problems of TRIMS and TRIPS to pose policy challenges. Major problems of availing raw materials,
problems of raising equity capital, Problems of obsolescence of indigenous and outdated technology,
increased pollutions, ecological imbalance, exploitation of small and poor countries etc.
Major Management Problems of Rural entrepreneurs
Some of the major management problems faced by rural entrepreneurs today are as follows:
1. Lack of Knowledge of I.T: Information technology is not very common in rural areas. This poses one of
the major challenges for entrepreneurs. Entrepreneurs rely on internal linkages that which encourage the
flow of services, goods, ideas and information. The intensity of family and personal relationships in rural
communities can sometimes be very helpful but they may also present obstacles to effective business
relationships. Business deals may receive intercommunity rivalries and less than rigorous objectivity which
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 Major Challenges and Problems of Rural Entrepreneurship in India

may reduce the scope for regional cooperation. Lines of authority and decision making process are mostly
blurred by local politics in rural areas
2. Legal formalities: Rural entrepreneurs find it extremely difficult in obtaining licenses and also complying
with various legal formalities due to illiteracy and ignorance.
3. Raw materials Procurement: One of the tough tasks for rural entrepreneur is procurement of raw
materials. Entrepreneurs quite often may end up with poor quality raw materials and also might face the
problem of warehousing and storage
4. Products of poor quality: Inferior quality products is another major reason which hinders the growth of
rural entrepreneurship as products produced mainly due to lack of availability of equipments and standard
tools as well as poor quality raw materials do not cater to the needs of customers
5. Lack of technical knowledge: Technical knowledge is another major area which rural entrepreneurs face
as a major problem to comprehend. Lack of extension services and training facilities create a hurdle for the
development of rural entrepreneurship.

Major Remedies to solve problems in rural entrepreneurship

Major financing organizations like SIDBI, NABARD, ICICI and IFCI are trying to sort out the problems of
rural entrepreneurship. Marketing problems as such are related with pricing, distribution channels, packaging,
promotion etc. Following mentioned measures may be adopted in order to make rural entrepreneurs to start
business venture:
1. To provide loans at concessional rate of interest: Finance should be provided to rural entrepreneurs at
concessional rates of interest and also on easy repayment basis. Also cumbersome formalities should be
avoided in sanctioning loans to rural entrepreneurs
2. Creation of finance cells: Special finance cells must be created by financial institutions and banks to
provide easy finance to rural entrepreneurs
3. Setting up marketing co-operatives: Assistance and encouragement should be provided to rural
entrepreneurs for setting up marketing co-operatives in rural areas. Co-operatives certainly can help in
getting inputs at quite a reasonable rate and also turn out to be helpful in selling their products at
remuneration prices. Rural entrepreneurs can derive the benefits of enterprise by avoiding middlemen.
Moreover to boost rural entrepreneurs common production and marketing centres should be set up with
sophisticated modern infrastructural facilities. Hence comprehensive training facilities, proper education,
development of marketing co-operatives, setting up of separate financial institutions much to a larger extent
can help to flourish rural entrepreneurs in India. Besides both government as well as non-government
agencies should also play an important role.
4. Supply of raw materials: On priority basis rural entrepreneurs should be ensured of proper supply of
scarce raw materials. Besides subsidy must also be offered to make the products manufactured by rural
entrepreneurs which are reasonable and also competitive in terms of cost
5. Offering high quality training facilities: Training is very much essential for the development of
entrepreneurship. As proper training imparts required skills to run an enterprise it enables rural
entrepreneurs to undertake their venture successfully. Economically weaker entrepreneurs of the society are
presently offered such training facility under Programmed FICCI (NGO‟s), Prime minister‟s rozgar yojna
(PMRY), rotary clubs, lion clubs and various other voluntary organizations which can also arrange such
training programmes for rural entrepreneurs to provide them proper assistance and stimulation counseling.
Individual based EDI approach is highly relevant for rural entrepreneurs where motivation and
familiarization processes are coupled with promise of various bank credit and support by way of escort
services which could persuade rural youths with mandatory basic skills and hands on technology to start
small enterprises in their region

II. Conclusion
Rural entrepreneurs are certainly act as a key figure in economic progress of India. They play a vital
role in converting developing country into developed nation. In today‟s global market a country‟s economic
policy environment must always be favourable for an organization to achieve efficiency. Economic policy of a
country should also enable entrepreneurs to provide magical touch to an organization irrespective of public,
private or joint sector in achieving innovativeness, speed, flexibility and also strong sense of self determination.
Rural entrepreneurship however is the best answer for removal of rural poverty in India. Hence government
should stress and emphasize more on integrated rural development programs. Also majority of the rural youths
do not think of entrepreneurship as a career option. Hence organizations and government should come with
training and sustaining support systems providing all necessary assistance so that rural youth can be motivated
to take up entrepreneurship as a career. Besides there should also be efficient regulated markets and
governments should also lend its helping hand in this context. Standardization and grading should be promoted

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 Major Challenges and Problems of Rural Entrepreneurship in India

and also promotional activities should be enhanced to encourage rural entrepreneurs. NGO‟s should also be
provided full support by the government. In the present context study of entrepreneurship helps entrepreneurs
not only to fulfill their personal needs but also help in economic contribution of new ventures. More than
increasing the national income by creating new jobs, rural entrepreneurship also acts a force in economic growth
by serving as a major bridge between innovation and marketplace. To conclude to bring change institutions need
to focus on synergies between education, innovation and entrepreneurship.

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IOSR Journal of Business and Management (IOSR-JBM) is UGC approved Journal with Sl.
No. 4481, Journal no. 46879.

Jayadatta S. “Major Challenges and Problems of Rural Entrepreneurship in India.” IOSR

Journal of Business and Management (IOSR-JBM) , vol. 19, no. 9, 2017, pp. 35–44.

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