Rural Entrepreneurship in India: Opportunities and Challenges

Abstract:
After over 5 decades of Independence, Industrialization and introduction of LPG concept
in our country, still large part of population remains below poverty line. 70% of the
Indian population is engaged in agricultural activity as their main occupation, whereby
creating agriculture sector to be the back bone of the rural Indian society. With the
increase in population resulting in overcrowding on the agricultural land, there has been
continuous diminishing in the farm produce. This also results in migration of farm
workers in large numbers to the urban areas. In both the cases the population remains
under poverty line. By keeping in mind that there is a continuous growth of population,
there is the need to bring out some changes in the form of new policies for rural
development to overcome from prevailing poverty arising out of disguised employment
in rural areas, by providing other occupation options to the rural youths. In this context
“Rural Entrepreneurship” seems to be perfect topic as not only it will help rural
population to overcome from their problems but also it will bring a potential to the
economic growth of our Indian economy. Thus, the main objective of this research paper
is to find out why now-a-days rural entrepreneurship is important in our Indian economy?
And what are the opportunities and challenges related to it?

Introduction:-
During the current scenario of globalisation, where whole world is integrated into one
huge market, developing countries like India finding it difficult in coping with
competition laid down by developed countries. The major reason behind it, is the
increasing disparity among the urban people income and the rural ones. In urban sector
there are numerous sources to generate income, either from service, business or
investments in stock markets/mutual funds. But in rural areas at the age of 21st century of
information and technology people still depends on agriculture through indigenous
methods for their livelihood. Agricultural work force has a share of 70 per cent in the
total work force of the country. Cultivators who own farmland come to about 68 per cent
of this work force while agricultural labor accounts for the remaining 32 per cent. These
cultivators are increasing in number over the years but the large increase was among the
agricultural labor which went up from 20 per cent of the rural work force to 32 per cent.
There is no other means for them from which they can generate their income. With the
continuous growth in population there is the need to provide other occupation options to
the rural youths. This can be done by introducing the concept of entrepreneurship through
by establishing vocational training center at every district level.

Entrepreneurship is a critical element in the growth of an economy. It is estimated that

there are about 20 million entrepreneurs in the US. India ranked second in Total
Entrepreneurship Activity (TEA) according to the Global Entrepreneurship Monitor
Report for the year 2002. Subsequently, India slipped in TEA rankings.

For its size, India has lower number of startup entrepreneurs. In spite of the
shortcomings, it ranked ninth in the survey of entrepreneurial countries by Global
Entrepreneurship Monitor (GEM). India ranks the highest among a group of countries in
necessity-based entrepreneurship, which is associated with developing countries.
Conversely, it ranks fifth from the bottom in opportunity-based entrepreneurship.

After introduction of liberalization, privatization and globalization of the Indian economy

in the year 1991 and due to the information technology boom of the mid and late 90’s
have ushered in tremendous changes in the business environment thereby setting the
stage for a wave of entrepreneurship in India. The capacity of Indians for
entrepreneurship is also substantial. However, the society and government have not been
very encouraging towards entrepreneurship in India.

What could be a better option than entrepreneurship?

Entrepreneurship could take off the excess of labor from the farms that causes
disguised employment. Disguised Employment means that there might be groups of
people working on the farmland and calling themselves employed. However, when these
people are taken off that farm and employed elsewhere, the production of the farm does
not go down. Hence, such people though employed do not add to the production of the
farm. We have also seen in recent past that despite enough food stocks with government
warehouses, people are dying of starvation. This indicates problem with the public
distribution system. Now, in the current scenario the question is, do we have to depend on
government public distribution system? The response is, people taking up
entrepreneurship themselves in the form of Trading and Cooperatives.

Wherever we see on oasis of development in the desert of rural underdevelopment, we

can trace an imaginative entrepreneur, who has used the correct mode of management of
rural entrepreneurial venture to the best. The very best and true examples are presented
here.

For example, the case of dairy development in the State of Gujarat. This model is
popularly known as “Amul Model”. The Gujarat experiment was started more than 30
years ago. Starting from a small complex of eight societies which originally collected
only a few hundred litres of milk it has grown into a huge complex collecting nearly
seven lakh litres of milk per day from 240,000 members organized into 840 village
societies. Today 90 per cent of the processed butter and cheese market of the organized
sector in the country is controlled by Amul. This has helped small farmers. Behind the
success of this co-operative venture is that dynamic entrepreneur and leader, Dr. Kurien
whose target of opportunity seeking is not financial but social gain, not for him, not for
the enterprise or agency he works for, but for the people he serves.

