Learn about:- 1. Introduction to Rural Entrepreneurship 2. Meaning of Rural Entrepreneurship 3. Concept 4. Need 5. Types 6. Significance 7. Rural Industrialisation 8. Risk-Taking among Rural Entrepreneurs

9. Entrepreneurial Development in Backward Areas 10. Problems and Obstacles 11. Development Initiatives in India.

Rural Entrepreneurship in India: Introduction, Meaning, Concept, Problems, Need, Types, Development and More…

Introduction to Rural Entrepreneurship in India

Indian growth story is directly linked with the rural entrepreneurship development. Farming community is now quite aware about the value of their resources and their usefulness. Similarly, agro based industries are emerging in the rural areas giving a powerful base for rural entrepreneurship.

Diversification into non-agricultural uses of available resources such as catering for tourists, blacksmithing, carpentry, spinning etc. as well as diversification into activities other than those solely related to agricultural usage, for example, the use of resources other than land such as water, woodlands, buildings, available skills and local features, 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 that enable a reduction in the intensity of agricultural production, for example, organic production.

Dynamic rural entrepreneurs can also be found. They are expanding their activities and markets and they find new markets for their products and services in rural areas.

Now, farming community is also interested to convert their land for industrial purposes. In the changed scenario, they are ready to develop agro based units. Industrial units promoted by rural entrepreneurs are in a position to use the available resources at local level by diversification of their land for non-agricultural usage.

This type of entrepreneurial venture is an example of a straightforward entrepreneurship and not so much an example of on-farm diversification. It is an example of how seeing and seizing the opportunity are vital ingredients of entrepreneurial success.


These areas are quite popular. They include trade, food processing, handicrafts, production of basic consumer articles, catering, running tourist establishments, and bed and breakfast arrangements.

Although agriculture today still provides income to rural communities, rural development is increasingly linked to enterprise development.

Since Indian economy is more and more globalised and competition is intensifying at an unprecedented pace, affecting not only industry but any economic activity including agriculture, it is not surprising that rural entrepreneurship is gaining in its importance as a force of economic change that must take place if many rural communities are to survive. However, rural entrepreneurship demands an enabling environment in order to flourish.

Meaning of Rural Entrepreneurship

In simple words, entrepreneurship emerging in rural areas is called rural entrepreneurship. In other words, establishing industries in rural areas refers to rural entrepreneurship. This means rural entrepreneurship is synonymous to rural industrialisation.


Here, it seems pertinent to define rural industry and rural industrialisation. According to the Khadi and Village Industries Commission (KVIC), “village industry or rural industry means any industry located in rural area, population of which does not exceed 10,000 or such other figure which produces any goods or renders any services with or without use of power and in which the fixed capital investment per head of an artisan or a worker does not exceed a thousand Rupees”.

The Government of India has recently modified the definition of village industry as any industry located in rural area, village or town with a population of 20,000 and below an investment of Rs. 3 crores in plant & machinery. With this wider definition of village industries, a total of 41 new village industries have been added to the category of village industries.

All village industries have been classified into the following seven categories:

(i) Mineral-based industries


(ii) Forest-based industries

(iii) Agro-based industries

(iv) Engineering and non-conventional industries

(v) Textile industry (including Khadi), and


(vi) Service industry.

Why rural entrepreneurship?

The Indian situation is such that there is a great need to generate employment opportunities. Resource utilization at its origin has to be optimized.

1. The Grim Scenario:


There are about 100.5 million households in rural India, compared to 34 million in cities. The population distribution between rural and urban areas is 521.4 million and 162.3 million respectively. About 36 per cent rural households own less than 50 per cent capital and about 33 per cent possess one to five acres of land.

Agriculture and agriculture-based activities are the main sources of employment in Indian villages, where the service sector is weak with only 6.62 per cent households as against 26.23 per cent in urban areas. The trade sector also presents a grim picture with only 4.35 per cent households in rural areas, while in urban areas the corresponding figure is 16.55 per cent.

This only shows how much sectoral shifts and labour participation rates have to improve to result in entrepreneurial dynamism in rural areas. Also the unemployment situation in modern sectors in rural areas is serious. It is widely believed that over 10 crore population remains without work today. Majority of these belong to rural areas directly or indirectly.

