International Journal of Science and Research (IJSR)

ISSN: 2319-7064
ResearchGate Impact Factor (2018): 0.28 | SJIF (2018): 7.426

Rural Entrepreneurship: The Current Scenario in

India
Saud Ilahi
Assistant Professor, College of Business Administration, Jazan University, India

Abstract: Rural entrepreneurship engages the masses in manufacturing output, by providing employment opportunities, assists in
industrialization of rural & backward areas, thereby, assures regional balanced development and reduces migration of youth to urban
areas. It plays a pivotal role in distribution of income & wealth at grassroots level in the developing countries like India. The present
work provides an integrated view of rural entrepreneurship in India based on the analysis of the findings of the NSS 73rd Round of
NSSO, related to rural sector. It contemplates the status of rural entrepreneurship, schemes for the development of rural
entrepreneurship, government efforts to revive traditional industries after demonetization and problems of rural entrepreneurship.

Keywords: Rural Entrepreneurship, National Sample Survey (NSS) 73rd Round, Schemes for the Development of Rural Entrepreneurship

1. Introduction which has capability to drive various attempts in primary,

secondary and tertiary sectors and acts as a potent factor for
After over seven decades of independence and economic development.‟
industrialization in our country, still a large population lives
in rural areas. Rural regions face major issues in comparison Rural entrepreneurship is that entrepreneurship that initiates
to other regions (Brown & Schafft, 2011), which are more in rural areas brings value addition to rural resources
serious in the peripheral regions. According to OECD report engaging largely human resources of that particular area.
2005, rural areas are affected by major challenges like
unemployment or underemployment in primary industries, Thus, it is concluded that rural entrepreneurship must
lack of infrastructure, market, financial access, migration of emerge in rural area, by any person whether from rural or
young population to urban areas in search of employment urban area, employing most of the material and people from
opportunities. The solution of these problems lies in the rural area, providing the benefits and development to that
development of rural areas with entrepreneurial particular area, ultimately leading to economic development
development. Entrepreneurial activities contributes to of the country.
economic development with increased rural income,
exercising multiplier effect by raising the demand for 2. Methodology
products and services resulting in growth of employment
opportunities. This study is based on extensive review of different reports,
research articles, policy papers and comparative analysis of
Demonetization has led to closure of many micro and small statistical data from government databases. The data is
enterprises, leaving millions of people unemployed. It has mainly collected from published and unpublished works on
severe effects on the poor section of the society especially the related topic. The major source for secondary
small scale entrepreneurs& employees, agriculturists, daily information were the annual reports of MSMEs and KVIC,
wage workers. This caused to migration of people back to reports of NSS 73rd Round of NSSO, economic surveys,
rural areas, creating additional burden on already journals, and websites.
unemployed rural sector. To overcome these problems and
support rural entrepreneurship development the government 3. Literature Review
has initiated new schemes besides the old ones. On July 5,
2019, the Finance Minister presented Budget in Parliament There are various studies and surveys, which indicate,
focusing on reviving traditional industries such as khadi continuous engagements in the area of rural
bamboo etcetera through a cluster-based approach. A entrepreneurship. The brief discussion of some of them is as
hundred new clusters for traditional industries will be follows:
created in 2019-20.This will be done under the Scheme of
Fund for Regeneration of Traditional Industries (SFURTI), Mali D.D., (1988) and Kondaiah C., (1990) studied the
which targets to organize such industries and artisans into cultural and psychological factors affecting the
clusters, making them competitive, bolster up their long- entrepreneurship in rural areas. It was found that most
term sustainability leading to increased employment and people in rural areas were engaged in the traditional
marketability of products. occupations, they had developed a possessiveness with land
and whatever it can produce. Therefore, gradual steps are
Definition of Rural Entrepreneurship required to diversify them to occupations in the non-
In simple words, we can say that rural entrepreneurship is traditional areas like cottage, household and small-scale
any endeavor to organize any business activity in rural area. industries, etc. Khanka, S.S.,(1999) and Sarwade et al.,
(2000) conducted study on different villages and
It is defined as entrepreneurship emerging in rural areas, propounded that in small villages the rural entrepreneurs
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Paper ID: ART20202945 10.21275/ART20202945 1428
 International Journal of Science and Research (IJSR)
ISSN: 2319-7064
ResearchGate Impact Factor (2018): 0.28 | SJIF (2018): 7.426
started their enterprises as a part time activity while large Table 2: Distribution of Enterprises Category
villages it was started as the main business. The major Wise(Numbers in lakhs)
problem of the rural entrepreneurs was credit sale as the Sector Micro Small Medium Total Share (%)
demand for a product was connected directly to agricultural Rural 324.09 0.78 0.01 324.88 51
income. Urban 306.43 2.53 0.04 309.00 49
All 630.52 3.31 0.05 633.88 100
Sherief, (2005) and S. Sannasi, (2008) studied the
determinants of rural entrepreneurship and the environment 3. Type of Ownership of Enterprises: Concerning type of
conducive to its development. They opinioned in their study ownership (table-3) male dominance prevails in both the
that promotion of entrepreneurship activities is inevitable in sectors. Male owned 79.63% of enterprises as compared to
order to accelerate economic development in rural areas. 20.37% owned by female. Although the dominance of male
owned enterprises was slightly more pronounced in urban
Ghosh, Anjali (2011), concluded that merely the setting up sector in comparison of rural sector (81.58% as compared to
enterprises in rural areas is not enough but employing the 77.76%).
people and resources of that area is also essential in order to
develop rural entrepreneurship. Basically, the benefits Table 3: Percentage Distribution of Enterprises in rural and
derived from the entrepreneurial activity should reach the urban areas.(Gender wise)
different stakeholders of rural areas. Sector Male Female All
Rural 77.76 22.24 100
Chakmraborty and Barman (2014) found in their research of Urban 81.58 18.42 100
Sonitpur district in Assam that rural entrepreneurs were All 79.63 20.37 100
primarily motivated by the need for eagerness to make
money and self employment. They also confirmed that 4. Employment Category Wise: Table-4, shows the
training of different stakeholders not only improved the estimated employment in MSME sector. The sector has
productivity and efficiency of local farmers and artisans, but created 1109.89 lakhs jobs (360.41 lakh in Manufacturing,
also have potential social and environmental effects by 387.18 lakh inTradeand362.82lakhinOtherServices) in both
developing ecofriendly solution to local problems. the rural and the urban areas. The rural sector has created
more jobs in manufacturing activity than urban
Status of Rural Entrepreneurship sector(186.56 as compared to173.86)
As per the National Sample Survey (NSS)73rdround, on
unincorporated nonagricultural enterprises in Table 4: Estimated Employment in MSME Sector (Broad
manufacturing, trade and other services sectors, there are Activity Category Wise)
Broad Activity Employment (in lakh) Share (%)
approximately 324.88 lakhs enterprises in rural sector. The
Category Rural Urban Total
following tables present the current situation of rural
Manufacturing 186.56 173.86 360.41 32
entrepreneurs in the country.
Trade 160.64 226.54 387.18 35
Other Services 150.53 211.69 362.22 33
1. Number of Enterprises: As per table-1, there Electricity* 0.06 0.02 0.07 0
are633.88lakhs MSMEs in the country engaged in All 497.78 612.10 1109.89 100
different economic activities, out of that 324.88 lakhs *Non-captive electricity generation and transmission
units are in rural areas while 309 lakhs lie in urban areas.
The Manufacturing units are more in rural areas whereas 5. Distribution of Employment in MSME: As per table- 5,
Trade and Other Services exceed in urban areas. Micro sector provides employment to 1076.19 lakh persons,
which is around 97% of total employment. The share of Small
Table 1: Estimated Number of MSMEs (Activity Wise) sector and Medium sector being 31.95 lakhs (2.88%) and 1.75
Activity Estimated Number of Enterprises (in lakh) Share lakh (0.16%) persons of total employment respectively. The
Category Rural Urban Total (%)
employment level of urban sector is less in all types of
Manufacturing 114.14 82.50 196.65 31
enterprises as compared to urban sector.
Trade 108.71 121.64 230.35 36
Other Services 102.00 104.85 206.85 33
Electricity* 0.03 0.01 0.03 0
Table 5: Distribution of Employment in MSME Rural and
All 324.88 309.00 633.88 100 Urban Areas (Number in lakh)
Sector Micro Small Medium Total Share (%)
*Non-captive electricity generation and transmission and
Rural 489.30 7.88 0.60 497.78 45
distribution by units not registered with the Central
Urban 586.88 24.06 1.16 612.10 55
Electricity Authority (CEA)
All 1076.19 31.95 1.75 1109.89 100

