UNIT 5 UNLEASHING RURAL

ENTREPRENEURSHIP
Contents
. 5.0 Objectives

5.1 Introduction

5.2 Rural Urban Dichotomy

5.3 What is Rural Entrepreneurship?

5.4 Constraint in Making Rural Areas Destination for Jnvestment

5.5 Government and Non-Government Initiatives

5.6 Let Us Sum Up

5.7 Key Words

5.8 Suggested Readings

5.0 OBJECTIVES
In this unit we will discuss what constitutes rural entrepreneurship, constraints to
development of rural entrepreneurs and ways and means to foster rural
entrepreneurship. At the end ofthe unit, we will be able to :
I

assess briefly the Rural Urban Dichotomy;

understand the meaning of Rural Entrepreneurship;

understand the main factors causing lack of rural entrepreneurship;

note the need for developing entrepreneurial spirit;

list out the deterring factors of entrepreneurship;

understand why and how the government at the different levels has been assisting
the growth of rural entrepreneurship;

highlight the role played by the NGOs in the developing of rural entrepreneurial
skills and industries;

5.1 INTRODUCTION
The needs of entrepreneurship in rural areas require a good understanding of various
issues that foster rural entrepreneurship. Deterring factors and other constraints also
become important as we study these issues. The role of catalytic agents like the
government machinery and non-government agencies is primary. Effective strategies
to unleash rural entrepreneurship also need to be studied. The effort of unleashing
rural entrepreneurship with the collective assistance of the governmental and non-
governmental sectors will be the main theme of this unit.
Understanding
Entrepreneurship 5.2 RURAL URBAN DICHOTOMY
There is a striking difference as we go to the rural areas of India from the urban
centres. The physical appearance itself gives us the feeling of being in the open with
stretches of fields adjoining the hutments where the rural people generally reside. One
can see some concrete houses but they are few in number in comparison to houses
that are kachha.

We all know that most of the people in the rural areas are engaged in agriculture as
their primary occupation. Since fields for cultivation are closer to their houses, they
walk down to their places of work, or at the most, use a cycle, whereas in the towns
and cities people use different modes of transport because they have to travel long
distances to work.
The bigger the city, more hectic the life, because people have to travel long distances
and engage in diverse occupations. The relationship between the people in villages is
of primary nature as they are close to each other while that in the towns and cities,
people not only belong to small primary groups but also to ever increasing secondary
groups. Relationships tend to transform from informal to formal as we move from the
villages to urban centres.
Being preoccupied with agriculture as their main occupation and as agriculture being
heavily dependent on nature, village people live a life of close proximity to nature.
Vagaries of nature affect agriculture which, in consequence, affects the villagers
adversely. The impact of drought and excessive floods on rural people can be
devastating, which can have long-term consequences. In the villages even in normal
times life goes on taking nature into consideration. People orient their activities letting
nature play a dominant role. Even the cultural activities are influenced by nature to a
great extent. Village festivals are rooted in nature.
When nature is generous and moderate there is a good harvest and activities of the
rural people become hectic as there is more work for people. Villages from a distance
may look very idyllic, moving at a pace in harmony with nature but the reality is
unfortunately quite pathetic. The hard fact is that there isn't enough work for people.
Even if people are engaged in some work, most often they remain underemployed.
The ideal of self-sufficient village that we come across in the Gandhian thought is far
from truth if we take villages of India at present. One of the studies conducted by
Gopinath Pradhan, Professor of Economics in IGNOU in a village of India in connection
with sustainable forest management, reveals a startling fact that a village can, on its
own fulfill, at the most, 30% of its overall economic needs. While 10% of the need is
rendered by the forest resources, the remaining 60% is managed by activities outside
the village economic system. Village economy is not at all self-sufficient; rather it is
dependent on the government initiatives and the backward linkages with the townships.
The primary occupation in the villages is agriculture and its share in the Indian economy
is below 30% of the economy. So we can understand the degree of underemployment
in agriculture.
The nature of underemployment and the number of unemployed would have been,
more severe if all the villagers continue to live in villages for good. To beat the under
employment and unemployment people have moved out of their villages as skilled 01.
semi skilled and even as unskilled workers to neighbouring townships and to large:
cities located far from their native places. Such large scale migration of people from
the villages have led to the growth of slums in the towns and cities. People have:
preferred to leave their own houses in their respective villages to live in filth andl
horrible conditions of human existence in urban centres primarily because they
are able to earn some amount of money regularly to meet both ends which woulcl
have not been possible in their own villages. We are aware of the plight of the cities
due to this excessive unending inflow of migration that has been taking place. The:
Metros along with cities of all grades are virtually bloating with population which these Unleashing Rural
Entrepreneurship
can hardly support and sustain because of inadequate basic amenities. Delhi has about
70% of its population living in slums which is mostly because of an exodus mainly from
the villages of Rajasthan, U.P., Haryana and to some extent, Bihar and Madhya
Pradesh.
Life in the villages is relatively slow than it is in the towns and cities. This is primarily
because energetic young people who are enterprising as well as knowledgeable move
out of their villages. Life in the urban centres is exceedingly hectic. Despite degrading
conditions there, influx from rural areas continues. The situation in the rural areas is
pathetically poor as regards employment so people are compelled to move out. Dipanker
Gupta, an eminent Sociologist, has been commenting that the villages in India 'have
started disappearing'. By this he only means that people of the villages no more want
to reside in the villages, the young and the old are moving out or are keen to relocate
to the towns and cities for earning opportunities as well as better quality of life. Once
the people move out the villages will lose their significance.
The question is not whether really the villages have started disappearing. In case this
trend is accentuated, which is only more likely given the deteriorating economic
conditions of the rural areas, what is going to happen to towns and cities of India? If
India were to live only in its towns and cities, is it possible to accommodate all within
a fraction of the space (that is constitutedby urban India), having vast tracts of unutilized
space? This lop-sided development is only going to ensure more misery for the people
than really improving the quality of life. What is needed is a deliberate attempt to make
the villages economically viable units integrated with one another and having a symbiotic
relationship with the urban centres.
Efforts should be geared up so that dichotomy between the rural and urban areas gets
reduced. Urban areas need not become alienatkd from nature. At the same time the
villages should also not be totally devoid of urban facilities. This is possible only when
innovative minds set themselves to the task of bringing the urban set up closer to
nature and develop the villages so that all the basic amenities of living are available
there along with employment which would sustain the economy.
There is a dire need for people with enterprise to come forward and undertake the
initiative to establish viable economic enterprises in the rural areas so that the value
addition that would take place in products and services in rural areas would throw up
a number of direct and indirect jobs apart from opportunities for self-employment for
the rural entrepreneurs themselves.

