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Rural Entrepreneurship

In the recent past agriculture in the rural areas became a relatively unrewarding exercise due to unfavorable price structures and poor productivity, resulting in migration to urban areas. Most of the poor in the rural areas are small farmers; tenants share croppers, artisans and landless agricultural workers. Due to seasonality of agriculture, employment is a major problem. Millions of youth and women, for want of any job opportunity, are joining the ranks of unemployed. This is due to limited access to natural resources. The organized sector has not been able to generate additional employment opportunities. In the recent past, employment elasticity to output growth of all the sectors has been falling. Agriculture sector is overburdened with unproductive employment. The large industry is catering to the requirements of urban areas. The modern small industry is concentrated in urban and semi urban centers. There is thus a new added dimension of increasing migration to urban centers, both for resources and skills. The only hope is to generate employment opportunities in the sustainable non-farm sector in the rural areas. The rural industrialization can provide an answer to the growing problems of poverty, Unemployment and migration. The rural areas specialize in agriculture and the urban areas are characterized by conglomeration of Industries. There is a gap in the income levels between the rural and the urban areas as agriculture has a tendency to develop at a lower pace and productivity is higher in Industry. Rural Industrialization is viewed as one effective means of accelerating the process of rural development and thus reduce gap in income levels between rural and urban areas. Rural industrialization aims at providing employment to under employment people in the rural areas. If facilitates supplementing

Rural Entrepreneurship

agricultural activities with industrial and self employed production activities. Promotion of rural industries has been the main object of every policy declared. agricultural Rural industrialization is inter-linked with the Rural industrialization through rural as one effective means of As entrepreneurship Rural Rural activity.

entrepreneurship development is viewed

accelerating the process of rural development and thus, reduce gap in income levels between rural & urban areas. precedes industrialization, hence the need for rural entrepreneurship. Rural entrepreneurship emerging in rural entrepreneurship. entrepreneurship emerging in rural area is called.

entrepreneurship. In other words establishing rural industries in rural areas refers to rural entrepreneurship.

Rural Industry:
Rural industries more or less specialize in agriculture. According 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 and an investment of Rs. 3 corers in plant and machinery. This was lowered to Rs. 1 crore. With this wider definition a toral of 41 new village industries have been added to the category of village industries.

Rural Entrepreneurship

All the villages have been classified into the following seven categories: a. Service industry b. Textile industry (including Khadi). c. Engineering and non-conventional industries. d. Mineral-based industries. e. Fores-based industries. f. Agro-based industries.

Benefits of Rural Industrialization:

1. Employment opportunities: Rural industries provide additional

employment opportunities, improve economic condition and raise production in rural areas.
2. Labor Intensive: Rural industries are labor intensive.


ensure decentralization of economic power and elimination of monopolistic exploitation.

3. Promotion of artistic achievement: Rural industrialization

provides ample scope for the promotion of artistic achievement and creativity.
4. Rural







development of rural areas thereby reducing the growth of social tension, exploitation and pollution in large cities.

5. Reducing over-head cost: Decentralized production through net.

Work of well knit rural industries solves the problems of

Rural Entrepreneurship

complicated managerial and competitive marketing techniques and thus reducing the cost on account of overheads.

Importance of Rural Industrialization:

1. Correct regional imbalances: Rural industries have the capacity

to correct regional imbalances by initiating industrial activities on dispersed basis.

2. Less gestation period: These decentralized industries require

less gestation period, less overhead and produce goods of common necessities.
3. Maximum Participation: Being small they can ensure maximum

participation of workers in management, thus ensuring a feeling of involvement.

4. Rural Prosperity: Rural Industrialization is a key to rural

development and rural prosperity. It contributes a significant link in the process of Socio-economic transformation of rural areas.
5. Employment at the place of residence: These industries are

capable of offering employment opportunities at the place of residence to large section of population.
6. Disguised Unemployment: The village industries are the best

solution to the wide spread problem of disguised unemployment or underemployment.

7. Participation of Women folk: These industries posses an

additional advantage wherein the maximum participation of women folk can be ensured.

