B.

Com (Computer Application)- Semester VI

Course Name- Entrepreneurship Development
Topic- Meaning, Need, Rural Entrepreneurship/
Industrialization in retrospect, Problems and How to develop
Rural Entrepreneurship?

Reference Video Link

https://www.youtube.com/watch?v=TGqkbq2nLfo
https://www.youtube.com/watch?v=RBZxDseT5Qo
https://www.youtube.com/watch?v=-QwXaCI4898
https://www.youtube.com/watch?v=Amhi4ULEqwI
https://www.youtube.com/watch?v=1jc65OXSrsw

Study Material
Concept of Rural Entrepreneurship
Rural entrepreneurship refers to initiatives and activities of the entrepreneurs related
to the establishment of industrial and business units in the rural areas. Rural
entrepreneurship can be the panacea for the problems to poverty, migration, economic
disparity, unemployment and underdevelopment associated with rural areas and
backward regions.

Rural entrepreneur can be considered as an important catalyst in bringing about the

economic development of a country and of rural areas within the country. Rural
entrepreneurs are that class of entrepreneurs who carry out entrepreneurial activities
by establishing Industrial and business units in the rural sector of the economy.

Rural entrepreneurship concentrates on finding and stimulating rural entrepreneurial

talents and thereby promotes the growth of indigenous enterprises.
Rural entrepreneurship augments the economic value of the rural areas by introducing
new methods of production, new markets, and new products. Moreover, it also
generates employment opportunities in the rural areas and thus ensures rural
development.

In India as per the Census of 2011, out of the 121.2 million population in India, the size
of the rural population is 833.1 million which is about 68.84 percent of the total
population. The economic development of India largely depends on the progress of
rural areas and the improvement of the standard of living of rural masses. Rural
entrepreneurship can significantly contribute to national economy by enhancing the
pace of rural development.

It recognizes opportunity in the rural areas and accelerates a unique blend of resources
either inside or outside of agriculture.

According to Government of India, “Any industry located in rural areas, village or town
with a population of 20,000 and. below and an investment of 3 crores in plant and
machinery is classified as a village industry”.

Need For Rural Entrepreneurship (With Development Strategies for Village and Small-
Scale Industries)
The need for developing rural entrepreneurship is to promote rural development in the
country.

This is justified as follows:

i. Rural industries being labour intensive serve as an antidote to the widespread

problems of rural disguised unemployment and underemployment stalking the rural
areas.
ii. The development of rural industries by providing jobs to rural unemployed helps in
reducing disparities in income between rural and urban areas.

iii. These industries promote balanced regional development by dispersing industries to

rural areas.

iv. Development of rural industries serves as an effective means to build up village

republics.

v. Rural industries also help preserve the age-old rich heritage of the country by
protecting and promoting art and creativity.

vi. Rural industrialization fosters economic development in rural areas. This checks
migration from rural to urban areas, on the one hand, and lessens the disproportionate
growth in the cities, reduces growth of slums, social tensions, and atmospheric
pollution, on the other.

vii. Rural industries also lead to development without destruction, i.e., the most
desideratum of the time.

Rural Industrialization in Retrospect:

Rural industrialization did not receive any significance before Independence of India.
The reason is not difficult to seek. The British Government encouraged imports and
discouraged development of indigenous industries. The Indian art and culture during
this period was at stake in the hands of the British Government.

Rural industries started getting importance only after the independence. This got
expressions in the major policy pronouncements on development in India. For example,
the first Industrial Policy of Independent India, the Industrial Policy Resolution of 1948
emphasised the utilization of local resources and the achievement of local self-
sufficiency in respect of certain essential “consumer goods” as the most suitable
characteristics of cottage and small industries.

There was no looking back since then. While emphasising the creation of employment,
equitable distribution of incomes and an effective mobilisation of capital and skills, the
Industrial Policy Resolution, 1956 pointed out that the characteristics of cottage, village
and small-industries are favourable to the achievement of these objectives.

The major policy plank of the Third Five-Year Plan was to provide employment and
increase the supply of consumer goods and some producer goods through the
development of village and small industries sector. Development of village and rural
industries, including ancillary units of large-scale units was the thrust areas to achieve
the balanced regional development. Introduction of Backward Area Development
Programme including industrial development was a new dimension attached to rural
industrialisation during the Fourth Five-Year Plan.

The Fifth Five-Year Plan gave importance to industrial development of backward/rural

areas in the country. With this emphasis in mind, District Industry Centres (DICs) were
set up in the Fifth Five-Year Plan to provide all the required guidance and help under
one roof. The Sixth Five-Year Plan, continuing its concern for rural industrialisation,
redefined small-scale industry so as to make it broad- based by including those
manufacturing and repairing units as having investment in plant and machinery up to
Rs. 20 lakh and in case of ancillary units Rs. 25 lakh.