Check Your Progress I

Note : i) Space is given below for your answer.
ii) Compare your answer(s) with the text.
1) How does nature influences rural life?
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2) Why do you think urban centres capnot accommodate all the rural immigrants?
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Understanding
Entrepreneurship 3) What is the importance of entrepreneurship to rural people?
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5.3 WHAT IS RURAL ENTREPRENEURSHIP?

In the previous section we described the rural-urban dichotomy and stressed the fact
that the difference that continues to grow between the two is the major reason for
aggravating the problem in both the rural as well as the urban areas. The problem is
essentially lop-sided development which is development of one area at the cost of
development of some other place, with concomitant associated problems of under
development. For instance, we have seen unemployment or underemployment in the
villages that has led to influx of rural population to the cities. What is needed is to
create a situation so that the migration from rural areas to urban areas comes.down.
Migration per se is not always undesirable but it should be the minimum as far as
employment is concerned. Rather the situation should be such that people should find
it worthwhile to shift themselves from towns and cities to rural areas because of
realization of better opportunities there. In other words, migration from rural areas
should not only get checked but overpopulated towns and cities should also get
decongested.
The question is, is it really possible? If it is so, ways can always be found out. One is
by forcibly stopping villagers from settling in the slums of towns and cities, making use
of all powers to clear the slums so the villagers are forced to go back. But such
practices have not achieved the desired results in the past. Apart from causing suffering
to the poor people and adding to the expenditure for the Government, social tensions
and economic hardships created by the government officials and their staff in every
demolition of slums is not desirable from a sane government. Moreover, when a slum
is demolished people do not move out of urban locality. They only relocate to a nearby
place because they are entrenched in the economy of the town or city.
Though governments have tried out various schemes for generating incomes in the
rural areas such government initiatives have not stopped people from moving out of
villages to cities. This is because such government initiatives are not on their own
capable of enabling people to earn adequately and ameliorate their conditions. There
has to be some committed enterprising individual or a group of people 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.
The purpose of this Course is to encourage young people who would like to do something Unleashing Rural
of their own in the rural areas itself. Enabling them to think positively, creatively and Entrept-eneurship
purposefully is utmost for the development of rural areas. Young people with such .
perspective and with the help of rightly channelised 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 centres to neighbouring 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 centres. 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.

5.4 CONSTRAINTS IN MAKING RURAL AREAS

DESTINATIONS FOR INVESTMENTS
After we learnt about the benefits both the rural and the urban centres get
- as a result
of setting up rural enterprises, we will now understand the constraints that have been
experienced in attracting financial investments into the rural areas.
The major constraint to promote rural entrepreneurship is the general perception of
the people towards the rural areas. Rural areas invariably fall short of attracting the
attention of those who are either established entrepreneurs and even that of the budding
entrepreneurs. The reason is quite simple. Villages seem to offer very little for such
entrepreneurs who only look for readily available opportunities. There is a facile and
preconceived opinion that the rural areas have very little to offer by way of promised
returns or potentials to be made use of. But the entrepreneur is one who thinks
harder or different from the prevailing perception. S h e is the one who should bring
about a change in the general thinking of the people. S h e is supposed to make it
possible that may seem to be impossible.
Understanding It is only natural for the entrepreneur to take calculated risks in venturing into their
Entrepreneurship
enterprise. But if one puts the advantage that rural areas offer in the risk calculation
and cost-benefits, it may actually be found that the cost of setting up a unit in the rural
areas and running it, in the long run, would be cheaper than it is while setting up units
in an urban area.

Lack of basic infrastructure is no doubt a major hurdle while planning to set up an

enterprise in rural areas. But one has to see if the infrastructure that is actually required
for the specific enterprise is not really available in the area or is it just inadequate.
Such genuine lack or inadequacy of infrastructure can be circumvented to a great
deal by demanding the necessary infrastructure facilities from the State preferably by
a consortium (cohesive group) of entrepreneurs, who are either based locally or those
who are interested to set up industries in the rural area. Certainly supply of raw
materials to the rural areas would be a problem if the sources are primarily from a
distant location. That is why the bulk of the raw materials should be available in the
rural areas only. Some ingredients that are easily transportable could be brought from
other places. So the enterprise has to use the available local raw materials as much as
possible to prevent wastage in time and resources.