Rural Entrepreneurship

Problems of Rural Entrepreneurship:

The general bottleneck in the development of village industries are financial constraints, lack of technical know-how, lack of training and extension services, management problems, lack of storage and warehouses, primitive and obsolete technology and lack of promotional strategy. According to the Ninth plan the main problems faced in developing entrepreneurship in rural areas are:

Inadequate flow of credit, use of obsolete technology, machinery and equipment,


Poor quality standards and Inadequate infrastructural facilities. One of the major problems faced in developing rural


entrepreneurship is lack of awareness and knowledge about the importance of developing rural industries in rural areas. Rural people generally want to take up salaried employment because of assured income, less hours of work, and less degree of responsibilities. Overall the environment in the family, society and support system is generally not conductive to encourage the rural people to consider self-employment and the entrepreneurial carrier, as an option to salaried employment.

Measures to develop rural entrepreneurship:

Rural Entrepreneurship 1. Employment oriented rural industries should be provide with

raw-material. 2. Availability of finance on soft and easy terms.

3. Measures like common production-cum-marketing centers

are taken to solve the marketing problems faced by rural industries.

4. Inculcate and develop entrepreneurial aptitude among

entrepreneurs to make them successful in their ventures. This can be done through the training intervention such as EDP, TRYSEM and alike. 5. Imparting entrepreneurial education at the school, college and universities. 6. Disseminating information about various facilities available for prospective entrepreneurs to set up industries in rural areas. 7. Encourage N.G.Os to contribute to the development of rural industries.

Khadi and Village Industries commission (KVIC):

Rural Entrepreneurship

The KVIC was established in April, 1957 under the Khadi and village industries commission act 1956. Under the guidance of Mahatma Gandhi, activities of Khadi were started in 1922. The Khadi Programme was closely linked with the struggle for freedom. In order to organize hand spinning and hand weaving the All-India Spinners Association was established in 1925. This was followed by the establishment of another organization in 1935, called the All-India Village Industries Association to look after other village industries such as Ghana-Oil, Palm Oil, Beekeeping hand-made paper etc.

Function of KVIC
1. Promote the sale of Khadi Products: To promote the sale and

marketing of Khadi products of village industry and handicraft the KVIC was established to undertake these activities.
2. Encourage Khadi and village industries: The KVIC is also

charged with responsibility of encouraged and promoting research in the production technique employed in the Khadi and Village industries sector.
3. Financial Assistance: KVIC is entrusted with the task of

providing financial assistance to institutions or persons engaged in the development and operation of Khadi and village industries and guiding them through the supply of design, Proto-types and other technical information.
4. Attention problems of KVIC: The KVIC may also undertake

directly or through other agencies studies concerning the

Rural Entrepreneurship

problems of Khadi or village industries besides experiments or pilot projects for the development of Khadi and Village industries.
5. Maintain separate organization: The KVIC is authorized to

establish and maintain separate organization for the purpose of carrying out any of all above matters incidental to its activities.

Cottage Industries:
They form the smallest segment among the small-scale industries. They are largely household enterprises. These industries have limited scope for development in urban areas as they have to face stiff competition from small-scale industries. Basket weaving are some of the examples. They come under the regulation of Khadi & village industries commission. Pottery, Carpentry,

Characteristics of Cottage Industries:

1. They predominantly use manual labor

2. Borrowed capital is relatively insignificant in their resources and the availability of institutional finance negligible.
3. Being more labor intensive, the tangible assets of these units are


4. Management and maintenance of records are rather poor. 5. They produce mainly traditional goods with old techniques.

Rural Entrepreneurship

6. They cater to the needs of the local market. 7. They derive raw material from local services and their market is local in character. 8. They are mainly located in rural areas. 9. They requires less capital investment 10. labor. They are household enterprises employing very little hired

Handicraft Industries:
These are household industries require skilled craftsmanship. The products of these industries are known for their artistic excellent quality and rare beauty. The final products are sophisticated but tools which are used for manufacturing purposes are simple. Sale generally takes place through middleman. Handicrafts are looked after by All India Handicraft Board.

Ancillary Industries:

Rural Entrepreneurship

An ancillary industry is defined as A unit having investment in fixed assets in plant and machinery not exceeding Rs.100 lakhs and engaged in the manufacture of parts, components, sub assemblies, looking or intermediates or the rendering of services and supplying or proposing to supply 50% of their production to one or more percent units or 10% of their production to the large unit.

