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Rural Entrepreneurship in India PDF
Rural Entrepreneurship in India PDF
who should be capable of making use of the government policies and schemes for the
betterment of rural people. Some individuals who happen to be local leaders and NGOs and
who are committed to the cause of the rural people have been catalytic agents for
development. Though their efforts need to be recognized yet much more needs to be done to
reverse the direction of movement of people, i.e. to attract people to the rural areas. It means
not only stopping the outflow of rural people but also attracting them back from the towns
and cities where they had migrated. This is possible when young people consider rural areas
as places of opportunities. Despite all the inadequacies in rural areas one should assess their
strengths and build on them to make rural areas places of opportunities. This is much to do
with the way one sees the reality of the rural areas. The way a survivor or a job seeker would
see things would be certainly different from those who would like to do something
worthwhile and are ready to go through a difficult path to achieve their goals. It isn't that
there is a dearth of people with such mindset. But with time they change their minds and join
the bandwagon of job seekers due to various compulsions. Enabling them to think positively,
creatively and Entrepreneurship purposefully is utmost for the development of rural areas.
Young people with such perspective and with the help of rightly channelized efforts would
usher in an era of rural entrepreneurship. In this country successful rural entrepreneurs would
solve many of the chronic problems within a short time.
To promote entrepreneurs who would take to rural entrepreneurship in utmost earnestness
and sincerity is to ensure rural development. Such enterprising people who prefer rural
entrepreneurship may or may not themselves belong to rural areas. Entrepreneurs taking to
rural entrepreneurship should not only set up enterprises in rural areas but should be also
using rural produce as raw material and employing rural people in their production
processes. Rural entrepreneurship is, in essence, that entrepreneurship which ensures value
addition to rural resources in rural areas engaging largely rural human resources. In other
words, this means that finished products are produced in rural areas out of resources
obtained in rural areas by largely rural people.
The entrepreneur may or may not be of rural origin. The entrepreneurs may be from
anywhere, but their enterprises have to be located in a rural area, using mainly local resources
both material as well as human. Also, the enterprises have to be located in a rural area though
it need not be actually using 100% local material and human resources. Some amount of
material and some people may be from urban cities. But certainly large portion of material
used has to be locally produced and an appreciable number of people engaged in the
production of finished goods should be people based or living in rural areas.
Even a unit set up by the government or a large company in a rural area could promote rural
entrepreneurship depending on how much opportunities it throws up for entrepreneurs to use
local resources, to fulfill the demands of such large units and the multiplier effect such large
units create. Any large unit coming up in rural areas more or less does have an impact in
activating the surrounding economy for entrepreneurs to take advantage of. This is precisely
the reason why it is recommended to shift industries from urban centers to neighboring rural
areas. Such shifting initially may be a difficult proposition but in the long run beneficial in
many ways. Moreover, it would throw up lots of opportunities in the rural areas and result in
decongestion of the urban centers. Urban slums would start disappearing with large number
of industries getting shifted to rural areas resulting in increasing opportunities in the rural
areas. Thus, both the rural as well as urban areas get benefited by setting up more industrial
units in the rural areas, making rural areas attractive locations for investments.
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Constraints
Low self-image and confidence.
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Inputs
Motivational inputs, unfreezing and
experience sharing by successful local
entrepreneurs.
Group building experiences.
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No exposure to industry/business.
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The merits of partnership are ease of formation, large resources, and combined
abilities and judgment, flexibility, quick decisions, cautions operations, survival
capacity, better human and public relations, improved chances of growth and
protection of minority interest.
The demerits could be lack of harmony, divided authority, instability of business, lack
of public confidence, risk of implied authority, unlimited liability, non-transferability
of interest and social losses.
b. Private Limited Company
In this case the shareholders are the owners. There must be a minimum of 2 (two)
shareholders. The Indian law allows maximum of 50 (fifty) shareholders. The liability
is limited in this case. As such if the company goes bankrupt then no one has to part
with one's other personal assets to meet the obligation of the creditors.
Being a private limited company, one can raise far less money than a public limited
company. But there is better control as the number of shareholders is few besides they
may be your kith and kin. Many provisions of Company Law are not applicable to
private limited companies. There is much less paperwork too. Companies are
governed by Companies Act, 1956.
c. Public Limited Company
In this case the shareholders are also the owners. There must be minimum 7 (seven)
shareholders. There might be millions of shareholders as there is no such upper limit.
