Not mass production but production by the masses” – Mahatma Gandhiji.

What is Inclusive Growth all about??

It is often used interchangeably with a suite of other terms, including ‘broad-based growth’,
‘Shared growth’ and ‘pro-poor growth’.

Defining Inclusive Growth

Rapid and sustained poverty reduction requires inclusive growth that allows people
to contribute to and benefit from economic growth.

Rapid pace of growth is unquestionably necessary for substantial poverty reduction, but for this
growth to be sustainable in the long run, it should be broad-based across sectors, and inclusive of
the large part of the country’s labor force. This definition of inclusive growth implies a direct
link between the macro and micro determinants of growth. The micro dimension captures the
importance of structural transformation for economic diversification and competition, including
creative destruction of jobs and firms.

Inclusive growth refers both to the pace and pattern of growth, which are
Considered interlinked, and therefore in need to be addressed together.

What is Inclusive Growth (IG) About?

 IG focuses on economic growth which is a necessary and crucial condition for poverty
reduction.
 IG adopts a long term perspective and is concerned with sustained growth.
 For growth to be sustained in the long run, it should be broad-based across sectors.
 It should also be inclusive of the large part of the country’s labor force, where
inclusiveness refers to equality of opportunity in terms of access to markets, resources
and unbiased regulatory environment for businesses and individuals.

 IG focuses on both the pace and pattern of growth. How growth is generated is critical
for accelerating poverty reduction, and any IG strategies must be tailored to country-
specific circumstances.

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  IG focuses on productive employment rather than income redistribution. Hence the
focus is not only on employment growth but also on productivity growth.

 IG is in line with the absolute definition of pro-poor growth, not the relative one.

 IG is not defined in terms of specific targets such as employment generation or income

distribution. These are potential outcomes, not specific goals.

RURAL INDUSTRILASATION

The goal of any country is development. Development is development of people – their

increased living standards and improved quality of life. Industry provides goods, services and
material comforts to increase living standards. Social values such as human dignity, self-reliance
and gainful employment for every person set the quality of life. Such development can only
come by generating, mobilizing and optimally utilizing natural and human resources, natural
genius and skills and maximizing the returns for the same. Majority of the people live in rural
areas. The question then arises as to how to maximize the returns, let us say, for a hectare of
land. On land, we have soil, water, forest or agricultural crop, animals and people – under a
given climate. How to maximize the returns for these resources is the issue. How to grow more
crops, get better yields is one aspect: Soil-water management, better seeds, fertilizers, pesticide
sand farming techniques etc. have given good results. But these involved high-energy inputs.
The emerging technologies like tissue culture, genetic engineering etc. offer great promise. Past
experience has clearly shown that rural industrialization is not setting up large industries in rural
areas. True, rural people live on land and agricultural development is a must. But it is not
enough. Agriculture should have a nexus with industry.

Leaf to root concept

Every part of the agricultural plant must become a raw material for industries. For example,
several industries may be set up around paddy plant. Straw may be used formaking card boards,
wrapping paper, roof thatch; bed for mushrooms, apart from animal fodder. Paddy husk may be
used as fuel and the resultant ash for producing sodium silicate, solar grade silica, silica sol,
ceramic materials and refractory and cement like products. It can also be used for making
particle boards, activated carbon, furfural, fillers and extenders, fire resistant compositions.
Paddy husk is used by brick manufacture, for mulching, soil reclamation and as filler in fertilizer
industry and animal feed. Rice bran is extracted for oil for edible and non-edible purposes like
soaps, detergents, paints etc. The de-oiled rice bran contains 20 – 22% protein and used as

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animal fodder. Rice as such is used for food and several food products for use in beer, wine and
several starches – based industries.

Similarly 25 industries could be started around sugar cane; 7 to 12 industries around cotton and
groundnut etc.