Numbers apart, critical aspects of unemployment situation in India are:


i. Unlike cyclic unemployment problem of developed economies, India faces chronic under-employment. Majority of the farming population is restricted to a single crop dependent upon monsoon. The scene becomes worse as there are no part-time productive activities near their places.

ii. Due to over investment in a few mega cities, distressed migration of vastly unskilled poor villagers from far-flung areas to mega-cities has resulted in the shift of rural poverty to urban slums. Migration is triggered by deprivation and not due to growth in skills. Contrary to common belief 54 to 73 per cent of rural migrants or displaced people end up in tertiary jobs like domestic servants, hawkers, porters, labourers, construction workers, etc.

iii. Livelihood of highly skilled artisans trained over centuries of tradition stands threatened due to lack of their organization and access to markets. The craze for modern goods and modern market systems has further put the rurally produced goods at a disadvantage.

iv. The neglect of adequate and appropriate primary rural industrialization has caused serious damages such as follows –

a. While villages remain deserted and underdeveloped for want of adequate economic activities – cities are overcrowded and have become uninhabitable and unaffordable for a vast majority.

b. The purchasing power of both villagers and urban people is reduced to such an extent that over 90 per cent of households are constantly struggling for survival for food, shelter, health, children’s education, etc. The infrastructure in urban areas is bursting at its seams.


c. Dominated by traditional informal activities, the productivity levels in industrial sector in rural areas are low. Technological intervention is moving at a slow pace; also the IT revolution has not brought significant dividends to the rural masses. The school dropouts and the literate classes search for white collared jobs.

Frustrated at lack of such opportunities, they are on the lookout for new systems to change their plight. This trend is widely traceable among the youth. The education levels are even more depressing.

The above facts underline the necessity for promoting entrepreneurship, especially among the semi-literate groups who are neither fit for jobs nor can be left out of the economic mainstream. They need to be motivated to perform an entrepreneurial function, by stimulating their latent enterprising initiatives so as not to weigh down on the social conscience.

In the entrepreneurial building approach the target groups are semi-literate youth and women. While the highly educated potential entrepreneurs could utilize the services of technical and consultancy organizations, entrepreneurship development institutions and the support services of institutions like the DIC, SFC, SIDO, SISI, IDBI, etc., the rural masses have to depend only on grass root level organizations which are seldom active.

As the economy cannot respond to a situation of growing unemployment and tackle the problem of chronically unemployed, the need to strengthen the grass root level organizations to respond suitably to the emerging needs of entrepreneurship in rural areas has to take priority.

Thus, a strategy of entrepreneurship building needs to be integrated with the development process. It has to be category-specific, area-specific, and has to be woven around practical aspects and ground realities. These include social and economic inputs, training and motivation, functional inputs in credit, technology markets and information, and above all, an umbrella organization to provide a security cover.


The only answer to enhance rural purchasing power is to create a vast scale of production related economic activity directly under the control of rural entrepreneurs and artisans. This is possible by setting up thousands of viable tiny village industries spread all over the country.

With the potential to generate 100 to 300 times employment per unit of investment as compared to the large-scale sector, the village industries sector could have accomplished the primary task for economy in time ensuring full employment in the country. Mahatma Gandhi did understand this primary need of Indian economy and therefore emphasized upon the critical role of village industries as the indispensable linkage between agriculture and the growth of secondary economy.

2. Policy Initiatives:

Organised efforts are necessary to ensure success of the village industries to survive.

Some of the desired policy initiatives are as follows:

i. Creation of entrepreneurial environment – Successful models such as group entrepreneurship or self-help groups can become the primary enterprising systems.


ii. Market linkages – Incentives for setting up of regional marketing enterprises only for village industries sector products, and networking among such market enterprises through village industries federation all over the nation.

iii. National brand recognition – Village industry units should not be allowed to suffer on account of their inability to create a brand for their products individually. As such common national brands should be made available to all tiny village industries units at a fraction of the cost linked to their sales.

iv. Easy to make daily use products for rural sector – In order to provide thrust to rural industries, national policy makers must appreciate the importance of reserving easy to make daily use products for village industries.

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.