Being a, public limited company it can raise more money from the public by issuing
equity shares, debentures, etc. to meet various expenses of the company.
All provisions of the Company Law are applicable here. It is more of a professional
organization and is fully governed by the Companies Act, 1956. It is to be noted that
merit of forming a company are many such as large financial resources, limited
liability, continuity, transferability of shares, benefits of large scale operations,
professional management, public confidence, scope of expansion and growth, social
benefits, tax benefits, etc.
3] CLUSTER FORMATION
It is primarily a formal and non-formal group of people to achieve a common objective.
It basically covers Non-Governmental Organizations (NGOs), Voluntary Organization (VOs), SelfHelp Groups (SHGs), Community-Based Organizations (CBOs) and networking of all these.
a. NGOs
These are non-profit making organizations registered under the Society's Registration Act,
1860. A group of seven people come on a common platform to carry out defined activities for
the socio-economic development of people.
The main characteristics of NGOs are:
i) These are initiated, sponsored and constituted mainly by the Government as autonomous
bodies to fulfill specific developmental objectives.
ii) These receive funds mainly from the Govt. and channelize them through VOs.
iii) These are usually non-political in nature.
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This is a non-formal group. The SHGs get funding from the NGOs, VOs and even from the
Government to carry out various activities in areas of common interest and an objective for
economic empowerment.
d. CBOs
These are community based organizations and are informal in nature. Specific community
with a specific avocation forms a group to carry out various activities in a group. A CBO is a
group of people from a common living area of habitat who get together for a common cause.
The overall objective is to enhance the bargaining strength of individuals in the group. For
example: fishermen group, cobbler group, milk producers, etc.
4] COOPERATIVES
According to ILO, a cooperative organization is an association of persons usually of limited means,
who have voluntarily joined together to achieve a common economic end, through formation of a
democratically controlled business organisation making equitable contributions to the capital required
and accepting a fair share of risks and benefits of the undertaking.
According to International Cooperative Alliance (ICA) "A cooperative is an autonomous association
of persons united voluntarily to meet their common economic, social and cultural needs and
aspirations through a jointly-owned and democratically controlled enterprise".
1. Food Processing
Food processing covers variety of products from various sectors comprising agriculture,
horticulture, plantation, animal husbandry and fisheries & marine products. India is one of the
major food producers in the world and has enough availability of a wide variety of foodgrains, fruits, vegetables, flowers, livestock, poultry, fish and seafood. Diverse climatic
conditions and a long coastline has contributed to India's position as a large food producer
with variety. However, the food processing industry is still a low-key affair and only two
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4. Mushrooms
Mushrooms including the commonly known Dhingri grow on decaying tissues of plant
material under normal conditions.. It is light grey in colour and has pleasant flavour. The
study at CFTRI, Mysore has shown that it can be cultivated easily under normal conditions of
temperature (21 to 2SC) and relative humidity ( 5% to 75%) for a period of 6 to 8 months in
a year in many parts of the country. It can also be cultivated in summer months, by providing
extra humidity and low temperature with the use of modem techniques.
The spawn (seed material) of mushroom is the ramified mycelium, which is used as which is
used as seed. The spawn is prepared by inoculating the pure culture of mushroom on paddy
jowar straw under certain conditions. This is known as master spawn. This can be stored at
room temperature for a period of 3 months from the date of inoculation.
Mushrooms have got tremendous market, both domestic as well as international. Local
market also has two segments, one is the domestic consumer and the other is the business
consumer at hotels and restaurants. Use of Mushroom has increased substantially at local
level in the recent past.
5. Chikki Industry
Chikki is a popular and traditional Indian sweet. It is known by different names in different
languages and in different States. The ingredients which go into production chikkies are
puffe&rmsted Bengd gram, groundnut, puffed rice, beaten rice, coconut scrapings
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6. Poultry Industry
Poultry farming is one of the fastest growing industries in India. It is quite profitable
and can be managed by persons of all ages from all walks of life in all sections of the
country. It may be conducted as an exclusive business or as a side business for
additional income.
The National Commission of Agriculture states that poultry farming has certain special
Strategies and Experiences features, which favour its large-scale adoption by small and
marginal farmers and agricultural labourers. Land required for poultry farming is small;
the capital investment for starting small poultry units is less. Poultry farming can be
started on a small scale and can be expanded gradually. It does not require heavy
investment and the raw materials are easily available. Also short-term training facilities
are available and even uneducated people could set up poultry farms. Profits are earned
much sooner than most other farm products.
