Developing rural entrepreneurship in India

Establishing businesses is important for a country’s progress as it augments economic and employment growth. State and central governments are continuously launching new and attractive schemes to encourage their citizens to come up with innovative business ideas. Setting up an enterprise depends on one’s capacity, which differs from person to person. If the enterprise must come up in a rural environment, the dynamics are more complex compared to the urban context.

Rural enterprises are business entities, which by the means of effective use of local resources, promote revenue generation and act as agents of social change at the grassroots level. These entities not only play a pivotal role in the wholistic development of the rural economy but also contribute to the economic growth of our nation. The establishment of a large number of profitable enterprises in a region can bring in government investment, attract private participation, generate local employment, bring partnerships and secure funding apart from channelising idle savings into business entities.

According to the Government of India, “Any industry located in a rural area, village or town with a population of 20,000 or below and an investment of INR three crores in plant and machinery is classified as a village industry.” It is a revised definition of the previous one provided by Khadi & Village Industries Commission.
As of March 31, 2022, India has more than 63 million MSMEs, out of which about 94 per cent are micro-enterprises. According to official data released on April 30, 2022, the country’s 6.33 crore MSMEs employ about 12 crore workers. According to World Bank Data 2019, about 65 per cent of the Indian population, most of them (about 58 per cent, as per 2018-19 PLFS data) earn their livelihood from agriculture and allied sectors.

Rural enterprises are the best way to use local resources, which leads to prosperity and economic growth. It, in turn, spurs avenues for employment, which has a direct impact on the levels of migration. Therefore, to ensure the development of a viable business model to better support aspiring rural entrepreneurs, it is fundamental to ensure that manpower, money, material, machinery and understanding of the market is complete.

Challenges faced by rural entrepreneurs

While India has marginally improved its ranking in terms of the ease of doing business index, the challenges and concerns faced by rural entrepreneurs in running and scaling their enterprises persist.
The concerns range from the prevalent societal and gender-based biases to a lack of understanding of business, entrepreneurship and access to the requisite skills essential to run such enterprises. The entrepreneurs who have the courage to work on a business idea often face challenges in understanding the needs of the market, the viability of their product and its suitability for manufacture.
Furthermore, those enterprises who manage to establish themselves in the market and generate some early-stage revenue often face difficulties. These range from inconsistent market linkages, severe competition from urban markets, a lack of infrastructural facilities and logistical challenges, inadequate understanding of the government support mechanisms available for them to unskilled labour for the effective delivery of product/service.
Other challenges include the availability of working capital, the adoption to technology and the inability to diversify their products range.

Recovery roadmap

India has made tremendous progress towards creating a new business environment for enabling an increased participation of stakeholders in the workforce via enterprise creation.

However, acceleration of these numbers is possible through the introduction of some key models, such as a marketing cooperative to promote products manufactured by rural enterprises thereby eliminating middlemen. The establishment of common facility centres, particularly for production, can also boost rural entrepreneurship. Building business acumen through capacity building and training is crucial for entrepreneurial success. It, coupled with an access to financial linkages at concessional interest rates, flexible repayment options and waiving of collateral security will spur the growth in this sector.

Role of the government

For a nation like India, the role of the government in supporting and scaling rural enterprises is of pivotal importance. The Government of India’s Start-up Village Entrepreneurship Programme (SVEP) has been initiated with the purpose of assisting entrepreneurs to establish their business enterprises in rural India. The scheme supports existing enterprises as well as new enterprises with their unit establishment at the village level. Besides helping the rural entrepreneurs to access finance, a cadre of Community Resource Persons- Enterprise Promotion (CRP-EP) is also created to provide business support services to rural enterprises. It not only aids in the setting up of enterprises, but also ensures that sufficient handholding support is offered to these enterprises, thereby ensuring their longevity in the market.

It is fundamental to instill a culture of entrepreneurship to ensure the establishment of rural enterprises. Rural Self Employment Training Institutes (RSETIs) have addressed it by providing skill and entrepreneurship development training programmes to the rural unemployed youth thereby assisting them in commencing their own business units.

The Ministry of Skill Development and Entrepreneurship (MSDE) is also executing the Pradhan Mantri-YUVA initiative for forming entrepreneurial training and education across the country. The MSDE is implementing entrepreneurship expansion in six cities by supporting existing enterprises to scale-up and to capitalise on mentoring prospective entrepreneurs. The AY-NRLM scheme, in conjunction with this, also supports group women entrepreneurship in rural areas (agriculture and allied sector), with market linkages.  GOI, in collaboration with TATA trusts, has established a “Foundation for Development of Rural Value Chain (FDRVC)” to develop and implement value chain projects through the promotion of large-sized producer enterprises.

Rural entrepreneurship can also be promoted fundamentally by increasing access to the community and bridging the gaps in certain areas like providing mentoring by industry experts, establishing incubation centres and conducting ideation workshops, hackathons and other events in Tier 2- Tier 3 cities to spur innovation and entrepreneurial mindsets. While the Government of India plays a crucial role, the engagement and active participation of civil society bodies and NGOs goes a long way in institutionalising support mechanisms.

Rural enterprises are pivotal for our country’s growth, but the challenges are many, such as poor infrastructural facilities and the access to capital. Though the Government has taken steps to counter the challenges, sustained and focused efforts are needed. With the right support, access to training and finance, we can help rural entrepreneurs start and grow their businesses, create jobs and drive economic development in their communities.

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