Rural Industrialisation

Small-scale industrialisation has a major role in accelerating rural development. The experience of countries like South Korea, Taiwan, Zimbabwe and some others shows that, with peasantry as the basis for economic growth, a successful transition from an agrarian economy is possible. Most developing countries, however, have adopted a developmental approach with token reforms tending towards antipoverty programmes.

Non-farm activities are an important element of employment generation and are estimated to engage around 20 percent of the rural labour in India. This data however, is not very reliable since it varies with the agriculture cycle and does not always reflect secondary employment. In order of importance, activities which provide for productive work are cloth production, carpentry, metal working and food-processing. In developing countries, such units are mostly based in rural areas and are very small, with an average employment per unit of 1.6. The vast majority of them employ less than 5 workers.

Neither the promotion of large-scale industries as advocated by policy makers, nor external assistance from international funding institutions, has provided the momentum essential for development. Small industries, previously neglected, have become increasingly recognised as a viable alternative to, or at least an essential ingredient of, an integrated industrial structure. Development of small industries in rural areas would also reduce migration of the rural population to already overcrowded urban areas.

Several studies over the past few years, by the International Labour Organisation and the United Nations Development Programme, have focussed on the development of rural industries. The most critical factors emerging from these studies are:-

Inter-linkages of industry with other sectors of the economy, including projects on increasing agricultural output, improving health, providing education and housing, and expanding communication. Industrialisation, then, is not just a means of raising productivity and incomes in all the sectors. An increase in rural income stimulate the `final demands’ of small industries.

Foreign trade is not a factor for a large number of small industries. Export linkages are important only in sectors such as handicrafts, garments, leather goods etc.

Agricultural development raises rural incomes which increases the final demand for consumer goods, and is more important than production linkages of agricultural processing or backward linkages of manufacture of farm tools and equipment. Agro-processing shifts to urban sectors, whereas small-scale processing of staple foods to meet local demands continues in rural areas.

Linkages with large-scale industries have remained marginal, despite policies and initiatives of the government.

Development of transport, electrification, education, health, etc. is crucial for rural development, as growth of rural industries is stimulated by access to markets, lower cost of production, improved quality of labour and skills etc.

Rural industries are generally small, disbursed in area and concentrated in a few branches. They are usually passive with regard to innovation. In India, science and technology has contributed to a hesitant start in income-generating activities with groups of artisans in both traditional as well as non-traditional ones. Most of these experiments are based on time-bound project support and tend to collapse when project funds dry up.

Several factors are responsible for this, though what is of utmost concern is the impact on the rural actors when initiatives collapse. The implementing agencies not only survive but often thrive, obtaining support from the same or other funding organizations for similar activities. On the other hand, the landless farmer, because of the mirage-like opportunity offered by the small enterprise, may have lost the marginal income he could have earned by serving in the field of an absentee landlord.

Areas of thrust:

Policies in support of rural industries must concentrate on maximising linkages with other sectors. A general strategy should aim at economic diversification. Industry associates should promote sub-contracting of jobs by large-scale industries to small-scale enterprises through policies for upgrading technical skills.

Market protection and tax incentive schemes for rural industries should only be introduced as a temporary measure. Before any new initiative is launched, documentation of the existing basket of technologies is essential. This set of project profiles, if drawn up after proper assessment, would help both the funding organisations as well as the implementing agencies in drawing up viable project proposals.

The commitment and innovation displayed by the independent sector, largely voluntary organisations, needs to be tapped. Imaginative schemes must be initiated seeking their involvement in developing small rural enterprises. The existing bureaucratic structures have not performed adequately.

Successful entrepreneurs may be invited to "adopt" small rural entrepreneurs by providing them guidance at every step until them guidance at every step until the units have matured (parenting). The experience and business acumen of such committed parent units would make the difference between a successful and a sick infant enterprise.

Policies that favour grassroot and small enterprise development in rural areas should make use of existing institutions rather than bypass them or set up new ones. Where necessary, these institutions may have to be streamlined to make them more effective. This must be tempered, though, with the knowledge that extensive intervention promotes dependency and further delays the process of self-reliance and sustainability.

Anju Sinha
Ministry of Science & Technology

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