The enterprises should take advantage of the schemes of the Governments at the
Centre as well as in States. The governments provide infrastructure like roads,
electricity, communication network etc. to every village. There have been major policy
initiatives in this regard. Huge amounts of financial provisions have already been made
by various governments. Wherever infrastructure is already available the youth should
exploit it to their advantage and take to rural entrepreneurship seriously.

One of the major problems in setting up of units in rural areas is of maintenance and
repair of machines and tools. In this regard urban locations have great advantage of'
being closer to the service providers, as well as availability of spare parts in the local
markets. The frequent breakdowns of running a unit in remote villages would be of
that of breakdowns that might occur to the machinery. To solve such problems, to
begin with, one should go for good quality machines and make arrangements for
competent technicians for regular check-ups who should also be available at short
notices to mend the machines. If the enterprise is large enough, full time technicians
may be employed from among local people. For this, local people can be trained. A,
group of rural entrepreneurs can pool the trained technical expertise and manpower to
cut costs.
Spare parts that are needed frequently need to be stored to meet the requirements of
emergency. These may not be required in an urban location where things may be
available just on a phone call. All this means that more tinance is required. Much of
the finance will just be idle. Moreover especially for production units that would largely
depend on agricultural produce the working capital requirement becomes
proportionately large. This is because the raw material being agricultural produce
needs to be brought at one go, just after harvest and stored to last for the year till the
next harvest. So, storage facilities have to be built up that requires huge investment.
Tb make an enterprise in the rural areas viable the requirement of investments i11
terms of capital some times become more than that is necessary to start a unit in an
urban location. The entrepreneur is compelled to mobilize more resources to make up
for lack of facilities in the rural settings vis-a-visthose obtaining in urban locations. So
sometimes s h e is compelled to set up the enterprise in an urban location though s h e
hpils from a village or has affinity with one's village.

Cost of land and labour is less expensive in rural areas and the cost of running a unit
may not be so cheap because the entrepreneur has to make financial provisions to
keep things ready in advance, to meet eventualities like mechanical breakdowns. Also
more quantities of raw materials, which are necessary ingredients in a manufacturing
unit, have to be stored in advance.
Considering other advantages in rural areas, especially of cheap labour and the Unleashing Rural
availability of raw materials close by, entrepreneurs need to consider establishing their Entrepreneurship
units in a rural area because it would be beneficial in the long run. Well, the fundamental
question is, how does one survive in the short run to take advantage of it in the long
run. One way out is that if entrepreneurs join hands to complement one another then
much of the obstacles that seem insurmountable may be overcome. For example,
shortage of warehouses or cold storages could be met by entrepreneurs taking the
initiative to share common store houses or cold storages, which are enterprises in
themselves, to meet the problem of other entrepreneurs.

Entrepreneurs should also form associations to get their work done jointly, which is
not possible for a single individual to achieve; say, for instance, getting electricity to a
village and the like. Entrepreneurs can form a consortium to get their work done to fill
in all the gaps in infrastructure development supposed to be rendered by the
Government.
Apart from the attitudinal problems of the entrepreneurs, difficulties in arranging
finances, inadequate infrastructure, lack of supply of essential raw materials, and
non-availability of proper human resources, the social set up may act as a deterrent
for taking to entrepreneurship. Since the Indian society is divided into various castes
arranged in an hierarchical order, it creates structural as well as cultural bamers.
Only people of the higher order with resources and knowledge are bound to make the
best use of the opportunities that arise. The vast majority of the people who belong to
the middle and the lower rungs of the society cannot have access to or mobilize the
resources needed for an enterprise. The cultural milieu and the socialization process
may not generate the needful confidence to venture into an enterprise.

Even among the higher strata, entrepreneurship may not be appreciated because of
the prevailing value system in the rural areas. Moreover unsure of the possibilities of
success, people in general prefer a government job than setting up one's own enterprise.
If one has to get one's daughter married one would prefer a groom who has a
government job, primarily because the job is permanent with regular income and it has
the needful social recognition. Even an entrepreneur earning much more than a salaried
man in the government would be perhaps the last choice. Barring few places like
Gujarat and some parts of Rajasthan, in most places of our country the self-employed
entrepreneur is the least preferred. The situation that prevails in the rural areas is
more conservative, people value landed property and jobs in the government more
than any form of enterprise.
The deterring factors are so many that to be an entrepreneur in the rural areas is
perhaps the last option for a young person. For obvious reason, of being a risky career
without much social recognition it is bound to be the least preferred choice.

Check Your Progress I1

Note : i) Space is given below for your answer.
ii) Compare your answer(s) with the text.