Sugar industry produces three principal residues, namely, bagasse, press-mud and molasses.
These residues are no more wastes, if utilized properly to get various valuable products. The
main product of the sugar industry – sugar – is used as an item in food and as a raw material in
chemical and bio-chemical industry. Bagasse is mostly used as a fuel in the sugar industry. It is
also used for the manufacture of paper. If alternate source of energy is available to the sugar
mills, large quantities of bagasse would be available for the manufacture of pulp, paper, and
boards, furfural, activated carbons and other products. The pith can continue to be used as a fuel
while the depithed bagasse can be used for the manufacture of pulp and paper. Along with other
cellulosic wastes, biogases can be used as a source of energy for enzymic and microbial reactions
to produce single cell proteins (SCP) and sugars. Molasses is used for the production of alcohol,
yeast and animal feeds. Production of organic acids from molasses include: acetic acid (vinegar),
citric acid, lactic acid, glutamic acid, itaconic acid, aconitic acid, fumaric acid, malic acid.
Oxidation of molasses will give oxalic acid. The types of yeasts produced from molasses are:
baker’s yeast, food and feed yeast and fat yeast. In fermentation, besides yeasts, ethyl alcohol
and organic acids, some other products like butanol, butylenes glycol and glycerol are also
produced.

The case of chilies is another example. Chilly prices go up and down. If only to stabilize the
prices, industries can be set up centering round chilies. The chilies have got four major
components: oleo-resin, vitamin C, bactericide, and the hot pungent component. Besides
extraction of vitamin Cand oleo – resins, chilies could be more readily exported after removing
the hot pungent component.

Also industries round cotton and groundnut may be set up. Forest products like Agave
Americana and Annona Squamosa have multiple uses

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Why Industrialization?

Following are the main reason for which we are adopting the industrialization.

 Faster growth of national income,

As we know in our country the number of people involved in agriculture sector is more
than the number of people involved in manufacturing and service sector. Although the
contribution of agriculture sector towards the GDP is less as compare to manufacturing
and service sector. That means the labour is more productive in manufacturing sectors.
So, if we a=divert our labour from agriculture sector to manufacturing it will prove more
productive and leads to faster growth of the national income.

 Creation of the employment

By establishing the small scale industries in the rural areas which is more labour oriented
it likely to generate more employment over there.

 Reduction of income inequalities

By establishing the small scale industries in the rural areas and creating employment and
income opportunity in rural and backward areas we can reduce the inequality of income
distribution between rural and urban communities.

 Alleviation of poverty,

As industrialization is likely to create employment will result into reduction in poverty.

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What industrialization required?

 Infrastructure facilities

For the development of the industry infrastructure facility is must. Infrastructure facility
includes transport facilities, communication facilities, energy, power facilities etc.without
which growth of the industry is not possible.

 Technical Feasibility

 Availability of technology

 Human Factors for industrialization

A very necessary ingredient for promoting industrialization and technological change is

the investment in human capital. India’s current average adult literacy rate is low at 52%.
There are large inequalities between males (literacy: 64%) and females (literacy: 39%),
between urban and rural areas, and between different social classes. Low levels of female
education in India are due to the gender division of labour. Females are expected to spend
most of their life in domestic work and child rearing.

Secondly, the practice of dowry and the ideology of hypergamous marriage can turn
female education into a liability. An educated girl is likely to be more expensive to marry
off, thus female education tends to be a threat to the social order. Illiteracy is widespread
not only in older groups, but also among young boys and girls, particularly in rural areas.

The remarkable neglect of elementary education in India is all the more striking given the
widespread recognition, in the contemporary world, of the importance of basic education
for economic development.

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India’s current problems regarding rural industrialization

India is facing lot of problem regarding the rural industrialization. Some of the problems are
described as follows.

Infrastructure

Perhaps the biggest problem for doing business in India is the woeful state of its infrastructure.

Poor infrastructure is acting as a drag on the Indian economy, and the Indian government is now
attracting private domestic and foreign investment to build the backbone of a modern economy.
Indian government is heavily spending on infrastructure. This includes massive improvements in
telecommunications, power, energy, and transport.