Advantages of Ancillary Industries:

1. Sub-Contracting: The size of the operation of several industrial

units has increased enormously with the results that they are compelled to sub-contract some of the items of production to ancillaries.
2. Economical: Small-scale manufacturers can economize on

transport cost storage cost etc. by sub-contracting and it is also economical to have some items manufactured by ancillary units because the cost storage cost etc. by sub-contracting and it is also economical to have some items manufactured by ancillary units because the cost of these items is higher when they are fabricated by large-scale manufacturers.
3. Concentration on important problems: With the growing

complexity of management the large-scale manufacturer can now concentrate on the problems of organization, marketing finance etc. rather than waste his energies on finding new raw materials.

4. Supply of scarce raw material: The ancillary unit need not

bother about the availability or raw material. An ancillary unit is


Rural Entrepreneurship

assured of regular supply of scarce raw material from the present firm.
5. Provision of finance: The parent company assists the ancillary

industry at the time of financial crises. spares, parts and components.

Ultimately the parents

company is dependent on the ancillary unit for the supply of its

Maharashtra State Khadi and Village Industries Commission:

Government of Maharashtra established the Maharashtra State Khadi and Village Industries Commission as per the act passed in 1967. The main object of KVIC is t provide opportunities for work albeit part time work in certain cases and thereby to help to mitigate the severity of rural unemployment and underemployment, bring stability of village artisans increase the self-employment fields, provide credit facilities, raw materials, encourage for improving the technical skills of village artisans. The commission provides employment to 5 lakh people living in 29,194 villages in Maharashtra State. Following institutions are given financial aid for 114 industries coming under purview of KVIC. 1. Institutes registered under Societies Registration Act 1860. 2. Cooperative societies registered under Cooperative Act 1960. 3. Institutes registered under Public Trust Act 1950. 4. Rural enterprises and artisans.

Special Employment Programme (SEP):


Rural Entrepreneurship

SEP has been announced in industrially backward district in order to provide employment to 10000 people in every district. For implementing the Programme following districts from Maharashtra State are selected. 1. Chandrapur 2. yeotmal 3. Raigad/Ratnagiri 4. Beed and and 5. Nanded

The main features of the Programme are:

1. To develop skills amongst village artisans and to improve their standard of living.
2. Coordination with KVIC, district rural development agencies, other

financial and social institutions for development of rural area. 3. To act as linking agency in order to provide continuous employment for rural unemployed people. The above said Programme is implemented in above districts through Margin Money Scheme.

Honey Industry: For providing source of income to the people staying in jungles and doing the business of honeybees, the commission has undertaken the Programme of developing the honey industry. The commission

Rural Entrepreneurship

gives necessary training, provides honey boxes and other allied machinery required at concessional rates. The programmes of production, research, processing of honeyk, production of fly queen etc. are undertaken by the commission.


With a view to get all types of assistance to Entrepreneurs at one place, Govt. has established District Industries Centers at all District Headquarters.

Rural Entrepreneurship

The Head of District Industries Centers are General Managers who are assisted by Managers working under them. For every Taluka in the district, Industries Inspectors are appointed by the govt. who visits the office of the Panchayat Samithi once in a week on a fixed day as per allocation made and guide the entrepreneurs in order to solve their problems selected to their industries. District Advisory Committee: Under the presidentship of collector, the District Advisory committee is constituted to guide the district industries centers and coordination of other various committees functioning for the purpose. Member of Parliament/ Legislation Assembly, representatives of Industrial institutions and officers of industrial Development Corporation are the members of this committee. The general Managers of DIC work as secondary in this committee. Zilla Udyog Mitra: Under the president ship of Collector of the District, a committee known as Zilla Udyog Mitra is established. The General Manager of DIC is an Ex-office member on this committee. The delayed proposals of entrepreneurship are discussed in the General Manager of DIC for their speedy headquarters.

FUNCTIONS AND SERVICE OF DIC (District Industrial Centers) Transferring plots admeasuring 2500 sq. Meters to entrepreneurs from industrial estate of Maharashtra Industrial Development Corporation.