1) What steps have been taken by the Governments to check migration from
the rural areas?
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Understanding What constraints are faced by the entrepreneurs in setting up enterprises in
Entrepreneurship 2)
the rural areas?
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3) How can prospective entrepreneurs take advantage of the facilities to establish
enterprises in rural areas?
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5.5 GOVERNMENTAND NON-GOVERNMENTAL

INITIATIVES
The previous section dealt with the challenges or impediments encountered in
developing entrepreneurship especially in the rural areas. In this section, we will be
studying the importance attached by the Government of India to encourage
entrepreneurship. First, we will understand the background that compelled the
government to understand the need for encouraging private entrepreneurship.
Fortunately, the former leaders of this nation decided to pursue the path of mixecl
economy despite the world being divided into two dominating ideological orientations
or blocs which were poles apart. One bloc believed in the socialistic pattern of economy
where there was very little scope for free enterprise. Ours being a developing country,
the leaders perhaps rightly thought that it was not mature enough to embrace free
enterprise as the only means to development.
We needed a great deal of centralized planning during the initial years of independence
for maximum resource mobilization for investment in key sectors to enhance not onl:y
growth but also bring about distributive justice to ensure the basic needs of the majority
of people. The twin objectives, of centralized planning of growth along with distribution
was to sustain development. However, the political imperatives compelled the leaders
to adhere to a socialist pattern of economy heavily deviating from the mixed path
markedly by emphasizing nationalization.
5.5.1 Impact of Nationalization
Nationalization had its plus points as it ensured larger investments and the management
lived up to the expectations of the trade unions. The workers were able to get the
basic privileges that are expected of regular jobs. But with years passing by it was
realized that nationalization led to more of unionization and less productivity. Besides
it became too expensive for the Government to run public sector organisations as
many of them were running into heavy losses. The situation turned out to be so
unpleasant that some had to be closed down and there were others which had to Ibe
sold off to private companies. The process of disinvestment or divestment gained
momentum initially starting with selling of sick units. Then the government seems to
be also keen to part with even the profit making public sector undertalungs like NALC:O
and BALCO. The government is eager to unburden itself by withdrawing from the
management of such organisations because it feels it can be better managed by the
Private sector. The policy of economic reforms essentially is to reverse nationalization,
but it cannot move to its ultimate goal because of political compulsions.
During the phase of nationalization Public Sector Undertakings were created and Unleashing Rural
Entrepreneurship
some of the private sector units were nationalized. With nationalization the
government's agenda of creating jobs knew no bounds. As a result organisations
were over staffed. Overstaffing of organistions had its role in making many units
sick. The government having realized its mistake of creating jobs without the means
to sustain them, now feels that it should be merely a regulating authority while the
jobs should be created as per the demands of the economy and should be left to
individual initiatives of private entrepreneurs.
Entrepreneurship at present is looked at as the key to solve most of the complicated
problems that have arisen, though the government both at the Centre and the States
continue to be the largest organized employer. It intends to pass on the responsibility
of creating sustainable jobs to the entrepreneurs in the years to come.
5.5.2 Ford Foundation Report
Though till 1991 the Union government could not openly declare its preference for
economic reforms due to political compulsions, it had been making efforts to promote
entrepreneurship especially among those who set up small scale and tiny units since
the rnid-fifties of the last century. In the year 1954 itself it has accepted the Ford
Foundation report, wherein it is recommended that "for Iasting industrial growth,
private initiative should be encouraged to the fullest. The assumption, too widely
held, that government should assist in managerial responsibility, while profits
remain with the manufacturer, is not conducive to a sound economic base for
industrialization. While Government initiative, controls and guidance will be
needed at the beginning of an industrial development programme, the
government should make it clear that it is anxious for the private sector to take
the initiative, and firmly intends to withdraw from management control at the
earliest possible date where it has been necessary for the government to initiate
action. The growth of active, responsible, independent small industries and a
gradual rise of many among the more gifed artisans to the status of self reliant
small industrialists will be an important contntnbutionto the social and economic
structure of India.
The Team took as its basic task, finding of wu-vs and means of ultimately providing
more and better employment for the people, especially in rural areas. It is in
substantial agreement in recommending a series of proposals which it believes,
will lead to such increased employment.
The Team has studied the commendable eSforts that have been made to assist
small industries. These efforts have been largely sporadic and have dealt chiefly
with isolated segments oJ the problem. Lacking a systematic approach, they fall
far short of making any appreciable impact toward the overall advancement of
industrial development and no sati~factorysolution or appreciable progress
can be expected from them. It would be a false illusion to think otherwise.
The Team has, in consequence, made an effort to base its proposals and
recommendations on a systematic approach, not to the segmented problems of
small industry but to its overall problems -from raw material supply, product
design, techniques and equipment, to trade education, finance and credit, to
the value of co-operatives and trade associations, and marketing and
distribution. Setting up of pilot plants to demonstrate efficient methods of
increasing production, raising wages and manufacturing higher quality
products at lower cost. The Team believes that such proposals will, i f brought to
successful fruition, make possible higher production and higher wages, and
accelerate and enhance the progress now being made to foster the welfare of
small industry and of India's village workers and craftsmen."
(Reproduced from the Report on Small Industries in India by the Ihternational Planning
Team, Ford Foundation, 1954.)
Understanding 5.5.3 Government Initiatives
Entrepreneurship
The Government of India had accepted some of the recommendations of the Ford
Fou~ldationReport of 1954. Keeping with the needs of time, in the 1960s and 1970s a
larga number of small scale and tiny units were encouraged to be set up. The trend
continued throughout the 1980s as entrepreneurship was considered to be one of the
best options for creation of jobs. The presidential address delivered at the sixth
Economic Development Conference at New Delhi on February 27, 1982 by Shri N.
D. Tiwari, the then Union Minister for Industries, Steel and Mines, emphasized the
theme of private sector's role and the increasing importance of financing by the banks.
He also outlined various steps taken by the Entrepreneurial Development Programme
division and the new programmes to remove the impediments faced by the small
scale and ancillary industries. Relevant excerpts of his speech are quoted to get
comprehensive idea of the central government's policies.