There is no enough and proper tele-communication facilities available in Indian village which
create major hurdle for growth of industry in rural area.

The power problems are severe in India with three-hour-a-day power cuts and damaging voltage
fluctuations that require companies to generate their own power. Investment in energy is a sound
way of increasing manufacturing activity. Thus, due to shortage of power supply the industry
cannot produce at their best level and leads to low efficiency.

Low literacy

Public sector

Another big problem is India’s notoriously bloated and inefficient public sector. Many electricity
boards have become insolvent as a result of providing electricity at extremely subsidized rates
and ignoring large-scale thefts of electricity. State governments have been unable or unwilling to
take the politically unpalatable decisions needed to make their electricity boards viable.

The most telling evidence of the cost of delaying reform is the sheer effort companies have to
expend to cope with the country’s labyrinthine bureaucracy. For example, foreign investors
continue to seek permission from the Foreign Investment Promotion Board, even though their
plans are covered by the automatic approvals system.

Corruption

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An immediate threat to India’s governance is not the tottering coalition governments or the BJP,
but corruption. The combination of a state-run economy and weak political institutions created
all too many opportunities for crooked politicians and bureaucrats.

Worse still for the business community is that the government itself is the fountain-head of
corruption. This is particularly serious in view of the huge importance of the government sector
in India’s economy.

Corruption has become ubiquitous at all levels and is accepted by everyone. Many Indian
businessmen feel that liberalization of the economy will have no impact on reducing the
corruption that has become so well entrenched. The influx of foreign companies is already
unleashing a new wave of even greater corruption..

The blame for the deluge of corruption in India lies in the lack of transparency in the rules of
governance, extremely cumbersome official procedures, excessive and unregulated discretionary
power in the hands of politicians and bureaucrats, who are prone to abuse it, and a lax judiciary.

Tax Problems

Tax reforms have been seeking to transform India’s tax system from one with high differential
tax rates falling on a narrow base, into one with tax rates at moderate levels falling on a broad
base. But the government’s income is also constricted by an inefficient taxation system. Rural
areas are not taxed because they contain such a large pool of voters and no government has had
the political will to change this. Income tax is skilfully dodged. This leaves the government with
excise and customs duties, which represent two thirds of all taxes.

Labour market

India needs greater labour market flexibility to make its companies more competitive and its
economy more productive. Politically powerful labour unions have stifled most efforts at serious
reform or privatisation of India’s largest public sector enterprises, including most banks, all
insurance companies, and many major industries, even though privatisation would probably cost
the jobs of no more than 1.1% of the urban labour market. India’s labour laws hinder efficiency
and growth.

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Financial sector

India’s financial sector still cannot effectively mobilise and mediate capital to respond to
economic changes. The resulting high cost of capital makes Indian industry and exports less
competitive. In spite of recent improvements, India’s equity markets are still too thin and volatile
to inspire great confidence on the part of domestic or foreign investors. Bond markets are
practically non-existent. Liberalisation of the insurance industry, which would greatly improve
the investing of India’s substantial savings, now 26% of GDP, has been stymied. India’s banking
system remains flawed, with the dominant state-owned banks still carrying bad loans amounting
to 15 to 25% of their total.

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MAIN AGENCIES FOR RURAL INDUSTRILISATION

The following are the main agencies involved in the rural industrialization.

 Small Industries Development Bank of India (SIDBI),

 National Bank for Agriculture and Rural Development (NABARD),

 Khadi & Village Industries Commission (KVIC) and states are the major implementing
agencies of the programmes.

Small Industries Development Bank of India

(SIDBI)

Origin & Objectives

Small Industries Development Bank of India (SIDBI) was established in April 1990 under an Act
of Indian Parliament as the principal financial institution for:

 Promotion
 Financing
 Development of industry in the small scale sector
 Co-ordinating the functions of other institutions engaged in similar activities

Since its inception, SIDBI has been assisting the entire spectrum of SSI Sector including the tiny,
village and cottage industries through suitable schemes tailored to meet the requirement of
setting up of new projects, expansion, diversification, modernization and rehabilitation of
existing units.