The model for frozen peas market developed by MAFCO in Maharashtra is another
success story. This venture was started eight years ago. During the first year only 10
tonnes of peas were sold, which went up to 42 tonnes in the second year, 120 tonnes in
the third year and 140 tonnes next year and so on. Behind this success story is also that
the entrepreneur who could foresee and implement his plans of marketing. The
opportunities in this area are quite big. For example, the market for vegetables in West
Asia is approximately Rs. 36 lakhs per day, to be transported by air daily. What is lacking
is managerial talent, which could exploit these opportunities by organizing small farmers
of this country.

Need for showing the dream in the minds of rural youth:

“Youths in the rural areas have little options”, this is what they are given to believe.
This is the reason that many of them either work at farm or migrate to urban land. The
need is to plant other options in the minds of rural youth. Entrepreneurship could be the
best option.

Understanding Prospects of Rural Entrepreneurship:

There are numerous opportunities present for rural entrepreneurs to start and flourish
their enterprise. The only need is of the basic entrepreneurial principles that should be
applied to rural development. This would result:

1. Large scale untapped market: Success of new economic trends such as

microfinance and increasing number of companies in the rural
sectors suggest that there exists a large untapped market at the
bottom of the economic pyramid. There are many hidden resources to
which they can use it as their raw material. And can sell their new products to the
new large scale rural market.
2. Absence of competition: Unlike urban sector, the degree of competition is very
low at rural sector. This proves to be the opportunity for rural entrepreneurs as
low degree competition will produce low degree of risk.
3. Low cost labour: One of the major factors of production is work force. In rural
areas, since availability of labour force is abundant, hence cost associated with it.
4. Better distribution of farm produce resulting in the rural prosperity.
5. Entrepreneurial occupation rural for youth resulting in reduction of disguised
employment and alternative occupations for rural youth.
6. Formations of big cooperatives like Amul for optimum utilization of farm
produce.
7. Optimum utilization of local resource in entrepreneurial venture by rural youth.
8. Tax holidays and other tax advantages given to rural projects.
9. Advantage of local and regional resources in case the unit uses them as a raw
material.
10. Competitive advantage over the big business due to the proximity to the raw
material and labor.
11. Prestige and respect among the local community
12. Support and motivation from local people

If planted and nurtured in the minds of rural women and youth, it could result in
revolutionizing the Indian economy. It should be emphasized that the projects undertaken
by these entrepreneurs should not be constrained by its location in rural area. It should
enjoy all the advantages of the location. Model for rural entrepreneurship development is
given below.
Challenges:-

Beside many opportunities there are many obstacles and challenges in the path of rural
entrepreneurship. The major problems/challenges faced by rural entrepreneurship
development are listed below:

1. Lack of Micro Finance: The key constraint in rural entrepreneurship is that

resources dedicated to nurturing and creating micro ventures based upon the
‘viable’ technologies are few and far between. Venture funding in India is mainly
focused on high technology and internet-based ventures and equity investment
vehicles do not consider small innovators and entrepreneurs. In addition to this,
transfer of appropriate technologies from urban research centers and universities
to rural areas needs further ‘push’.
2. Government policies: Apart from licensing, taxes and tariffs, there has not been
much development in the rural area despite impetus provided by government. One
of the major reasons why not much headway has been made in this area during
the last 50 years is the lack of committed government officials implementing rural
area development projects.

3. Management: In many small firms same individual is responsible for the

production and management. And due to lack of proper management education
and whole sole responsibility on a single person diminish the efficiency in
business.

4. Marketing and finance operations: The entrepreneur still has to make the decision
relating to each of the above functions. Decisions require knowledge of marketing
and finance operations which a rural entrepreneur lacks in.

5. Technical information: Lack of awareness on technology and processing is also

one of the hindrances in rural entrepreneurship.

6. Marketing: Large firms can afford transport, storage facility, advertising and
product development efforts which an individual, more often, cannot.

7. Connectivity: Even after reaching on moon, still villages in India lacking proper
road connectivity, adequate transport facility, better infrastructure and updated
technology. Without these facilities no business can be flourishing.

8. Credit: Mostly forced to rely on personal savings, borrowing from friends and
relatives and moneylenders. Capital arrangements from these sources are often
not sufficient to bear business expenses letting business into losses.