The Ninth Plan envisaged the following development strategies for village and small-scale industries in the country:

i. Provision for incentives and support to small-scale industries.

ii. Providing factoring services and facility of discounting bills to solve financial problems of small industries.

iii. Raising investment limit to Rs. 3 crore to broad-based small-sector. The present investment limit is Rs. 1 crore.

iv. Promotion and up gradation of technology in small sector.

v. Special attention to sericulture sector in small-scale industries.

Top 5 Types of Rural Entrepreneurs

Rural entrepreneurs represent a complex heterogeneous social structure with a wide variability.

Broadly rural entrepreneurs fall into the following categories:

1. Farm Entrepreneurs

These are people whose primary occupation and main source of livelihood, is farming. Persons not having land or other farming resources but are willing to take up an enterprise in the village that will aid agriculture, can be regarded as farm entrepreneurs.

2. Artisan Entrepreneurs

These entrepreneurs represent the skilled persons in rural society. Such skills are either acquired through professional training in association with their kinship group, or through inheritage as for example, blacksmithy, carpentry, etc.

3. Merchant and Trading Group

This includes primarily the business community of rural areas who form a small segment of rural population. It shares the larger trades in the community. These people are perceived as traditionally exploitative class and play the role of middleman in business to the pursuit of any vocation in the rural areas.

4. Tribal Entrepreneurs

Tribal entrepreneurs are predominantly in tribal villages and could be regarded as an entrepreneurial class by itself. Their source of origin is the tribal community. Their entrepreneurship may however lead to the pursuit of any vocation in the rural areas.

5. General Entrepreneurs

Some examples of this class are high school drop-outs, educated-unemployed, landless labourers, wage earners, and persons belonging to the scheduled castes, etc.

The rural entrepreneurs can initiate their enterprise in any of the category classified as rural industry.

i. Forest based industries that include honey making, beedi making, bamboo products, cane products, wood products, coir industry, etc.

ii. Agro based industries include processing and sale of agricultural products such as pickles, jiggery, juice , fruit jam, dairy products, products made out of rice, oil processing from oil seeds.

iii. Mineral based industries include stone crushing, cement industries, making of idols, decorative items made from marble and granite.

iv. Textile industry includes weaving, spinning and dying of clothes. This industry incorporates within its ambit khaddi, tusar silk, muga silk.

v. Enterprises based on handicrafts include decorative and household products like made out of cane, bamboo and wood available in the area.

vi. Engineering industries include making and repairing of parts of agricultural equipments, tools and implements, parts of machinery etc.

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.


The programme of rural industrialisation has endeavoured to take industrial and manufacturing activity to the rural areas through a process of dispersal as also developing on sound footing the existing traditional units thereby creating an industrial climate in the countryside. For effecting this creation of growth centres and provision of infrastructural facilities in the rural areas should be planned carefully.

Setting up of nucleus plants in districts or potential block level will promote as many ancillary, small and cottage units, as possible. The interlink ages will strive for integrated industrial development in rural area. Development of focal points in specific regions by providing different kinds of complementary facilities on the lines of Punjab is considered worth emulating. This will facilitate better balancing, greater optimal use of resources, better control and higher productivity and profitability.

And, setting up of agro-industrial services complexes and non-traditional industries in planned manner will lead to gradual urbanisation of the rural areas. This will in turn stop migration from the villages and may enable return flow of skilled manpower to rural areas. Rural industrialisation is, therefore, integral part of rural development.

A ‘cluster of villages’ approach would also be beneficial if adopted sagaciously and without undue interference of exogenous elements. Thus, rural industrialisation provides the necessary impetus to rapid rural development.

Initiating an entrepreneurial venture in rural area or a small town is a daunting task. But today, the number of entrepreneurs tapping the opportunities available are on a steady rise. The will power to overcome challenges and a strong passion to make a difference in the lives of thousands residing in rural areas is making these entrepreneurs strive for excellence. The growth of entrepreneurship in rural areas provides answers to innumerable ills prevailing in rural areas and placing it on growth path.

In short, entrepreneurial success in rural areas will assist in eradicating rural poverty, increase employment opportunities, raise the per capita income level and improve living standards significantly.

Risk-Taking among Rural Entrepreneurs

Development of rural entrepreneurship requires strategies that are different from those applied in urban areas. A different orientation is required in rural sector and such an orientation should be based on an understanding of the dynamics of rural behaviour. Perception of risk is a critical factor in villagers at the time of taking any new activity.