Domain of Service

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The Small Scale Industries (SSIs) sector is a vibrant and dynamic sector of the Indian economy.
The sector presently occupies an important place and its contribution in terms of generation of
employment, output and exports is quite significant. The Small Scale Industries sector including
tiny units, comprises the domain of SIDBI's business. The Bank also finances industrial
infrastructure projects for the development of SSI sector.

Channels of Assistance

SIDBI's financial assistance to small scale sector have three major dimensions:

1. Indirect assistance to primary lending institutions (PLIs);

2. Direct assistance to small units; and
3. Development and Support Services

Indirect Assistance

SIDBI's Schemes of indirect assistance envisages credit to SSIs through a large network of 913
PLIs spread across the country with a branch network of over 65000. The assistance is provided
by way of refinance, bills rediscounting, and resource support in the form of short term
loans/Line of Credit (LoC) in lieu of refinance, etc.

Direct Assistance

The objective behind SIDBI's direct assistance schemes has been to supplement the efforts of
PLIs by identifying the gaps in the existing credit delivery mechanism for Small Scale Industries.
Direct assistance is provided under several tailor made schemes through SIDBI's 41
Regional/Branch offices spread across the country.

Development and Support Services

The Bank extends development and support services in the form of loans and grants to different
agencies working for the promotion and development of SSIs and tiny industries. Over the years,
the initiatives of SIDBI under promotional and developmental activities have crystallized into the
following important areas:

 Enterprise Promotion with emphasis on Rural Industrialization

 Human Resource Development to suit the SSI sector needs
 Technology Upgradation
 Quality and Environment Management
 Marketing and Promotion and

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  Information Dissemination.

National Bank for Agriculture and Rural

Development
Headquarters Mumbai, Maharashtra, India

Established 12 July 1982

Managing Director Dr K G Karmakar

National Bank for Agriculture and Rural Development (NABARD) is an apex

development bank in India based in Mumbai. It has been accredited with "matters concerning
policy, planning and operations in the field of credit for agriculture and other economic activities
in rural areas in India"

NABARD was established on the recommendations of Shivaraman Committee, by an act of

Parliament on 12 July 1982 to implement the National Bank for Agriculture and Rural
Development Act 1981. It replaced the Agricultural Credit Department (ACD) and Rural
Planning and Credit Cell (RPCC) of Reserve Bank of India, and Agricultural Refinance and
Development Corporation (ARDC). It is one of the premiere agencies to provide credit in rural
areas.

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NABARD:

1. serves as an apex financing agency for the institutions providing investment and
production credit for promoting the various developmental activities in rural areas
2. Takes measures towards institution building for improving absorptive capacity of the
credit delivery system, including monitoring, formulation of rehabilitation schemes,
restructuring of credit institutions, training of personnel, etc.
3. co-ordinates the rural financing activities of all institutions engaged in developmental
work at the field level and maintains liaison with Government of India, State
Governments, Reserve Bank of India (RBI) and other national level institutions
concerned with policy formulation
4. Undertakes monitoring and evaluation of projects refinanced by it.

NABARD's refinance is available to State Co-operative Agriculture and Rural Development

Banks (SCARDBs), State Co-operative Banks (SCBs), Regional Rural Banks (RRBs),
Commercial Banks (CBs) and other financial institutions approved by RBI. While the ultimate
beneficiaries of investment credit can be individuals, partnership concerns, companies, State-
owned corporations or co-operative societies, production credit is generally given to individuals.

NABARD operates throughout the country through its 28 Regional Offices and one Sub-office,
located in the capitals of all the states/union territories. Each Regional Office[RO] has a Chief
General Manager [CGMs] as its head, and the Head office has several Top executives like the
Executive Directors[ED], Managing Directors[MD], and the Chairperson. It has 336 District
Offices across the country, one Sub-office at Port Blair and one special cell at Srinagar. It also
has 6 training establishments.

