Rural Entrepreneurship

Introduction:
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
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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

activity.

Rural

industrialization

entrepreneurship development is viewed

through

rural

as one effective means of

accelerating the process of rural development and thus, reduce gap in

income levels between rural & urban areas.

As entrepreneurship

precedes industrialization, hence the need for rural entrepreneurship.

Rural entrepreneurship emerging in rural entrepreneurship.

Rural

entrepreneurship

Rural

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.

They

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:

Rural

Industrialization

leads

to

the

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.
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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:
i)

Inadequate flow of credit, use of obsolete technology,

machinery and equipment,

ii)

Poor quality standards and

iii)

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.

They come under the

regulation of Khadi & village industries commission. Pottery, Carpentry,

Basket weaving are some of the examples.

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
limited.

4. Management and maintenance of records are rather poor.

5. They produce mainly traditional goods with old techniques.
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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.

They are household enterprises employing very little hired

labor.

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
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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.

Ultimately the parents

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

spares, parts and components.

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):

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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
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Rural Entrepreneurship

the Programme of developing the honey industry.

The commission

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.

DISTRICT INDUSTRIES CENTRES:

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Rural Entrepreneurship

With a view to get all types of assistance to Entrepreneurs at one

place, Govt. has established District Industries Centers at all District
Headquarters.
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)

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Rural Entrepreneurship

Transferring plots admeasuring 2500 sq. Meters to entrepreneurs

from industrial estate of Maharashtra Industrial Development
Corporation.
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.

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Rural Entrepreneurship

Guide the entrepreneurs in all respect.

Distribution of seed capital to educated employed youths.
Implement

Govt.

of

Maharashtra

consolidated

incentives

schemes 1993 for small-scale industries.

INDUSTRIAL ESTATES:
Definition:
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.
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Rural Entrepreneurship

To achieve decentralized development in small towns and large

villages.

FEATURES OF AN INDUSTRIAL ESTATE:

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.

TYPES OF INDUSTRIAL ESTATES:

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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:

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Rural Entrepreneurship

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 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.

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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.

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