Given an individual’s attitudes and biases in given set of circumstances, there is a threshold beyond which the individuals will perceive the risk of change as unacceptable. In any new activity, the degree of perceived risk varies with the unknown element and the reassuring conditions. Therefore, if new activity is to be sustained a twofold strategy is required. First, the individual himself should be developed so that he has the capabilities to reduce the perceived risk to the acceptable level.

Secondly, reassuring relationships and circumstances should be created. This means preparing a group of mutually reinforcing individuals. Preparing the individual is not merely a question of the initial technical know-how. He should learn all aspects (technical, marketing, finance, etc.) of his trade. A most important aspect of developing the individual is for him to learn, with conviction, that as member of a wider group in which individuals cooperate with each other he has a better chance of survival and success.

Preparing the individual also means preparing him to manage the new relationships which arise in establishing links with agencies which can help his development. In the preparation of the individual and the group the technical and economic learning of the individual is important. But more important is the preparation of an individual to work in a group since mutual reinforcement can reduce risk perception of the individual. Thus, the development of the people in this process is more important than the development of the activity itself.

A rural entrepreneur is subjected to the following types of risks:

i. Technical Risks – The risk of not knowing enough about the technical process, materials, etc. also the risk of not being able to overcome the technical problems.

ii. Economic Risks – The risks of market fluctuations and change in relation to availability of raw materials and market for finished product, etc.

iii. Social Risks – Risks arising from environmental changes requires dealing with unfamiliar people, cultures, systems, etc.

These aspects of risk-taking can be used as a framework to formulate strategies for the development of rural entrepreneurship. Any agency engaged in this task should undertake the role of coordinating all the elements of money, materials, equipment, technical knowledge, marketing, etc. It does not mean that the agency must on its own provide all these skills and resources. But it should ensure that all these exist. For example, a bank may provide finance to a rural entrepreneur. But if other inputs and facilities are not available the bank’s efforts will be of no use.

The focus in any programme of developing rural entrepreneurs should not be on achieving time bound quantitative target (e.g., training 10,000 persons in one year) but on developing the villagers’ risk-taking and innovative capabilities.

Entrepreneurial Development in Backward Areas

Most of the industrial development in India has been concentrated round a few metropolitan cities and big towns. Therefore, development of entrepreneurship in backward regions has been adopted as a basic strategy of economic planning in India. In backward regions, the entrepreneurs, most of whom are first generation entrepreneurs, face several problems such as lack of finance, shortage of raw materials, lack of market coverage, lack of technical and managerial skills, improper project planning, shortage of power, lack of testing facilities, etc.

Entrepreneurship among local people is lacking mainly due to lack of risk-taking ability, lack of business experience, ignorance of various facilities and incentives available for setting up industries, lack of aptitude and necessary motivations. Bureaucratic procedures involved in setting up new units and the initial harassment and hardships discourage many prospective entrepreneurs.

Lack of infrastructural facilities is the main hurdle in the growth of entrepreneurship in backward regions. A dynamic organisational infrastructure to coordinate and activate entrepreneurial development is a basic prerequisite in a backward area. Such an organisation can bridge the knowledge gap, lack of expertise, training and aptitude. It can face problems of finance, raw materials, marketing and transportation, etc.

Several steps can be taken to promote entrepreneurship in backward areas. Proper coordination must be ensured between the concerned authorities. They should have adequate technical staff for selecting and guiding genuine investors. The staff of these agencies must be motivated, honest and sincere.

An orientation in their outlook and approach is necessary. Before the loan is released proper techno-economic viability test of the proposal be carried out. Proper infrastructural facilities should be developed in the backward areas. The planners and policymakers should be fully familiar with the problems and priorities of these areas. Snags in the institutional framework and various schemes of assistance should be removed.

Emphasis should be on industries based on local resources. The agencies should monitor the progress of assisted units. Their officials should frequently visit the entrepreneurs to ensure that the facilities are being availed of properly.

To conclude an integrated and multidimensional approach is required for the growth of entrepreneurship in backward areas and for identifying opportunities that have growth prospects based on local resources. It is necessary to provide the technology, finance and other assistance which small scale entrepreneurs need very acutely.

Government agencies and financial institutions often provide essential infrastructural facilities like land, power, raw materials and finance at concessional rates to entrepreneurs in backward areas. Technical guidance, training, marketing assistance, subsidies and tax exemptions are also available.