Rural Innovation

NABARD's role in rural development in India is phenomenal. National Bank For Agriculture &
Rural Development (NABARD) is set up as an apex Development Bank by the Government of
India with a mandate for facilitating credit flow for promotion and development of agriculture,
cottage and village industries. Role of NABARD in overall development of India in general and
rural & agricultural in specific is highly pivotal.

Through assistance of Swiss Agency for Development and Cooperation, NABARD set up the
Rural Infrastructure Development Fund. Rural Innovation Fund is a fund designed to support

12
innovative, risk friendly, unconventional experiments in these sectors that would have the
potential to promote livelihood opportunities and employment in rural areas. The assistance is
extended to Individuals, NGOs, Cooperatives, Self Help Group, and Panchayati Raj Institutions
who have the expertise and willingness to implement innovative ideas for improving the quality
of life in rural areas.

Recently in 2007-08, NABARD has started a new direct lending facility under 'Umbrella
Programme for Natural Resource Management' (UPNRM). Under this facility financial support
for natural resource management activities can be provided as a loan at reasonable rate of
interest. Already 35 projects have been sanctioned involving loan amount of about Rs 1000
million. The sanctioned projects include honey collection by tribals in Maharashtra, tussar value
chain by a women producer company ('MASUTA'), eco-tourism in Karnataka

Khadi and Village Industries Commission

Formation 1956

Headquaters Mumbai

The Khadi and Village Industries Commission (KVIC) is a statutory body formed by the
Government of India, under the Act of Parliament, 'Khadi and Village Industries Commission
Act of 1956'. It is an apex organization under Ministry of Micro, Small and Medium Enterprises
(Govt. of India), with regard to khadi and village industries within India, which seeks to - "plan,
promote, facilitate, organise and assist in the establishment and development of khadi and village
industries in the rural areas in coordination with other agencies engaged in rural development
wherever necessary. In April 1957, it took over the work of former All India Khadi and Village
Industries Board.

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Its head office is based in Mumbai, with its six zonal offices in Delhi, Bhopal, Bangalore,
Kolkata, Mumbai and Guwahati. Other than its zonal offices, it has offices in 29 states for the
implementation of its various programs.

Khadi, refers to handspun and hand-woven cloth. The raw materials may be cotton, silk, or wool,
which are spun into threads on a Charkha (A traditional spinning implement).

Khadi was launched in 1920 as a political weapon in the Swadeshi movement of Mahatma
Gandhi.

Khadi is sourced from different parts of India, depending upon its raw materials - While the silk
variety is sourced from West Bengal, Bihar, Orissa and North Eastern states, the cotton variety
comes from Andhra Pradesh, Uttar Pradesh, Bihar and West Bengal. Khadi poly is spun in
Gujarat and Rajasthan while Haryana, Himachal Pradesh and Jammu and Kashmir are known for
the woolen variety.

Any Industry that is located within a rural area, where the Fixed Capital Investment per Artisan
(weaver) does not exceed Rupees One Lakh. The Fixed Capital Investment can be changed by
the Central Government of India whenever it so requires.

Relevance of Khadi and Village Industries.

The common characteristic found in both - Khadi and Village Industries is that they are labor
intensive in nature. In the wake of industrialization, and the mechanization of almost all
processes, Khadi and Village industries are suited like no other to a labor surplus country like
India.

Another advantage of Khadi and Village Industries is that they require little or no capital to set
up, thereby making them an economically viable option for the rural poor. This is an important
point with reference to India in view of its stark income, regional and rural/urban inequalities.

Objectives of the Commission

The Commission has three main objectives which guide its functioning. These are -

 The Social Objective - Providing employment in rural areas

 The Economic Objective-Providing salable articles
 The Wider Objective -Creating self-reliance amongst people and building up a
strong rural community spirit.

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The commission seeks to achieve these objectives by implementing and monitoring various
schemes and programs.

Implementation of Schemes and Programs

The process of Implementation of schemes and programs starts at the Ministry of Micro, Small
and Medium Enterprises which is the administrative head of the programs. The Ministry receives
funds from the Central Government of India, and routes these to the Khadi and Village Industries
Commission for the implementation of programs and schemes related to Khadi and Village
Industries.

