INTRODUCTION

Village and cottage industries have a popularrole in the Indian economy due to scarcity ofphysical capital, unemployment and underemployment, regional imbalances and disparities,inequalities in the distribution of income andwealth, unutilisation or under utilisation of ruralresources. The government has accorded utmostimportance for the growth of these industriesthrough five year plans and industrial policiesbecause of their high employment intensity. Sinceemployment is a means to achieve growth withsocial justice, a number of programmes andschemes have been designed and implementedfor their development since the dawn of theplanning era. It will help in the redistribution ofincome and wealth.

Improving the quality of life for rural peopleis an enormous and challenging problem.Solutions to this problem are to be found withinthe rural areas. In essence, it comes down togenerating employment, increasing income,harnessing and utilising the primary andsecondary resources that the rural areas areendowed with. Diversification of manpower isrequired from already saturated agricultural sectorto industry and secondary sectors. It has beenrecognised that in the long run agriculture andother land based activities, even with a high rateof growth, will not be able to provide employmentto all the rural workers at adequate levels ofincome. Over one fifth of the rural workers areengaged in non agricultural activities. Thisproportion has shown a remarkable increase in

© Kamla-Raj 2009 J Soc Sci, 20(1): 23-29 (2009)

Rural Industrialisation: Challenges and Proposition

K. Sundar and T. Srinivasan

Commerce Wing DDE (Directorate of Distance Education), Annamalai University,Annamalai 608 002, Tamil Nadu, India

KEYWORDS Rural Industries. Infrastructure. Village Industries. Small Industries

ABSTRACT Village and cottage industries and agriculture sector which were accommodating rural population havebeen losing ground to service and industrial sector. The share of agriculture in the GDP has steadily declined from36.4% in 1982-83 to 18.5% in 2006-07, although this sector supports more than half a billion people, providingemployment to 52% of work force. The Indian economic survey 2007-08 lamented the sliding growth of foodproduction to the extend of 1.2% during 1990-2007, lower than annual population growth averaging 1.9%. Thelabour force engaged in various sectors of economy in rural segment are fast migrating to urban areas which triggerpoor civic amenities, high pollution, hiking urban land value, population density and so on. In this context, the paperdeliberates the strategies to intensify the rural industrialisation and make suggestions for remedying the worseningconditions in urban areas.

recent years. Policies are needed to be evolvedto further strengthen this trend. The developmentof small business especially in rural segments ofa viable remedy. Tiny units have been found toconstitute that segment of small scale industriesthat is most prone to sickness or least likely to beviable.

At present, rural small scale and cottageindustries comprise of handicrafts an£ artisanenterprises. The handicraft industry is cottage orsmall scale industry. It’s products are artistic innature and require individual skills andcraftsmanship in the manufacturing process. Thehandicraft industry is a labour intensive industry,its products are of higher value added onesarticles, whereas the village industry producesarticles of daily use.

Review of Literature

Desai (2007) has high lighted that poorinfrastructural facilities in rural segments has beenone of the factors holding back ruralindustrialisation in India. Sharma (2006) observedthat rural financing has been one of the mostneglected segments in the current context ofglobalization. Haynes (2005) suggested a nodalagencies to certify the quality of the productsproduced by village industries. Gopu (2007)viewed that unbridled growth of industries inurban areas has accentuated the regionaldisparities in India. Vivek Paul (2004) in his articlehas stated that rural industrial estates are a viableremedy to correct regional imbalance. Krishna(2003) favours framing community – oriented

24 K. SUNDAR AND T. SRINIVASAN

curricula to promote a close interaction betweeneducation institutions and rural industrialenterprises. Jain Rajesh (2006) has stated the entireedifice of rural industrialisation concept has tobe built on solid foundation of sound marketingframe work. Ragu Dayal (2008) has observed thatthe share of Indian agriculture has declined from36.4% during 1982-83 to 18.5% during 2006-07and has suggested stepping up investment inrural infra structure service to woo industriestowards industrial areas and thereby checkingthe exodus of migrant labour. It is patently evidentfrom the foregoing review that strengthening ruralinfra structure is the key to promote ruralindustrialisation concept

Significance of Rural Industrialization

Panditrao (1997). as the population growthrate in India is 2.3 percent per annum, itspopulation is expected to be above 100 crores atpresent and about 30 percent of the totalpopulation are below the poverty line. So Indianeconomy is likely to face the problem ofunemployment of very high magnitude. Majorcrisis will begin in the rural areas. Today 60 percentof the working population comprises ofagricultural labourers and they remain idle for aperiod of four to six months in a year, adequateemployment opportunities should be explored forthis population. Rural industrialization can play asignificant role in this regard.