The Seventh and Eighth Plans changed their gears to rural industrialisation by assigning
importance to the role of institutions in marketing, credit, technology, etc. A number of
projects covering a variety of rural industries, viz., food processing, pottery, leather
items, readymade garments, etc., were taken up by the Khadi and Village Industries
Commission (KVIC) to boost rural industrialisation.
Significance of Rural Entrepreneurship for a Country
The rural entrepreneurship is great importance for a country which has a huge rural
population.

The significance of rural entrepreneurship is manifested in the following ways:

1. Augments employment opportunities – Rural entrepreneurship is basically labour

intensive. It provides employment opportunities for the rural mass. Rural
entrepreneurship has the potential of abating the problem of unemployment and
underemployment prevalent in rural regions.

2. Positive check on migration of rural population to urban areas – Rural population

including the unskilled workers move out to the urban areas in search of jobs and lead a
very miserable life in urban areas. Rural entrepreneurship has the capacity to reduce
the gap existing between urban areas and the rural areas. Rural entrepreneurship can
generate employment opportunities and contribute in developing the infrastructure
and other amenities in the rural areas.

3. Rural entrepreneurship can significantly contribute towards promotion of balanced

regional development.

4. Rural entrepreneurship has the potential of protecting and promoting traditional

artistic activities, art, craft and handicraft of the rural areas.

5. The social problems like poverty, inequality, caste distinctions can be reduced by
rural entrepreneurship.

6. Entrepreneurship in the rural areas can be taken up as career by the youths. The rural
youth can be encouraged and awakened.

7. Rural entrepreneurship can improve the standard of living in rural areas. Their
increasing opportunities for growth and prosperity can uplift the rural communities.
8. The local resources available in the rural areas are best known to local rural
population. Rural entrepreneurship can ensure the most efficient and effective use of
limited resources by the entrepreneurs that can contribute to the overall economic
development of rural areas.

9. Rural entrepreneurship can play a significant role in increasing the foreign exchange
earnings of the country if their products are recognized and demanded abroad.

10. Rural entrepreneurship can generate more employment, output, and wealth from
the rural areas and thus contribute to the growth and improvement of per capita
income of rural people.

Rural Industrialisation – Strategy, Benefits, Importance and Necessary Corrective

Actions
Strategy of Rural Industrialisation:
The framework of a strategy of rural industrialisation should consist of attempts
towards rejuvenation of traditional village industries by bringing improvement in their
technology, dispersal of modern manufacturing activity in the countryside with or
without a linkage to the existing village industries as also production of any type of
commodities that would cater to the needs of the country’s population and that may or
may not be based on the local resources.

The rural industries would continue to be supplementary source of income as well as

part/full time employment activity for the rural artisans, landless labourers, women
and educated unemployed. Progressive expansion and modernisation of rural industry
could be best brought out by the establishment of small industrial units along with the
necessary services in large villages and small towns located all over the country.

The non-traditional industries also seem to be capable of breaking the caste-industry

nexus and reducing the rigidities of social stratification in rural areas. Their
entrepreneurs come from a wider cross-section of rural society, while the caste-
industry identification has been more or less complete in the traditional industries.

In fact, the growth of rural industries, based primarily on traditional occupations, may
well accentuate the social distance among the caste groups, despite the betterment they
may bring about in the economic conditions of artisans and craftsmen. No doubt, even
non- traditional activities exhibit concentration by social groups, though to a smaller
extent than the traditional industries; but such concentration is primarily based on class
distinction in terms of ownership resources, rather than on the traditional caste-
occupation association.

Most rural industries, however, have a limited capacity for generating even as
subsistence income for those engaged in them and have not shown a very encouraging
record of growth in the recent past. Only blacksmith, carpentry and handloom have
shown a good promise in so far as the value added per worker and their dependents.

The new industries — wire-meshing, lampshade and hub-brush manufacturing — meet

the criterion easily; and food and oil products, the two old industries but run on modern
lines and on a larger scale, have brought prosperity and affluence to their
entrepreneurs.

The basic reason for their low income-generating capacity lies in their tiny size in terms
of their physical volume of output. Most units are run on a household basis, and do
provide full employment to all the household workers.

Low level of productivity, prevalence of traditional technology, lack of knowledge of the

new innovations and development in the field of production, inadequate infrastructure,
inadequate finance, absence of marketing skills, lethargy, inefficiency, non-availability of
skills and entrepreneurial ability, administrative snags have been enumerated as the
constraints in the task.
The supply of raw materials, which mostly are a free gift of nature, has already started
posing a problem, and is likely to taper off with the passage of time. It is, therefore,
essential to concentrate on the development of such traditional rural industries as have
a positive income elasticity of demand for their products and are not faced with the
danger of inevitable extinction, such as have potential for the technological flexibility
which is necessary before they are able to cope with the changes in the demand pattern.