But there is often lack of coordination among the different agencies like banks, State financial corporations and the government. For example, the financing agencies insist on a licence or permit before granting finance. But the licensing authorities grant permit only after the vehicle is acquired. Officers of various agencies lack requisite knowledge to guide the entrepreneurs. In some cases the officers harass the entrepreneurs.

Development of Backward Areas:

The problem of backward or underdeveloped areas has assumed considerable significance since the mid-1960s from the point of view of both economic growth and national integration. As early as in the First Five Year Plan document, it was mentioned that if industrial development in the country was to proceed rapidly, and in a balanced manner, greater attention would have to be paid to the development of states and regions which had remained backward.

The Second Five Year Plan made it clear that in any comprehensive plan of development it is axiomatic that the special needs of less developed areas should receive due attention. The Fourth Plan document admitted that the problems of imbalance between the states were highly complex and an attempt was made to cater to the needs of the backward states. Capital assistance, special fee and programmes for drought prone areas were provided. The Fifth Plan laid special emphasis on the development of backward and hill areas.

However, the identification of backward areas is, however, an uphill task. Over the years various panels and committees set up the government have suggested different criteria as the basis for deciding the backwardness and extending incentives for development of such areas.

For instance, the Pande Committee adopted the following criteria to decide backwardness:

i. Per capita income

ii. Per capita income from industry

iii. Number of works in registered factories

iv. Per capita annual consumption of electricity

v. Length of surface roads in relation to population

vi. Railway mileage in relation to population.

As a result of these yardsticks, Andhra Pradesh, Bihar, Madhya Pradesh, Orissa, Uttar Pradesh, and Rajasthan were considered industrially backward and qualified for incentives for industrial development. Similarly, save committee recommended two or three districts in each backward state for grant of incentives.

For selecting a beneficiary district in an industrially backward state, the criteria adopted was that it should be 50 miles away from any large industrial project, the per capita income be at least 25 per cent below the state average, a low percentage of population engaged in subsidiary activity, etc. In 1982, the Union government identified and declared 83 districts in the country as – ‘No industry districts’. Special tax concessions and incentives were announced for setting up industry in these areas.

Incentives for Backward Areas:

Following are the main industrial incentives announced by the Union and various State governments to promote entrepreneurship in backward areas:

i. Grant of higher development rebate

ii. Exemption from income tax for five years after providing development rebate

iii. Exemption from import duties on plant and machinery

iv. Exemption from excise duties for five years

v. Exemption from sales tax both on raw materials and finished products for a period of five years

vi. Transport subsidy for a period of five years particularly in north-eastern states.

In spite of this lucrative package of incentives, it is doubtful whether these by themselves would significantly help in stimulating industrial growth in the backward areas. The reasons for backwardness must also be sought in intangible factors and cultural attitudes of the people.

The most important among attitudes, from the point of view of industrial development, is to understand whether the target populace has the ability to innovate, to undertake risks and to plan for the future. This is what an entrepreneur does. He or she is the person who conceives an idea, works it out in detail and sells it to others.

That is a person who has the vision, the drive and above all, the self-confidence to attract investments for the project finally. That is the person who has the tenacity to see the project through and make a new product. In the ultimate analysis, there is no substitute for entrepreneurial ability to conceive projects and to work them out.

13 Major Problems Faced by the Entrepreneurs in Rural India

The entrepreneurs of rural India are confronted by an array of obstacles and hindrances. The problems faced by the rural entrepreneurs crop up owing to the socio-economic, political, cultural, business environment in which they exist.

The major problems faced by the rural entrepreneurs are discussed below:

1. Illiteracy:

The level of literacy is a serious handicap for the aspiring rural entrepreneurs. They find it very difficult to understand the nitty- gritty of business activities, the changes in technological environment and the prospects of different sectors of business. Besides, in the rural areas, the rural entrepreneurs have to tackle the problem of illiteracy among the labour force available.

The levels of literacy of the workers affect the business prospects of the rural entrepreneurs and is thus as a serious challenge. The rural entrepreneurs owing to the low level of literacy find very cumbersome to understand and comply the legal formalities.

2. Lack of Experience:

The rural entrepreneurs are mostly the first generation entrepreneurs. They a rarely endowed with rich experience of entrepreneurship. It is obvious that they have to compete with the people with rich experience.