Rural industrialization becomes all the moreimportant in view of the fact that the percentageshare of agriculture to gross domestic productionand the percentage of population engaged in thissector have been declining all over the world,Indian market cannot deviate from this trend.Because of saturation in the agricultural sector,there is no scope to accommodate additionalmanpower therein and it has further accentuatedthe problem of unemployment. Therefore,diversion of manpower becomes imperative fromagricultural sector to industry and service sectors.Since employment opportunities in the servicesector are limited, the development of industrialsector, especially in rural segment, is the onlyremedy. Rapid urban industrialization, might alsohave been helpful in this regard, but this may notbe the proper way to provide employment in India,as it triggers urban migration leading to social,economic, hygiene implications.

The National commission of Agriculture

(2007) has very rightly observed that moreindustries must grow at a faster rate or there willbe accelerated migration to urban areas leadingto decay in both areas and social tensions willbuild up, endangering the nation. Ram (2002). ruralindustrialization seeks to use locally availableresources and labour. Tiny cottage and villageindustries are best suited for rural areas.

In this background, the following issueswhich are likely to be addressed in the noble taskof rural industrialisation are deliberated.

DISCUSSION OF ISSUES AND STRATEGIES

1. Formulation of Rural Industrial Policy

Rural Industrialisation means encouraginglocation of large and small scale units away fromurban areas or planned shifting of units fromurban areas to rural areas. But it is not likely thatthe existing urban industrial structure can bedisturbed. Therefore under rural industrialisationconcept, the state should encourage industrialisa-tion in rural areas on a massive scale. It isimmaterial whether it is small, village industriesor large scale industries. A comprehensive policyshould be so evolved that industries are encoura-ged in rural areas hereafter. A vast reservoir ofrural resources should be harnessed. Govt.should create full fledged infrastructural facilitiesin rural areas before initiating efforts in thisdirection. Rural industrialization aims at all-rounddevelopment of an area as well as people living insuch areas. This can be realized only throughsystematic adoption of improved technology.There should be a harmony among primary sector,secondary sector and tertiary sector in ruralindustrialization. The focus of rural industriali-zation should be alleviation of rural poverty bycreating wide employment opportunities in ruralsphere. At present, there is no policy directive onrural industrialization. A number of Govt-sponsored programmes like Khadi and villageindustries. Hand loom, sericulture, coir, IRDP,DPAP, PMRY, DRIP, DAAP, Artisan employmentguarantee programme are in vogue.

These programme have different set ofobjectives, pattern of organization, and systemof assistance. The focus of these schemes is eitherto develop industries or to develop target groupbut not to promote rural industrialization. Patel(2004) is of the view that lack of coordinationamong the various poverty alleviation

25RURAL INDUSTRIALISATION: CHALLENGES AND PROPOSITION

programmes contributed least to the fight againstpoverty and unemployment in rural horizon. Thereis no coordination among these programmes. Thishas affected concerted action in the implemen-tation of rural industrialization programme. Inother words, Central Govt plays a leading role incertain programmes and State Govt act animplementing agency of Central Govt. In certainschemes State Govt. play a leading role whileinstitutional financing agencies dominate in somestates. Therefore confusion arises as to who isaccountable to whom. Manon (2007) hasobserved in his article that too many schemes,too many government agencies dual govern-ments, high leakage of financial assistants androle ambiguity made little impact on abject ruralpoverty and growing rural unemployment. A clear-cut policy for rural .industrialization is to beevolved which should address the likely pitfallsin the road to rural industrialisation.

2. Reversal of the Trend - TowardsDecentralization

Rural industrialization is indubitably a nobleidea. While the economic development has goneso far towards capital intensive industrialization,centralization and high degree of unplannedurbanization, very exercise of evolving policiesand undertaking efforts towards decentralizationand rural industrialization seem to be irrelevant intoday’s context of liberalization. It is doubtfulwhether the present Govt would have politicalwill and pursue rural industrialization anddecentralization. In other words, open economypresupposes non-invention of Govt. whilesuccessful rural industrialization warrants stateintervention. Therefore the issue is how toreconcile these two diametrically opposite viewpoints.