Some of the advantages of poultry keeping are:
1) Supplies nutritious food for the people.
2) Serves as hobby and sport for some people.
3) Requires less capital to start a poultry unit and gives good and quick
4) Needs little space and can be done in phases.
5) Water requirement is less as compared to crop cultivation or farming.
6) Waste products like bran and substandard grains can be utilized.
7) Eradicates garden pests such as caterpillars, insects and snails.
8) Gives rich fertilizer for crop cultivation especially for vegetable gardens.
9) Poultry feathers are useful in many ways.
10) It is a favourable side business to agriculture.
11) Gives income throughout the year.
12) Not much labour is involved and generates self-employment.
13) Supports many ancillary units.
14) Easy to manage, even women and children can look after them.
15) Some medicines and tonics are obtained from poultry as by-products.
Presently it is a well-organised agro-industry where people with limited or adequate
finances can start commercial poultry farming.
7. Cottage and Handicrafts Industry
Cottage industries are those industries run within the residences of the artisans by family
members without any hired labour, with the use of locally available raw materials and by
making little capid investment. The major industrial activities in this scheme include pot
making, match making, ghani oil extraction, bee-keeping, bamboo cane works, basketmaking, korai mat weaving, stone weaving items, clay folks.
This area covers large number of activities in rural India where youth can undertake the
activity of higher taste. This being a purely service oriented sector, a person with good
interpersonal relations and qualities will win over the business competition, which in any case
is basic requirement to become a successful entrepreneur.
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12. Entertainment
In the absence of leisure time Bs well as purchasing power, the rural folks are generally
devoid of the entertainment which everyone needs for rest and relaxation. With the reach of
electronic media the rural youth has developed a taste towards music, dance, acting, etc. in
addition to traditional songs, folk dances, cultural activities, traditional games and sports
which can be used as source of revenue generation. This type of service can be provided
either by an individual having good financial background or by a small group rendering and
promoting such activities and services in rural India on various occasions such as social
functions, VIP visits, etc.
Such events are attracting not only the domestic tourist but international tourist also is now
keen to observe Indian customs, culture and costumes thus becoming a very good source of
income for the rural unemployed youth.
13. Modern Industries
With the Government efforts to extend the development initiatives to rural India especially in
developing States, the Modem industries are being given special packages and relief with tax
benefits for setting up the industries at a subsidized cost with the aim to provide job
opportunities, infrastructure development in terms of road, power, water supply, e t ~T.h is, in
consequence, leads to overall increase in the living standards of local people where the
modem industries are being set up by various national and international companies. As a
matter of policy, the industries are being asked to shift from the large townships like metros
especially to decongest and lessen the burden on the urban centres.
These industries offer great opportunities of varied nature of jobs for local youth who are
educated and are willing take challenging assignments, whether wage-employment or selfemployment type. The employment opportunities are basically based on qualifications, skills
and expertise while self-employment opportunities or indirect employment opportunities are
based on the various types of industry related trade or service activities which the rural youth
can undertake and be gainfully employed.
Modern industry is now playing very important role ever since globalization and
liberalization policy of Government came into existence and it has definitely helped the rural
youth in finding suitable vocation.
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Information on Business Ideas - There are numerous directories, handbooks and databases published
by the Govt. of India, Associations and other agencies for obtaining information on opportunities.
These are information in the following forms:
Feasibility studies
Project profiles
Industry studies
Area development studies
The organizations in possession of information on business opportunities are are:
1) District Industry Centres (DIC) - (one in each district)
2) Technical Consultancy Organizations (TCO) - (one each in most States)
3) Centres for Entrepreneurship Development (one each in many States)
4) Small Industry Service Institutes (SISI) (one in each of many large cities)
5) Lead Bank (one in each district)
6) Industrial Extension Bureaus (these exist in several States) and are known as INDEXTB, Udyog
Mitra, Udyog Sahay and so on).
7) National Industrial Development Corporation (NIDC), New Delhi
8) Khadi and Village Industries Commission (KVIC)
9) Commissioner of Cottage Industries (one in each State)
10) Entrepreneurship Development Institute of India (EDI), Ahmedabad
11) National Institute of Entrepreneurship and Small Business Development (NIESBUD), New Delhi
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Capital Organization
Capital is the prime requirement for any project. Term lending institutions such as State Financial
Corporations (SFCs), State Industrial Development Corporations (SIDCs), State Industrial Investment
Corporations (SIICs), Commercial Banks, etc. are the prime sources for meeting the project cost such
as :
Land cost and land development charges,
Construction of buildings,
Purchase of plant and machinery,
Acquiring technical know-how,
Procuring miscellaneous fixed assets,
Margin of working capital,
Contingencies, etc.