"The Industrial policy of the government has accepted the important role of the private
sector and an elaborate network of Institutions has been established to support it and
to regulate its activities. A major component of the support system is the network of
banking institutions which have been established to finance private investment in
indhstry. Besides, the government have set up a variety of institutions to assist in the
provision of infrastructure, raw material supply, marketing and technology development.
Small scale industries and artlsans have been also protected through product reservation
and fiscal concessions. The Entrepreneurial Development Programme Division in the
Small Industries Development Organisation is engaged in planning, organizing and
coordinating the activities relating to development of entrepreneurship in the small
scale industrial sector. The activities of the divlsion include training programme for
engineer entrepreneurs, entrepreneurial development programme for non-engineers
and interest subsidy scheme for engineer entrepreneurs. State profiles are also prepared
wfiich are primarily meant for prospective entrepreneurs intending to set up smdl
scale industrial units".

The Minister also spoke about administrative and policy measures being taken by
his government to encourage the small scale and ancillary industries. To get
around the constraints to production and generating higner exportable surpluses, the
government increased the investment limits for small scale and ancil1a.t-y industries,
encouraged automatic growth up to a maximum of 25 percent, regularized excess
capacity in the case of 34 basic and mass consumption industries and those with,
export potential. Introduced special scheme for 100 percent export oriented units and
streamlined procedures for industrial approvals with a view to reducing the time:
frame for clearances. It was encouraging for the entrepreneurs to be assured of the
government's streamlining industrial policies and licensing procedures. These were
intended for boosting 'investment climate'. Industry was also a~suredof direct
assistance in overcoming operational problems. Control and monitoring room in the
Ministry of Industry was strengthened for quick removal of production snag and ,a
single nodal agency was also created to remove loss of time. Furthermore, the Minister
promised regular reviews of investment policies and procedures for economic
development.

The government, in tune with the promise, was concerned about rural unemploymen~t
and under employment. Rural emigration, problems related to capital and labour
displacement were the other challenges before the government to settle. A strategy to
contain some of these problems was to be through encouragement of self-employment
by small scale and cottage industries. So the Sixth Five Year Plan (1 980-85) laid great
Cmphasis on promotion of self-employment in order to fight out the problems of
increasing unemployment and under-employment prevailing in the country.

According to officials of the Small Scale Industries, "the Sixth plan envisaged a target
of creating about 9 million employment opportunities in the small industry sector. The
village and small industries constituted one of the major avenues for wage Unleashing Rural
employment. The small industry sector which is labour intensive and capital savings, Entrepreneurship
has the capacity to attract and utilize small saving for production purposes". Small
industries development in the rural areas was thus considered to be central for solving
unemployment problem.

To help the Small Scale Industries in rural areas, the government came up with a
programme of Entrepreneurship Development. It was also concerned with finding
the right type of entrepreneurs, and the extent of motivation for training of such
identified entrepreneurs. It was emphasised to take care of "Proper orientation and
guidance with regard to specific items/products or services in which they may set up
small industries, making them self-employed and thereby creating employment
opportunities for other employed in the area. Once entrepreneur is identified and
motivated to be self-employed, range of items or services likely to be taken up are
selected for a particular location in which one is interested to give him idea about the
project i.e. the machinery and equipment the unit will need, manpower to be employed,
other inputs that may be necessary and the economics of production and profitability,
a well drawn project profile is necessary which is expected to provide this information
to assist the entrepreneur in taking sound investment decisions and proceed further in
the matter". (Promotion of self-employment in rural areas; involvement of SIDO,
Laghu Udyog Samachar, Jul-Sep, 2004).

However, much that the government tried by the way of training inputs, finances
and other support, there were still certain gaps. Dr. Dinesh N Awasthi of the
Entrepreneurship Development Institute of India (EDII), Ahmedabad analysed the
situation thus.

"Although the government's policy framework did take into consideration the concerns
for poverty alleviation and employment generation, it did not yield the desired results.
A large number of institutions were created to tackle the problems of poverty and
unemployment. A number of schemes including the Integrated Rural Development
Programme (IRDP), Training of Rural Youth for Self Employment (TRYSEM), Self-
employment Scheme for Educated Unemployed Youth (SEEUY), the Prime Minister's
Rogar Yo,jna (PMRY) and the latest in the series, the Swarna Jayanti Rozgar Yojana,
were formulated to alleviate unemployment and poverty through the promotion of
enterprises.. . ..."