Blacksmith, carpentry, handloom and leather products fit quite well in this category. In
order, however, that rural industrialisation becomes an effective tool for the
development of rural areas as well as for the better integration of the rural and urban
sectors, equal emphasis should be laid on the development of non-traditional industries
in this areas. Many of them may not be linked with rural areas in terms either of use of
local materials or of having a local market, but would be effective in providing
productive employment to rural labour.

Rural industrialisation should be looked upon as a dynamic process in raising the

productivity and income levels of people in rural areas. It should also be looked upon as
means of rural development. The first issue relates to the treatment of rural
industrialisation is an aspect of industrial location or as a programme primarily for the
development of rural areas.

The long-term strategy of rural industrialisation would require not merely the
development of traditional rural industries, but also a programme of infusing
increasingly a larger component of modern consumer and other industries in rural
areas.

The promotion and development of ‘dynamic’ rural industries, no doubt, needs

emphasis, but in the interest of long-term growth on a sustained basis, rural
industrialisation should be looked upon as an integral part of the programme of rural
development. It means effective linkages with the medium and large industries in urban
areas.
Further, it is important not only to accelerate development of rural area, but also to
reduce the economic and technological gap between rural and urban areas, and seek to
achieve a greater degree of integration between the two. The development of low
technology and low productivity industries located in rural areas should generate not
only linkages, to the extent possible, in the villages, but become a link in rural-urban
integration.

Besides reducing the income gap between the two sectors, it is also desirable that rural
industries use technologies which are in line with the technological pattern of the
emerging industrial structure in the country as a whole. The upgradation of relatively
modern-technology industries in rural areas alone are likely to make rural industries an
integral part of the industrialisation process in the country.

The technology used in rural industries varies terms of the use of machinery,
equipment, non-human energy, and, therefore, of capital intensity; but, by and large, the
activities in which mechanical devices and capital equipment are used yield a
reasonable income only to those who are engaged in them.

At the same time, the use of such devices and equipment neither turn these industries
into “capital intensive” nor reduce the employment potential. It only makes
employment more effective in terms of income generation.

One of the reasons which accounts for the fact that the productivity and income aspects
of rural industries have received less attention than employment creation lies in the
assumption that these industries are subsidiary activities on the part of the households,
for which agriculture or some other activities is their main occupation; and therefore,
they only reduce underemployment and supplement their income from their major
activity. In fact, however, this assumption is not valid.
For the households and workers engaged in rural industries, their occupation in them is
their sole or at least the main source of income. Most of them do not even have another
activity as a subsidiary occupation. These industries will, therefore, have to be seen as
the effective means of providing full employment and as the only source of income for
those engaged in them.

The need for industrial employment on a full-time basis is likely to increase, for the
development of agriculture, even if rapid, will absorb only a part of the increasing rural
labour force.

It is necessary to spell out the concept of rural industrialisation. It begins with the
assessment of resources, human and material, locally available in a selected area.
Assessment is also made of the pattern of demand. Present and future and an area-wise
production plan is formulated for ensuring minimum needs of the people by using local
resources, skill and appropriate technology.

As rural industries play an important role in national economy, particularly in rural

economy, modernisation and improvement of efficiency of these industries has assumed
greater importance. A main element in the success of the modernisation programme is
to train and bring awareness about the new technology to the people who will
implement it.

As rural industries increase in progress, in number and diversity, and as their share of
industrial production begins to grow, it becomes even more important that they
improve efficiency in their operations.

Five main elements in the success of these programmes are – the orientation of the
rural entrepreneurs and rural artisans to a more forward-looking approach and
flexibility of loan basis to meet the cost of modernisation and the role of appropriate
technology and marketing in modernisation and improvement efficiency of rural
industries.
The basis objective of the programme is to set the rural industries — traditional and
non-traditional — on a path of growth so that they are able to complete, on more equal
terms, with the urban industries

Benefits of Rural Industrialisation:

1. Rural industries provide additional employment opportunities, raise production and
improve economic conditions in rural areas.

2. Rural industries are labour-intensive. They provide additional employment to men

and women. Ensure decentralisation of economic power and elimination of
monopolistic exploitation.

3. Decentralised production through network of well-knit rural industries obviates the

necessity of complicated managerial and competitive marketing techniques, thus
reducing the costs on account of overheads.

4. Rural industrialisation leads to the development of rural areas thereby lessening the
disproportionate growth in large cities, reducing the growth of slums, social tensions,
exploitation and atmospheric pollution.

5. Rural industries will strive to build up village republics and human resources
development.

6. Rural industrialisation provides ample scope for the promotion of artistic

achievement and creativity that has been suppressed in rural areas.