9. Support System: Moreover, there has not been enough development in the rural
area. One of the reasons can be that management modes used were largely
 governmental. Those who were charged with the responsibility of rural
development were either bureaucrats or technocrats, who were using only the
schemes as the motivation for developing entrepreneurs, without providing the
necessary training for running an enterprise.
10. Education system: School drop-outs rate is very high in rural India causing it a
serious problem in the rural development. The first reason appears to be the
supply issue. Government controls education sector in such a manner that the
schools operating margins hit badly. Apart from the license/quota issue there
seems to be the major issue related to lack of proper teaching styles for English
and Mathematics learning, which are most essential in entrepreneurship.

11. Lack of Innovation: There is a lack of innovative mind in rural youths. The major
problem with these entrepreneurs is that they look at the community only as a market.
For example, a tractor manufacturing and marketing company looks at the rural India
as a big market for his tractors/without thinking of its innovative usage in urban and
semi-urban areas, like tractor being utilized for town planning and Municipal
Corporation’s jobs. It is most essential to be innovative to survive in business world.

Agencies involved in development of rural entrepreneurship:

It is quite clear that rural entrepreneurship cannot be developed without significant

training. Therefore, instead of just schemes (financial and developmental) as the carrot
for entrepreneurship development an intensive training needs to be provided to the youth
in rural India. What’s required is to create a devoted team to take up rural
entrepreneurship training as per integrated rural development program. In this regard
many agencies are working on different platforms. Some of the well-known are-

a) Project Shakti, launched in 2000 in partnership with non governmental

organisations, banks and government. Women in self-help groups across India are
invited to become direct-to-consumer sales distributors for Hindustan Lever’s
soaps and shampoos. The company provides training in selling, commercial
knowledge and bookkeeping to help them become micro-entrepreneurs.

b) Pratham – a leading NGO dedicated to child education and Barclay’s have come
together to foster wealth creation in villages by grooming entrepreneurship among
the rural youth. Pratham would identify poor rural youth with acumen for
entrepreneurship and provide the much needed skills in various fields, while
Barclay’s would help with the initial investments for their business. The
programme will focus on grooming entrepreneurs in farming, dairies, small-scale
industries and the automobiles servicing sector.

c) Rural enterprise network (REN) is association of rural entrepreneurs. These are

people who drives real India. They works in the villages. They are self employed
people, who along with them drive the economy of the villages. REN works to
highlight problems of rural entrepreneurs. The network is funded by 'World bank
 youth to youth innovation fund 2006'. The organization aims to connect Micro
Enterprises. This Network will help each other in informal way:

- Regular training program for updating skills.

- Helping new entrepreneurs in managing business. A senior member will
voluntarily mentor this budding entrepreneur.
- Help in getting bank loan.
- Help to locate right machinery, tools and design for the project.
- To increase business.

Conclusions:

From the above discussion it is clear that despite of prevailing challenges related with
rural entrepreneurship still there are innumerable opportunities connected to it. Only there
is the need for awareness among rural people and government. Government should deal
this matter consciously because with the rural development only, our Indian economy
will also be counted among developed economy. The industries in rural areas should be
set up not just to take advantage of the cheap labour but also to bring about an integrated
rural development.

To manage agricultural sector and non-enclave projects in rural areas, rural entrepreneurs
need to apply entirely different management and administrative concepts. Rural
entrepreneurship is the answer to removal of rural poverty in India. Therefore, there
should be more stress on integrated rural development programs. The problem is that
most of the rural youth do not think of entrepreneurship as the career option. Therefore,
the rural youth need to be motivated to take up entrepreneurship as a career, with training
and sustaining support systems providing all necessary assistance. Moreover, rural
entrepreneurs should not only look at rural areas as their markets, they should also see the
challenges existing in the urban markets.

References:
• Rosy Joshi and Sang am Kapoor, 2003. Business Environment, Kalyani
Publishers.
• Dr. Parveen Kataria, Anshu Kataria & M. Shivani, 2006. UGC- NET/SLET,
Commerce, Trueman’s Specific series.
• S.K. Sinha, 2007.Entrepreneurship and Rural Development, Shree Publishers.
• http://www.fao.org/docrep/w6882e/w6882e02.htm#P44_8010
• http://www.scribd.com/doc/6361277/A-Case-Study-on-Rural-Entrepreneurship
• http://www.indiastudychannel.com/resources/94291-Entrepreneurship-Rural-
Areas-India.aspx