3. Multiplicity of Technologies andReservation of Industries

Existence of plurality of technologies in everyfield is threatening rural industrialization. Forexample we have hands spinning, as well aspower-spinning and hand loom and power loom,weaving. This diversity is found in foodprocessing, building materials, leather goods,soap making carpentry and blacksmithy, papermaking, food preservation and processing and

so on. Large units that use state-of-the arttechnology produce goods on a mass scale. Thissector is producing goods of necessity to meetthe demands of growing population and forsatisfying the urge to improve standard of livingand quality of life while small scale industries notonly produces but also provide employment to asignificantly large number of people and createpurchasing power in the economy. Ganesan(2006) Small scale units in Cuddalore districtsproved to be a boon to rural and village artisansin Cuddalore district and it has created 8978 jobsin 1428 units and contributed rupees 10,282 croresworth export during 2005 and 2006.This showsthe p[potential of rural and village industries infighting poverty and unemployment. There is noquestion of accepting one and rejecting the other.Both have to be supported and conditions are tobe created for their sustained development. Whilesmall scale industries as well as large scaleindustries engage in the production of similaritems, a conflict arises as to which industry needsto be supported. The large scale industriescontribute to massive production, decreaseemployment opportunity due to automation andfinally lead to unplanned urbanization, ecologicaland environmental degradation while ruralindustrialisation generates more employmentopportunities for the rural masses and brings allits attendant advantages to the rural scenario. Sofar as India is concerned, rural industrializationcannot be ignored as something irrelevant intoday’s context. Thus choice of technology iscrucial issue. The following approach isrecommended for deciding as to which industryis to be encouraged where.· Large scale industries which use state-of-art

technologies may be encouraged in certainproductive activities that call for sophisticatedtechnology, eg. construction, infrastructureindustries, shipbuilding, railways, powersector telecom and the like.

· Rural industries that use local technology maybe encouraged in certain areas where humanskill plays a predominant role. Eg. handicrafts,coir, embroidery, carpentry, blacksmithy,pottery etc.

· Ancillary type of industries may beencouraged in certain sectors like automobiles,Healthcare, electronics, drugs, chemicals etc.

· Both small as well as large scale industriesmay be allowed in certain areas where bothcan co exist. The areas of production are to be

26 K. SUNDAR AND T. SRINIVASAN

clearly demarcated in term of demandfeasibility employment generation, productioncapacity. This exercise would solve the twinproblems of employment generation as well aslarger production.

· Reservation of certain areas exclusively forSSIs would be effective if areas are properlyidentified. On reserving the areas exclusively forSSIs, certain issues such as quality standards,production capacities, price subsi-dy and so on,need to be addressed in a clear-cut terms.

4. Nature of Employment

As for nature of employment, it is to bedecided as to the type of employment suited forpromoting rural industrialization. There are severalpatterns of generating employment in rural areas.They include self-employment, wage employmentin industrial units, wage cum self employment andestablishment of rural industrial estates. Each ofthe above method has its own merits anddrawback. Alagappan (2004) who studiedemployment pattern in rural industries located inKeerapalayam panchayat concluded that wagecum self employment pattern of wage paymentproved to be effective. Therefore the pattern ofemployment generation is to be decided afterweighing the relevant factors dominant in eachpattern of employment generation.

5. Organizational Difficulties

Rural population being highly scattered andunorganized, organizing and institutionalizing theactivities of rural population and proving workon a regular basis are really challenging task.Either work is to be provided by the units to themto be done at their residence or industries are tobe started in the rural areas in order to bring theminto an organized entity. Some of the effortsundertaken by the Govt. in the past have not madeany perceivable impact on the employmentgeneration in rural India. Industrial co-operativeswere started with the mission of ruralindustrialization for different crafts in pursuanceof the recommendation of Karve committee 1955.These societies mobilized the scattered rural skillto a certain extent. But it failed in its re-mission.As these societies could not ensure regularemployment and provide fair wages, memberswere withdrawing from the societies. As a resultmost of the societies remain currently defunct.

Another experiment done was formation of multipurpose block level co-operatives by Govt. ofMaharastra. These societies ended up becomingmere credit societies. Mere provision of creditcould not promote rural industrialization.

Third experiment was formation of institutionsunder societies Registration Act 1860. This typeof institution was started by Khadi. This entity iscurrently thriving due to Govt. patronage.Management and workers assume significance inthese institutions. Since the societies can notafford to pay good pay scales, it can not get a teamof talented, experienced and capable administrativestaff. Therefore it suffers on administrative front.Paying higher pay scale would result in increasingthe final cost of the product and the consequently,the State would have to come forward to supportthem. Besides there is a need to evolve a separatelabour code for unorganized rural labour sincethe present labour laws are oriented towardsorganized sector. Maran (2007) has suggestedevolution of labour code for unorganized ruralworkers for improving the living standard ofworking masses in rural areas. In this background,it is suggested that the unorganized rural workforce may be converted into organized forcethrough self - help group. These groups may befinanced either directly by banks and institutionsor through voluntary agencies or through Non-Govt. organizations. The State has to put in placea marketing structure for marketing the produceof self help group on a massive scale. Thusorganization of unorganised work force throughself help group mechanism appears to be a viablesolution.