Although, agriculture is the main stay of the rural economy, rural industry is a
complementary industry. The pressure of population on land is already high and
increasing. In the process, it has resulted in a large surplus of labour, both educated as
well as uneducated in rural areas. Agriculture alone cannot absorb the entire surplus
force and hence the need for rural industries. If we consider rural industry as a main
stay, agriculture is an important part of this process.

Rural industrialisation aims at the maximum productive employment of local resources,

revival and development of traditional industries and skills, establishment of new units
and integration of agricultural and industrial development to local prosperity,
progressively narrow down the disparities between urban and rural incomes, prevent
migration of rural population. More so, rural industrialisation has been assigned a
crucial role in the development of industrially backward areas in rural India.

Importance of Rural Industrialisation:

Rural industrialisation is important not only as a means of generating employment
opportunities in the rural areas with low capital cost and raising the real income of the
people, but because it contributes to the development of agriculture and urban
industries. Without rural industrialisation, it would be considerably more difficult to
solve the problem of agricultural unemployment and widespread underemployment.
Rural industrialisation promotes rural industry.

The development of rural industries increases the level of income in rural areas, and
tends to break down the old self-sufficiency of the family and lessen its cohesiveness,
creating opportunities for youth, women and the able bodied as well in changing the
pattern of leisure and work.

Rural industrialisation should be looked upon not merely as way of containing the rural
workers and stopping them from migrating to urban areas by providing them some kind
of remunerative employment in the villages, but as a dynamic element in process of
raising the productivity and income levels of the workers in areas.

The main characteristics of these industries are to develop local initiative cooperation
and spirit of self-reliance in the economy and at the same time, help in utilisation of the
available manpower for processing locally available raw materials by adopting simple
techniques.

These are capable of offering employment opportunities at the place of residence to a

large section of population.

The village industries are an antidote to the widespread problems of disguised

unemployment or underemployment.

These decentralised industries require less gestation period on the one hand and
produce goods of common necessities on the other.

These industries have the capacity to correct regional imbalances by initiating

industrial activities on dispersed basis in the most neglected, backward inaccessible
areas where perhaps large-seals sector is unable to penetrate.

Being small, these activities can ensure maximum participation of workers in

management thus ensuring a feeling of involvement which is so uncommon with the
large-scale sector.

These industries possess an additional advantage wherein the maximum participation

of womenfolk can he ensured.

Rural industrialisation has taken roots in the rural economy in India. This is so because
simple forms of manufacture typical of consumer goods industries and varied service
industries, are everywhere developed before the more complex process involved in the
production of capital goods, and because the size of the home market at the time of
industrialisation prohibits the establishment of optimum- sized plants in the production
of certain capital goods.

Towards Rural Prosperity:

Rural industrialisation is a key to rural development and rural prosperity. It constitutes
a significant link in the process of socio-economic transformation of rural areas.
Primarily, it provides additional opportunities of employment, income, better standard
of living and thereby enriches the cultural heritage of the various social structures in
rural areas. Rural Industries programme should not be drawn in isolation.

It should be drawn up keeping in mind the long-term industrial development plan

under a broad framework for developing not only manufacturing industries but also
industry related activities to generate income and employment in the country,
particularly for the vulnerable section of the society in backward regions. The
development of rural industries should also take into account of enriching the
environment, particularly the eco-system in the rural hinterland.

Yet another policy measure adopted and implemented shall be to use products
manufactured by rural industries in preference to imported goods, particularly in urban
market segment. This will open up a vast market both in urban as well as rural areas for
the goods manufactured by rural industries and pave the way for its rapid growth in the
coming years.

Necessary Corrective Action:

Rural industrialisation constitutes the key link in the process of socio-economic
transformation of underdeveloped rural areas as well as social structures. In view of its
importance and problems, it is necessary to take some corrective actions to rejuvenate
rural industries and rural artisans to play a pivotal role in the development process.

Some of the necessary ingredients of successful rural industrialisation may be briefly

stated as follows:

1. The industry should be based on locally available resources.

2. There should be rural- urban, local-national, and, wherever possible, even foreign
trade, linkages. The concept of “village republics” is no longer valid.

3. There should be comprehensive planning, especially with regard to the availability of

ready markets.

4. There should be a nationwide organisation, with separate sections for each product
or group of products which are produced in the rural industrial sector. The existing
organisations like the Khadi and Village Industries Board, Handlooms Board and
Handicrafts Board can be utilised for the products which they are already handling.

5. Up-to-date technology should be used so that the industrial units can be competitive;
obsolete technologies should not be adopted in the name of “appropriate technology”
etc.

6. While the government may provide necessary benefits, the units should be set up on a
cooperative basis or through individual enterprise, and not by government
departments.