He wondered about the backlog of 106million unemployed youth at the turn of twenty
first century and the future of Indians. Avasthi was categorical about the need to
supply small assets to the poor while talking about the IRDP strategy, he concludes,
"the IRDP strategy, which was more popularly seen as a direct attack on poverty,
brought into its fold various schemes where in land and other farm inputs were made
available to the small/marginal farmers, tools and equipment to the skilled artisans
and other productive assets to landles4 labourers. The underlying rationale of the
strategy was that the people are poor because they, by and large, do not own any kind
of productive assets except for their labour. Hence, distribution of small assets to the
poor became the central theme of the IRDP. However, the blanket implementation of
the programmes for poverty eradication with a universal approach for different
categories of the poor in rural areas, not withstanding their individual aspirations,
capabilities and resource base, has raised serious doubts about the efficiency and
efficacy of the programmes. The policy framework made amateur assumptions about
entrepreneurship and other skills. In short, most of the government sponsored
schemes aimed at rural development and poverty alleviation turned out to be more
input-oriented (in terms of money), than output-oriented. The creation of avenues
for generating sustainable income for the rural poor drew scant attention in these
schemes". (P-5 Short Steps, Long Leaps, New Delhi 2001 Tata McGraw Hill
Publishing Company Ltd.)
Understanding The IRDP fell short of addressing the needs of rural people because, to quote Gaikwad,
Entrepreneurship "in the entire scheme, no effortswere made to develop some central dynamic enterprises
to function as a driving force for economic progress. They could not think of any new
enterprise which would provide such a driving force, add value to the farmers' produce,
exploit the potential of other unused natural resources. bring capital to the rural areas,
generate more employment opportunities, develop new skills and thus foster the
development of human resources, encourage people to give up their monotonous life
and narrow minded thinking and behaviour, provide opportunities for entrepreneurship
and a new type of leadership, and integrate other economic and social activities
around the concept of this entrepreneurship. They could at best contribute a little
towards. Creating new designs to the artisans, and resolving economic problems
through simplistic isolated solutions like the use of improved seeds, poultry birds and
milk cattle. All these could, at best provide marginal, temporary relief to a few." (V.R.
Gaikwad, 1986,Rural Development Strategies: Evaluation of some early experiments
in India" in Dantwala, et. al. (ed.) Asian Seminar on Rural Development. New Delhi.
Oxford and TBH Publishing Company Pvt. Ltd.)

Connecting between income generating schemes, jobs, enterprise. training for

entrepreneurs and policies for ensuring all these necessary inputs have been summed
up by Dantwala which DN Awasthi also quotes in his book.

".. ..... ... One needs income to come out of the poverty nap. To generate income,
one needs income generating activities, or jobs. For job creation one would require
enterprises, however small they may be; and for creating an enterprise, one would
need an entrepreneur. If the existing supply of entrepreneurs is inadequate, it can be
induced through policy intervention. If policy interventions fail to attract people
towards entrepreneurship, one can do it through training intenlention by providing
even the poor as entrepreneur or owners of micro-enterprises". (M.L. Dantwala:
Garibi Hatao :Strategy Options, Economic and Political Weekly vol. 20, 11-16 March
1985, pp 475-476)

Thus, entrepreneurial training. creating managerial skills and appropriate financing

become tlle primary need for combating rural unemployment. Dr. P.C. Alexander,
former Development Commissioner Small Scale Industries talked about the schemes
developed by the Government of India. Emphasing the role of assistance for widening
entrepreneurial base, he traces the schemes launched by the govt. from the 1950s. He
said that interventions such as easy credit facilities, accommodationin industrial estates.
facilities for training, supply of machinery on hire-purchase terms, technical counseling
through Small Industries Services Institutes by the government infused a spirit of
entrepreneurship even in those people who had previously no financial resources or
management skills such as government employees. At the same time, he considered
certain distortions that crept up such as concentration of s~nallindustries in the
metropolitan areas due to the easy availability of raw materials. skilled labour ancl
marketing and the speculative drive. He also dealt with the ways of promoting
entrepreneurship in 1970s. While giving due importance to training, he also under-
scored the limitations of training programme considering India's large population. He
advocated package assistance, single window approach, effective coordination among
agencies to stimulate local entrepreneurship in backward areas. (Dr. P.C. Alexander:
Promoting Entrepreneurship in Backward Areas, Laghu Udyog)
Like Dr. Alexander, the ED11 in its research project supported by Ford Foundation
were also critical of the urban orientation of the Entrepreneurial Development
Programmes. They developed a replicable model for promoting rural entrepreneurship;
Rural Entrepreneurship Development Programme (REDP) (see, Awasthi, 1991). "The
model validated the following hypothesis :
i) there is potential enterprise and the desire to do better than before among the
poor;
ii) their talent potentiaVdesire will respond if viable economic opportunities are Unleashing Rural
offered to them; Entrepreneurship

iii) there are plenty of such opportunities, in the rural and underdeveloped areas
which could be identified and tapped; and

iv) a well conceived development cum counseling approach can bring self-
employment opportunities and the latent entrepreneurial potential of the rural
poor together, by futher developing the capabilitiesand motivation of the selection
group, to set up enterprise."

The REDP model also considered difficulties due to "his~orical,economic and social
factors such as :

i) negative self-image resulting in low self-confidence and high fear of failure with
respect to an entrepreneurial career;

ii) the need for economic security and stability leading to a distinct p, eference for a
job, especially a government job, which would ostensibly also provide access to
power besides regular income (economic security);

iii) lack of initiative and shyness in approaching strangers;

iv) little faith in both outsiders as well as the government machinery;

v) limited exposure to market economy;

vi) little access to information;

vii) limited investible surplus due to low remuneration accruing agriculture; and

viii) limited job opportunities owing to the lack of adequate infrastructure, which, in
turn, leads to inaccessibility of markets and an undiversified economic base
(confined mostly to agriculture)."

Awasthi has thus identified constraints of potential rural entrepreneurs and

development inputs.
Constraints of Potential Rural Entrepreneurs and Development Inputs
S.No. Constraints Inputs
1. Low self-image and confidence. Motivational inputs, unfreezing and
experience sharing by successful local
entrepreneurs.

2. No faith on others including friends. Group building experiences.

3. No exposure to indusuy/business. Field visit to factories and big markets.

4. Who to contact for starting a Information inputs on procedures and

venture, what formalities and formalities.
procedures are to be followed?
-
5. How to know whether the identified Opportunity identification and
business is a viable and sound guidance.
proposition?