3. Purchasing Power is Limited:

Lack of purchasing power is a serious handicap for the rural entrepreneurs. Leaving aside few exceptions, the rural entrepreneurs face the crisis of lack of capacity to purchase resources and machineries.

4. Threat from the Existing Urban Entrepreneurs:

The urban entrepreneurs are believed to be in an advantageous position. They have better access to information, technology, business prospects, credit facility and etc. The rural entrepreneurs ultimately have to compete with the urban counterparts who are placed in an advantageous situation.

5. Lack of Funding:

The entrepreneurs of the rural areas find its challenging to generate external funds owing to the absence of tangible security. Moreover, the lack of credit facilities also adds to their plight. They often borrow from the unorganized financial sector and get thwarted.

6. Existence of Middlemen:

The existence of different levels of middlemen is a serious problem for the entrepreneurs of rural areas. Rural entrepreneurs are often dependent on the middlemen and in the process get exploited.

7. Procurement of Raw Materials:

The rural entrepreneurs have to face serious hurdles in procurement of raw materials. Usually the suppliers neglect the upcoming rural entrepreneurs because initially they are small size firms. The rural entrepreneurs also face the problem of warehousing and storage. Entrepreneurs using perishable raw materials don’t have easy access to cold storage facilities within the rural areas.

8. Lack of Technical Skill:

Rural entrepreneurs face a severe problem of lack of technical knowledge. There are two problems associated with. First, the rural entrepreneurs do not keep themselves updated with information of technological developments. Second, the employees and workers without technical skill affect productivity.

9. Lack of Training Facilities:

The lack of training and skill development facilities in rural areas is also a serious problem. The rural entrepreneurs find it very difficult to train and develop their workers in order to enhance their productivity.

10. Low Level of Infrastructural Facilities:

Usually the level of roads, communication facilities and electricity supply in rural areas are below standard. The low level of infrastructural facilities retards the development of rural entrepreneurship.

11. Poor Quality of Products:

The entrepreneurs of the rural areas find it extremely difficult to maintain high level of standard in their products and services. They lack the proper information about the prescribed standards owing to lack of access to internet. They also do not have the standard tools and equipments.

12. Lack of Positive and Inspiring Atmosphere:

In most of the cases, the rural entrepreneurs are not born and brought up in an environment that promotes entrepreneurship. The social environment, family customs, traditions are not conducive to encourage youngsters to take up entrepreneurship. The rural areas lack the awareness and knowledge of entrepreneurial opportunities.

13. The Element of Risk Involved:

Rural entrepreneurs unlike their counterparts are not well equipped to undertake heavy risks. The rural entrepreneurs have less risk bearing capacity due to lack of financial resources, credit facilities and external support.

Rural Entrepreneurship Development Initiatives in India – Government Efforts, Policies, Schemes and Prospects

Government Efforts:

The Rural Employment Generation Programme (REGP) implemented by Khadi and Village Industries Commission (KVIC) covers all viable village industries projects except those specified in the negative list of KVIC. 119 rural industries are specified under seven heads for financing by banks, with KVIC support for margin money.

These heads are mineral-based industries, forest-based industries, agro-based and food industries, polymer and chemical-based industries, engineering and non-conventional energy, textile industry (excluding khadi), and service industries. Further, rural development programmes like IRDP, TRYSEM, SWVRA, and Jawahar Rozgar Yojana have been concentrating on target groups and rural infrastructural facilities.

There are signs of inter-sectoral coordination and schematic linkages getting strengthened at the grass root level. Voluntary efforts too are getting due recognition and being provided an impetus through policy support. The action plan of the government desires to spend half of national resources on rural development.

Rural Industrialization Programme:

Non-farm sector (NFS) activities located in rural areas and urban areas up to one lakh population are covered under the rural industrialization programme. Under the programme, financial support and incentives are given to entrepreneurs for setting up manufacturing and service enterprises in the mini, micro, small, and medium.

The National Bank for Agriculture and Rural Development (NABARD) provides refinance for investment made in agro- industries, sericulture, and marketing of rural non-farm sector products, irrespective of the location. For other industries in locations up to 50,000 populations, refinance is sanctioned by NABARD.