The Khadi and Village Industries Commission then uses these funds to implement its programs
either directly - Through its 29 state offices, by directly funding Khadi and Village institutions
and co-operatives, or indirectly through 33. Khadi and Village Industries Boards, which are
statutory bodies formed by the state governments within India, set up for the purpose of
promoting Khadi and Village Industries in their respective states. The Khadi and Village
Industries Boards, in turn, fund Khadi and Village Institutions/Co-operatives/Entrepreneurs.

Schemes and Programs of the Commission

Prime Ministers Employment Generation Program (PMEGP)

The Prime Minister’s Employment Generation Programme (PMEGP) is the result of the merger
of two schemes - Prime Minister’s Rojgar Yojana (PMRY) and The Rural Employment
Generation Programme (REGP)

Under the scheme, the beneficiary is required to invest his/her own contribution of 10 per cent of
the project cost. In case of Schedule Castes/Schedule Tribes and beneficiaries from other weaker
sections, the beneficiary’s contribution is 5 per cent of the project cost. The remaining 90 and
95% as of the project cost, as the case may be, is granted by banks specified under the scheme.
The Beneficiaries under the scheme are refunded a certain amount of the loan (25% for General,
35% for weaker sections in rural areas) which is credited after two years from the date that the
loan was extende

Interest Subsidy Eligibility Certification Scheme (ISEC)

The Interest Subsidy Eligibility Certificate (ISEC) Scheme is the major source of funding for the
Khadi programme. It was introduced in May 1977 to mobilise funds from banking institutions to
fill the gap in the actual fund requirement and its availability from budgetary sources.

Under this scheme, loans are provided by the banks to the members to meet their working/fixed
capital requirements. These loans are provided at a concessional interest rate of 4% p.a.The

15
difference between the actual interest rate and the concessional rate is borne by the commission
under the 'grants' head of its budget. However, only members producing Khadi are eligible for
this scheme.

Rebate Scheme

The rebate on sales of Khadi and Khadi products is made available by the Government so as to
make the price of Khadi and Khadi products competitive with other textiles. Normal rebate (10
per cent) all through the year and an additional special rebate (10 per cent) for 108 days in a year,
is given to the customers.

The rebate is allowed only on the sales made by the institutions/centers run by the
Commission/State Boards and also at the sales centers run by the registered institutions which
are engaged in the production of Khadi and Polyvastra.

Budgetary Support to the Commission

The Union Government through the Ministry of Micro, Small and Medium Enterprises, provides
funds to the Commission under two heads: Plan and Non – Plan. The funds provided under the
‘Plan’ Head are allocated by the commission to its implementing agencies. The funds provided
under the ‘Non – Plan’ head are mainly for the Commission’s administrative expenditure. Funds
are provided mainly by a way of Grants and Loans.

Grants

A major part of the Khadi grant is being utilised for the payment of sales rebate, which is
considered a promotional expenditure. Other expenditures under this head are: Training,
Publicity, Marketing, Interest Subsidy on bank loans under ISEC scheme

Loans

Expenditures under this head include: Working Capital Expenditure and Fixed Capital
Expenditure Fixed Capital expenditure further consists of expenditure on -

a) Machinery b) Implements c) Work sheds d) Sales Outlets etc.

Sales of Khadi and Village Industry Products

The products produced by the institutions are either sold by them directly, through retailers,
wholesalers, or indirectly, through "Khadi Bhandars" (Khadi sales outlets owned by the
government)

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In total, there are 15431 sales outlets, out of which 7,050 are owned by the commission. These
are spread all over India.

The products are also sold internationally through exhibitions arranged by the commission.

CONCLUSION

 Indian government should have more emphasis on industrialization as it is a key

factor for inclusive growth.
 As industrialization has created more opportunities for rural employment,
government should take proper action for the growth and expansion of small scale
industries.

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