6. Technology Gap

While organized industry is fast upgradingits technology. There is no technology upgradation in rural industries. Around 60 per centof artisans are still carrying on their traditionaloccupation in a primitive way. National Researchand technical institutes have done little for thevillage industries. Infect there is more urgent needfor R & D in rural industrial sector. Other wise, itis likely to be irrelevant and obsolete. The factthat still large number of artisans carry on thework in most antiquated methods highlight thefailure of transfer of technology. This discouragesnew persons entering into this occupation cuttingacross the caste barrier. Therefore mechanical andengineering talents have to develop suitable

27RURAL INDUSTRIALISATION: CHALLENGES AND PROPOSITION

technology which would be modern and efficientand which would absorb greater number of peoplein work.

In this context Sushil Kumar (2005), it ispertinent to mention the efforts undertaken byIIT Delhi and Mumbai recently. The formerdeveloped looms, hand tools washing and dryingplants, embossing machines trimming and mois-ture measuring devices for use by the weavers inthe carpet industry and organized awarenessprogramme to promote new technologies amongthem. So far 500 weavers were trained in thevarious carpet belts. Training cum awarenessprogramme is still in progress. Further about 500looms and 1000 tool kits were distributed toweavers at subsidized price. IIT Mumbaideveloped tools and technologies for processingof bamboo and cane. About 400 sets of improvedtool kits have been fabricated which weredistributed to artisans at the subsidised rate inNorth - East and Kerala. Indian Institute of carpettechnology has been training the carpet designersin Computer-Aided-Design application, colourmatching and testing equipments.

The efforts of similar nature should beundertaken by Technical Universities SpecialisedInstitutes for different crafts and other IndustrialTechnical Training Institute and the like. Thiswould help the artisans shed antiquatedproduction practices and embrace modernproduction practices.

Planning commission ought to earmarkadequate funds for promoting researchendeavours in rural industrialization. A mechanismought to be put in place to fund directly theresearch endeavours directed towards technicalup-gradation of rural and village industries.

7. Promoting Managerial and EntrepreneurialSkills in Rural Entrepreneurs

Managerial inadequacies are one of thereasons for the failures in decentralized industrialsector. There is a need to equip village artisansand their institutions with new except ofentrepreneurship and managerial skills. Propertraining is to be arranged for village artisans todevelop their managerial and entrepreneurshipskills. Banks and development institutions shouldconduct entrepreneurship courses for studentsfrom the rural colleges and for the rural artisans.They need to be enlightened on various skills ofmanagement. In other words there groups need

to be enlightened on rudiments of entre-preneurship and management of the units. BaljithSingh (2003) emphasized the role of highereducational institutions functioning in rural areasin spreading entrepreneurial awareness throughestablishment of entrepreneurial cell.

8. New Definition for Small and VillageIndustries

Several attempts have been made to definevillage industry. Khadi Village IndustriesCommission proposed a definition interms of percapita investment. Still identity crisis persists. Thedefinition given for tiny industry during 1979could not suit for institutional village industriessince the total investments in such units weremore but per capita investment were less. Papola(2002) favoured re definition of small, medium,cottage and tiny industries

A clear definition for village industry is to beevolved in the context of globalisation. The factorssuch as per capital investment, eco-friendliness,degree of manual effort involved in making theproduct, non-conventional energy used, abilityto provide work at residence, value-addition,conversion of waste into wealth, level of energyrequired, high nutrition, purity, flavour, suitabilityto Indian context, women participation, absenceof child labour etc. may be some of factors whichshould be considered on defining ‘village andsmall scale industries’. Since these industriesenjoy a lot of financial and fiscal privileges, aclear definition is warranted so that privileges godirectly to deserving ones.

9. Role Clarity

The Central Govt. took up certain industrieslike coir, sericulture, handloom, Khadi andhandicrafts as central schemes the implementationof which was left to State Govt. In other words,Central Govt. provided funds, fiscal concessionand policy support to these industries. The Statehad to take care of implementation and to ensureinfrastructure support like water, electricity, roadwork shed and communication to .units locatedin rural areas. The State Govt. being passivepartners did not evince any interest in promotingthese centrally sponsored schemes.