Rural Entrepreneurship

Register small-scale units in the district. Recommend SSI units for getting telephone, electricity and machinery on easy installment. Help in procuring rare indigenous and imported raw materials. Recommend proposals of educated unemployed youths for sanctioning loans under Prime Ministers employment scheme & seed Capital Scheme to the financial institutions. Assist the concerned persons for establishing industrial estates. Counseling with Govt. and Semi-Govt. authorities to give assistance to entrepreneurs. Recommend the proposals of entrepreneurs to collector for getting necessary permission and procurement of land. Recommend proposals of entrepreneurs to bank & other financial institutions in order to get loans for erection of industry. In order to get proper market for the product of SSI units recommend them to concerned authorities. Recommend the application of entrepreneurs for State and District prizes. Guide the entrepreneurs in all respect.


Rural Entrepreneurship

Distribution of seed capital to educated employed youths. Implement Govt. of Maharashtra consolidated incentives schemes 1993 for small-scale industries.

The United Nations has defined an Industrial Estate as a planned clustering of enterprise, offering standard factory buildings erected in advance or demand and variety of services and facilities t o the occupants. OBJECTIVES OF INDUSTRIAL ESTATES: To encourage growth of ancillary industries in the town ships, surrounding major industrial undertakings, both in public and private sectors. To shift small-scale industries from congested areas to estate premises with a view to increasing their productivity. To encourage the growth of small-scale industries To foster the development for industry and Entrepreneurship by providing economies and incentives.


Rural Entrepreneurship

To achieve decentralized development in small towns and large villages.


It may be large, medium or small. It is a tract of land subdivided and developed into factory sheds or plots. It may be set up by the Government or by Co-operatives or by private agencies. It may be developed in urban, semi-urban or rural areas. It provides several common facilities or infrastructure amenities such as water, power, transport, tool room, training, bank, post office and maintenance etc. is the occupant. It is a planned clustering of industrial units. It is designed as a tool of industrialization and balanced regional development.



Rural Entrepreneurship

On the basis of the organizational setup, industrial estates are classified into 1. Government 2. Private 3. Co-operative, and 4. Municipal estates. There are a number other various industrial estates such as:

Ancillary Industrial Estate: Only small industrial, which are ancillary to a particular large industry are house in this estate just like the one attached to the HMT, Bangalore. The Service Industry-bay: This is usually located in shopping

centers to provide space for repair shop and enterprises such as job printing. Functional Industrial Estate: This is a small and fully services unit which serves as a reception center for displaced small firms. It also serves as a Plot-Cell for small firms going into production and is a base for expansion into larger factories. The Workshop-bay: This is designed for very small and is usually meant for an artisan who does mainly repair works.

General Purpose or Composite Industrial Estates: It consists of a variety and range of industrial units. Most of the industrial estates in India are of those types. Such types of industrial estates in

Rural Entrepreneurship

India are these types of industrial estates provide accommodation to all types of small-scale industries. Flatted Factory Estates: In order to provide space to industrial units manufacturing lightweight goods with the help of simple machine tools, there are multistory buildings constructed in big cities to accommodate SSI.

ADVATAGES OF INDUSTRIAL ESTATES: The following benefits are offered by Industrial Estates:

Balanced Regional Development: The Govt can ensure balanced industrialization of different parts of the country by developing Industrialization Estates in relatively backward region. This will lead to decentralization of industries.

Saving of time and Effort: An individual entrepreneur need not waste his time and energy in the formalities involved in acquiring land, securing power connection and obtaining approval of the local authorities. He is relieved of the trouble of searching for a suitable space.

Economies of Scale: Economies of scale arise because all the industrial units enjoy common infrastructural facilities. As the size of an industrial estate increases the cost of the estate development and administration per unit of each facility declines.


Rural Entrepreneurship

Low Investment: An Industrial shed or a plot can be obtained in an industrial estate on rent or hire purchase basis. This reduces fixed capital requirement considerably.

Less Risk: Because of the low capital investment and provision of common problems and seek to achieve common objective. Industrial Estates promote the spirit of co-operation and joint efforts.

Opening for New Entrepreneur: Industrial Estate reduces risks and increase profitability through internal and external economies. This induces new entrepreneur to set up their industrial units.