6. How to know whethe~theidentified Market survey, project report

business is a viable and sound preparation.
proposition?
Understanding
Entrepreneurship 7. How does one carry out bank Training in simple banking procedures
operations? like filing up deposit and withdrawal slip
etc.

8. How to manage the business? Basic management orientation through

simulation exercises.

9. How to read and write accounts? Functional and numberical literacy.

Simple accounting in terms of writing
income and expenditure.

10. ~ l m o sno
t technical skills (except Technical training (on-the-jobtraining).
in the case of artisans).

r
Check Your Progress 111
Note : i) Space is given below for your answer.
ii) Compare your answer(s) with the text.

1) What were the benefits secured due to centrdized planning?

......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
2) List out the Ford Foundation Team's major recommendations for promotion
of small scale and cottage industries.
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
3) What steps were taken by the Govt. of India to help the entrepreneurs in the
small scale industries sectors ?
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
4) What were certain gaps noticed in the Governmental training programmes
for self-employment in rural areas ?
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
J
5.4 INITIATIVES OF NON-GOVERNMENTAL
ORGANISATIONS
Limitations of training includes non-understanding of the social, psychological and
cultural aspects of the rural realities. These factors could only be understood and
articulated by the voluntary organisation due to this sector's own advantages. This
section would deal with the inherent benefits of this sector. We would also simultaneously
looking at the hurdles involved.
Benefits of the NGO sector includes their understanding of local realities, grassroots
participation and knowledge of ground situation, "geographical spread, commitment
to development initiatives, autonomy,creditability with the masses, ability to effectively
deal with the bureaucracy" (Awashti)
However, they suffer from the lack of trained human power and financial constraints.
Financial support from the Small Industries Development Bank of India (SIDBI),
National Bank for Agriculture and Rural Development (NABARD), Khadi and Village
Industries Commission (KVIC),in training of REDP trainer-motivators,by organizing
workshops has been crucial. EDII was involved in imparting training to senior staff of
NGOs. Participants had been selected from the chief executives of NGOs who, in
turn have also trained rural youth as entrepreneurs and encouraged them to start their
own business ventures. Overall, 300 NGOs were involved in conducting an average
of 500 programmes per year in rural entrepreneurship development. As per
Awasthi ,.............. "the national average start up rate is more than 51% and the
programmes help create around 8000 new enterprises generating 16,000direct jobs".
He further says that ED1 is propagating REDP through a large number of NGOs and
the Institute alone has conducted 435 EDPs during last 5-7 years. training 10017rural
youths and that 2484 out of 4845 trainees started ventures with an average investment
of Rs. 33971 employing, on an average of 2 persons per venture. On an average, he
says, each REDP generated an investment of Rs. 5,43,536.

He also says, "Besides REDPs, the Micro-Enterprise and Micro-Fiance Development

(ME&MR)D division of EDII has been working on the capacity building of NGOs
and sensitizing the environment, with the Division itself training 385 trainer-motivators
from over 300 NGOs. In the various workshops conducted specially for them, the
Institute has sensitized about 350 chief executives of NGOs. The institute is also
involved in the micro-credit related activities. To facilitate the smooth flow of credit to
the RED trainees, ED1 has also been sensitizing bankers, through an NGO-Banker
interface. In,six such programmes held so far, about 90 bank managers have been
sensitized towards the needs of the REDP trainees. Thus the REDP strategy that
started as an experiment has been bringing a silent revolution in the rural areas and
transforming the lives of thousands of rural youths across the country".

We have observed that those associated with Government at different levels were
keen that entrepreneurshipshould be promoted in the rural areas. Apart from providing
he infrastructure and facilities, they realized the importance of training to motivate
he youth to become successful rural entrepreneurs and even incorporated hand-
~oldingduring the follow-up in the training package. But the population of the country
leing so large, there were apprehensions regarding the proportion of rural youth that
:dly could get benefit out of such training. The Governments, both that Centre and in
le States, were not in a position to train a sizeable number of entrepreneurs. Besides,
~trepreneurshiptraining demanded very high level of commitment of the trainen
Understanding in the Ministry of Small Scale Industries took up the issue of promoting rural enterprise
Entrepreneurship seriously but they too, had their limitations.This limitation wa$to certain extent overcome
by ED11 by joining hand with the non-governmental organisations because of their
inherent strengths, flexibility and reach which neither the Government or quasi
Government organisations like Technical Consultancy Organisations (TCO) and
educational institutions have. The Department of Science & Technology, through its
National Science & Technology Entrepreneurship Development Board (NSTEDB)
also extended its scheme originally meant for promoting entrepreneurshipin 13 selected
backward areas, to about 40 locations with an aim to promote at least 2U0 micro
enterprises in each area with a focus on technology in association with reputed NGOs
and TCOs in the respective regions. NSTEDB also trains youth in specific skills, after
ascertaining the local requirements based on a comprehensive survey and a major
percentage of these get self-employed while the rest get wage employment.