It is suggested that the Union Govt. shouldtakeup both funding as well as implementation ofthe projects for centrally sponsored schemes.

28 K. SUNDAR AND T. SRINIVASAN

Similar should be case for state sponsoredschemes. Further the role of various facilitatingagencies like banks voluntary organization, KVIboard, Govt. Departments Central and State Govt.development organizations should be clearlyspelt out in no unambiguous terms in promotingthe rural industrialisation.

10. Credit Gap

It is observed that most of the rural industriesare starved of financial resources. Ranga Rao(2007) empirically proved the apathy ofcommercial banks towards rural credits ever sinceour country followed globalization path. Hefurther stated that the loan waiver is the pricepaid by the Govt for the neglect of the ruralsectors. The public sector outlays are hardly oneper cent and institutional credit is negligible.Therefore it is necessary to continue to provideconcessional credit to encourage rural indus-tiralisation. As suggested earlier, Govt. has toredefine small scale and village industries forconcessional financing and other privileges fromfinancing agencies.

11. Marketing Infrastructure

Rural industrialization would be a total fiascosans sound rural marketing infrastructure. As longas rural products do not enter the normal supplychain, their products cannot enjoy a good market.Some sort of network should be created formarketing the products of village industries.Where Govt. departments buy their requirementsfrom the rural marketing mechanism, half of themarketing problems of rural industries would besolved. Chellappan (2006) in his article hasappealed to the Govt of India to patronize theproducts produced by self help mechanism andthis would serve as a head ache balm to give aneternal relief to rural enterprises. At present ruralbazaars have been set up at District Head Quartersfor marketing the output of self-help groupentities. Besides, Govt. may set up some sort ofpermanent marketing structure at each districtwhich may collect rural products from variousunits and supply to final consumers throughvarious fair price shops, consumer co-operativesocieties. Efforts should be made to have apermanent retail stall in local shanties and pilgrimcentres and participate at festival gathering tomarket rural products. Govt. may think of

establishing rural departmental stores or ruralmalls in districts. The rural products may bebranded by the Govt. and certified for its qualityand franchises may be given for marketing theproducts of rural enterprises like the KVIorganizations do. It may offer credit facilities tosalaried class against the post dated cheques orthrough pay deduction. It may accept credit cardsand debit cards to boost sales from stable incomesegment. Govt. has to propagate and publicizethe products of rural industries in their own medialike AIR and DD and News reel.

RECOMMENDATIONS

The following are the recommendations.· A comprehensive rural industrial policies

addressing various issues and challengesfaced by rural enterprises need to be evolved.

· Reservation of certain industrial activitiesshould be made exclusively for rural industries

· Industries of labour intensive nature need tobe patronized in rural areas.

· A separate labour code for unorganized labourneed to be evolved.

· The unorganized work force has to betransformed into organized one through selfhelp mechanism.

· A close rapport between technicaleducational institution and rural industriesneed to be created to help the latter to improveproductivity, quality, technology and so on.

· Higher educational institution may take uponthe task of spreading entrepreneurialawareness among the rural masses throughentrepreneurial cells.

· There is a need to redefine small, medium andtiny industries in current context for gettingvarious concessions and privileges from theGovt and financing agencies.

· The role of central and state Govt in promo-ting rural industries should be demarcated.

· Financing agencies of different types maycontinue to support the small and tinyindustries as a part of their social obligation.

· Govt should ensure marketing support to ruralindustries by advising the Govt departmentsto compulsorily buy the requirements fromrural industries.

CONCLUSION

Initially, Indian village industries enjoyed self-

29RURAL INDUSTRIALISATION: CHALLENGES AND PROPOSITION

sufficiency. However, the gradual increase ofmachine made cheap consumer goods restrictedthe growth of rural industries and thus createdunemployment. With agriculture having littlecapacity to absorb surplus labour, the ruralpopulation began to migrate to urban areas,affecting social, economic and hygienic aspectsadversely. The trend increased with the rapidgrowth of population and increased availabilityof machine made products. This situation hasfurther necessitated the development of labourintensive industries, widely dispersed all over therural areas of the country. This sector has vastpotential for absorbing a very large number ofour expanding work force.

Thus, if properly planned and implementedthe industries developed in our rural segments,will usher in a new era of hope among rural masses,a majority of whom live below the poverty line.Last but not least, any attempt to industrialiserural spectrum would end in fiasco if a full-fledgedinfrastructural facilities are not created in thoseareas. One should not forget that it is thefundamental pre-condition essential for realisingthis noble idea.

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