Decentralised industrial development through traditional industries covered by a few All India Boards (like Central Silk Board Coir board, Central Wool board) and bodies such as – KVIC, All India Handloom Board, and All India Handicrafts Board are also part of the rural industrialization programme.

Several other agro, food processing, and mineral-based industries including power looms located in rural and semi-urban areas up to one lakh population are also included in this programme.

In the rural industrialization programme, an integrated approach is being pursued by identifying clusters of industries. The package of measures can include the following – credit, technology up gradation modernization, technology transfer, marketing including exports wherever practicable, infrastructure development, common services, supply of raw materials, etc.

The National Programme for Rural Industrialization (NPRI) was implemented for five years from 1999-2000 to 2004-2005, using the cluster approach. The institutions involved in implementing this programme are KVIC, and other decentralized organizations, like Small Industries Service Institutes (SIVI), NABARD, and SIDBI.

The NPRI scheme has a provision for extending financial assistance up to Rs. 5 lakh per cluster for various interventions. The programme has been subsumed under the Scheme of Fund for Regeneration of Traditional Industries (SFURTI) from 2005-06, as the latter provides a much more comprehensive approach to cluster development.

In each cluster, through a study of individual enterprises, requirements of the group are finalized taking into account the long-term perspective of the growth of the industry in the context of liberalization. The programme of work includes conducting motivational campaigns, entrepreneurial training, and skill up gradation of artisans and prospective entrepreneurs in rural and urban areas.

Policies and Schemes:

The government of India has been undertaking a number of schemes to directly or indirectly enhance rural entrepreneurship. These schemes directly or indirectly help in promoting rural entrepreneurship.

1. Training of Rural Youth for Self-Employment (TRYSEM) was a scheme that was aimed at providing basic technical and entrepreneurial skill to the rural poor in the age group of 18-35 years in order to enable them take up income generating activities. The scheme was merged into Swarnajayanti Gram Swarojgar Yojana (SGSY) with IRDP, DWCRA etc. from April, 1999.

2. Swarnjayanti Gram Swarozgar Yojana (SGSY) aims at bringing the assisted poor families (Swarozgaries) above the Poverty Line by ensuring appreciable sustained level of income over a period of time. SGSY aims at organiging the rural poor into Self Help Groups (SHGs) through the process of social mobilization, their training and capacity building and provision of income generating assets. SGSY stresses that instead of funding diverse activities; each block should concentrate on a few select activities (key activities) and attend to all aspects of these activities, so that the Swarozgaris can draw sustainable incomes from their investments.

3. Council for Advancement of People’s Action and Rural Technology (CAPART) was formed in 1986 as a nodal agency for catalysing and coordinating the emerging partnership between voluntary organisations and the Government for sustainable development of rural areas.

Prospects of Rural Entrepreneurship in India:

1. Low Cost of Establishment:

Rural entrepreneurship has an advantage over the urban counterparts. The establishment of a rural enterprise involves lesser cost. The promising entrepreneurs can avail this advantage and choose to initiate his/her enterprise.

2. Better Availability of Labour:

Majority of the rural population are engaged directly or indirectly with agriculture. The labour force includes both semi-skilled and unskilled labourers in abundance. The problem of disguised employment can be resolved. The excess labourers can shift and join the enterprises developed by rural entrepreneurship. The labour force is available in abundance for the rural entrepreneurship at cheaper rate. Even the labourers of the rural areas working in urban areas can rethink of joining the rural entrepreneurship.

3. Local Resources are Easily Available:

The rural entrepreneurship based on available local raw materials is place in a comfortable position. The local agro based or mineral based raw materials are easily available and do not involve huge transportation and storage costs.

4. Cost of Production:

As the factors of production are available at cheaper rate, the cost of production involved in rural enterprise will be comparatively low. Rural entrepreneurship if provided with required capital and expertise can do wonders.

5. Best Utilization of Available Resources:

Rural entrepreneurship can bear the responsibility of optimal utilization of the available resources in the rural areas.

6. Government Support and Policies:

The Central government and the state governments have always supported and promoted the growth of rural entrepreneurship in India. The governments have formulated policies and have provided subsides for promotion of rural entrepreneurship. The state is aware of the significance and potential of rural entrepreneurship. The state will definitely promote rural entrepreneurship. This is a very positive prospect for the aspirants of rural entrepreneurship.