To involve the non-governmental sector is perhaps a better alternative than to catering

to the entire country by only a handful of apex institutions and national organizations in
order to promote rural entrepreneurship. But the NGOs, to be able to perform their
task efficiently and effectively, need to build their capacities as well both in terms of
expertise and commitment to take up the onerous task seriously. Small Industries
Development Bank of India (SIDBI) has taken a bold step in this direction. SIDBI
claims that its association with NGOs have been beneficial but it faced certain constraints
that were mainly concerning operations and procedures. They also realized that many
NGOs could not equip themselves to manage micro credit programmes that were
bigger in size. So they have thought of shifting their focus from NGOs to concentrating
on institution building i.e. relatively more formal micro finance institutions (MHs). Its
capacity building efforts are directed not only towards MF[s but also towards grassroots
institutions engaged in micro finance operations, training, consultancy, rating and impact
assessment, etc. and other service providers in the form of training, seminars,
workshops, orientation and exposure visits. In order to strengthen the supply side of
trained manpower, SIDBI has provided support to premier management institutes for
courseware development on elective in micro finance.

It is actually a challenge for the NGOs to provide the needful, both in terms of capacity
and commitment to take up the task of unleashing rural entrepreneurship. They have
been enabling the rural youth to become entrepreneurs in more ways than one. Many
have adopted training and mentoring youth in rural areas as major part of their activity.
There are some who involve themselves guiding rural entrepreneur right from the
conception stage to even marketing of their products. The expectation from the NGOs
are bound to be more as they are closer to the people. The government as well as
academic institutions also need to be equally, if not more enterprising, innovative and
purposeful to ensure more and more youth taking to rural entrepreneurship.

I Check Your Progress IV

II
I Note : i) Space is given below for your answer.
I ii) Compare your answer(s) with the text. I
1) What are the advantages of the NGOs working in rural areas? Mention the
limitations.
 Unleashing Rural
2) Briefly highlight the importance of EDIT in promoting dentrepreneurship. Entrepreneurship
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................

5.6 LET US SUM UP

This unit highlighted the importance of rural entrepreneurship and the obstacles being
faced in developing the rural ventures. We also understood the existing social
economical and culture factors that are responsible. At the same time, we noted the
efforts being made by the governments both at the central and state levels in
encouraging rural entrepreneurship, such as assistance to small scale industries and
training facilities. Further, we learnt the efforts of non-government organisations in
assisting the growth of rural entrepreneurship. Thus, we noted that despite the
handicaps both the governmental and non-governmental sectors of Indian society are
equally engaged in the development of rural entrepreneurship.

5.7 KEYWORDS
Basic Amenities : Minimum useful features like road, water, electricity,
primary health, education, etc.
Credit : The facility rendered by Financial Institutions to borrow
funds for an enterprise.
Micro Finance : RBI defines Micro Finance as "provision of thrift, credit
and other financial services and products of very small
amounts to the poor in rural, semi-urban or urban areas
for enabling them to raise their income levels and improve
living standards.
Non-Government : A organisation (or a society) not belonging to or associated
Organisation with the Government.

5.8 SUGGESTED READINGS

Awasthi, Dinesh N., Short Steps Long Leaps, Stories of Impact Making Entrepre-
neurs, Tata McGraw Hill Publishing Company Limited, New Delh, 2001.
Beteille, Andre, Studies in Agrarian Social Structure, Delhi : Oxford University
Press. 1974.
Blunt, Edward, 'The Economic Aspect of Caste System' in Radhakamal Mukherjee,
ed., Econornic Problems of Modern India, Vol. I, London: Macrnillan, 1939.
Bogaert, M.V.D. and S.P. Das, 1989, Group Entrepreneurship with the Rural Poor
- A n idea, whose time has come, New Delhi, Indian Social Institute, 1989.
Dantwala, M.L., 1985, 'Garibi Hatao: Strategy Options', Economic and Political
Weekly, Vol. 20, No. 11, 16 March, pp. 475-476.

Gaikwad, V.R., 1986, 'Rural Development Strategies : Evaluation of Some Early

Experiments in India', in Dantwala, M.L. Ranjit Gupta and K.C. D'Souza (ed.).
Asian Seminar on Rural Development, New Delhi, Oxford & IBH Publishing
Company Pvt. Ltd.
~ndeistandin~ Hoselitz, B.F., 'Economic Growth and Rural Industrialisation', Economic Weekly, Feb-
Entrepreneurship
ruary 22,1958.
Khan, M.A., Entrepreneurial Development Programmes in India, 1992, Kanishka
Publishing House, Delhi.
Laghu Udhyog Samachar, 50 Years of SIDO, Commemorative Issue on Golden Jubi-
lee of Small Industries Development Organisation, 1954-2004.
Myrdal, Gunnar, Challenge of World Povero, Allen Lane : The Penguin Press, 1970.
Patel, V.G., 1981, Entrepreneurship Development Programme in India and its Rel-
evance to Developing Counties, Ahmedabad, Entrepreneurship Development
Institute of India.
Rath, Nilkanth, 1985, 'Garibi Hatao : Can IRDP do it?', Economic and Political
Weekly, Vol. 20, No. 6, 9 February, pp. 238-246.
Saini, Jasrner Singh, Entrepreneur Development Programmes and Practices, Deep
& Deep Publications, F-159, Rajouri Garden, New Delhi - 110027.

Shanna K.L., Entrepreneurial Growth and Industrial Development Programmes in

Punjab and Uttar Pradesh : A Comparative Study of Small Entrepreneurs,
Ludhiana: Department of Economics and Sociology, Punjab Agricultural Univer-
sity, 1976.
Wayne G. Broehl, Jr., The Village Entrepreneur Change Agents in India's Rural
Development, Harvard University Press, Cambridge, Massachusetts and Lon-
don, England, 1978.
 Unleashing Rural
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