While sanctioning loans, the financial institutions consider the credit worthiness of the project beside
the payback capacity of the project. Hence assessment of financial viability is a must before releasing
the funds.
Support System
Information about support system is a must for an enterprise. In short-term it is the information which
helps in-sound decision making. The information could be on infrastructure facilities, incentives
available, financial tie-ups, availability of raw materials, tax concessions, etc.
Information on various infrastructure facilities such as availability of land, power, and water, facilities
for effluents or wastes disposal should be available from the District Industries Centre of the District
or from the concerned State Directorate of Industries. For financial tie-ups the State Financial
Corporation and its branches which are located at various districts of the State can effectively guide.
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Problem definition
Research design
Field work
Data analysis
Report presentation and implementation
FEASIBILITY REPORT
It is very essential to prepare a feasibility report covering all the activities and the resources needed
for the project. The feasibility report broadly contains the following:
a) The background of the entrepreneur i.e. the educational background, family background and
professional exposure
b) Market potential and marketing strategy
c) Selection of location of the project which should be on the basis of proximity to the source of raw
materials and/or markets, availabilities of labour, infrastructural facilities, incentives, etc.
d) Requirements of land and building. It is to be ensured that the land is free from any legal
encumbrances
e) Requirement of plant and machinery including their installation
f) Manufacturing process
g) Requirements of utilities such as water and electricity
h) Requirements of raw materials and sources of supply
i) Estimated cost of the project
j) Means of finance
k) Cost of production, taxes and profitability
h) Break-even point
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SOURCES OF FUNDS
Normally an entrepreneur tries to meet at least part of the funds requirement from ones own
sources, which we call as capital of the promoter. He/she arrange this fund either from
friends, family members or from own saving. In most cases it is founds that this funds is quit
insufficient to run the business. Therefore he approaches various agencies for meeting the
requirements.
The credit and landing agencies operating rural areas can be divided into two types:1) Institutional
2) Non- Institutional
The former comprise commercial banks, co-operative societies, development banks, regional
rural banks and non banking financial companies. These institution operate in regulated
environment and observe fixed norms & guidelines enumerated by the government. Since
they are more amenable to policy prescriptions of government authorities they have fixed
criteria on rate of interest, primary & collateral securities & selection procedures.
The non institutional agencies are lending agencies operating in non formal manner. They are
mostly money lenders operating in rural areas. They are only lending agencies before the
entry of institutional agencies. Rural people have easy access to these sources of finance, as
there are no Rules & regulations guiding their activities. They charge very high rate of
interest and many of them take away the entire property of the poor people which is pledge
by them for granting loans of even very small amount.
Institutional financial is of three types:1) Banking Institutional:- Commercial banks, co-operative societies, Regional Rural Bank.
2) Development banks:- Small industries development bank of India(SIDBI) , National
Bank of Agricultural and Rural Development Bank (NABARD), National Housing
Bank (NHB)
3) Non banking financial companies
TYPES OF CREDIT FACILITIES AVAILABALE TO RURAL ENTREPRENEUR
Credit facilities can be fund based or non fund based. In case of non fund based facilities
bank do not lend funds directly. They issue Letter of Guarantee and letter of Credit (LC),
which are simply commitments on the part of the bank to pay for the borrower in case of
contingencies.
Fund based facilities are those where banks have to land funds directly. It include
1) Cash Credit (for Working capital Requirement)
2) Term Loan (for appearing Fixed Assets)
3) Bridge Loan (short term finance)
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Supervising
Supervision may be defined as the art of directing the effort or harnessing the energy of human
resources of the enterprise for the attainment of enterprise goals. Supervision involves directing,
delegating and controlling functions of a manager, Close and direct supervision is essential for
maintaining quality control.
Quality Control: Quality conscientiousness is another aspect that fetches more monetary returns.
Improving quality of products by redesigning and using better components is possible only when the
entrepreneur herself/himself spends adequate time with workers on shop floor, diagnosing problems
and immediately correcting them, and by getting directly involved in the manufacturing process.
To ensure quality, mid-way in the process of manufacturing various components, the entrepreneur
conducts various tests, because improper components may not be useful to assemble better final
products.
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