2. Distribution of Enterprises Category Wise: According

6. Annual Gross Value Added (GVA) of
to table- 2, the Micro sector with 630.52 lakhs units
Enterprises:Table-6, presents that the aggregate annual
accounts for more than 99% of total estimated number of
gross value added by the enterprises engaged in market
MSMEs. The share of Small sector and Medium sector
production was Rs.1152338crores. Activity wise,
being 3.31lakhs units with0.05 lakhs units respectively. The
enterprises engaged in Trade had contributed maximum to
overall share of rural sector is 51% as compared to urban
overall GVA i.e. 39%, followed by Other Services (38 %)
sector i.e. 49%.
and Manufacturing (23%). The GVA of urban sector
exceeds in all areas in comparison of rural sector.
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 International Journal of Science and Research (IJSR)
ISSN: 2319-7064
ResearchGate Impact Factor (2018): 0.28 | SJIF (2018): 7.426
Table 6: Annual Gross Value Added (GVA) of allotted budget, the government has incurred expenditure
Enterprises of Rs. 86.03 crore during the year 2018-19 for
Broad Activity GVA of enterprises ( in Rs. crore) implementation of the scheme.
Category Rural Urban Total  Prime Minister's Employment Generation
Manufacturing 89829 178233 268062 Programme (PMEGP): The scheme is a credit-linked
Trade 116206 332697 448903 subsidy programme, which is directed to generate
Other Services 138463 296838 435301 employment opportunities through establishment of
All 344551 807786 1152338 micro-enterprises by assisting traditional artisans and
unemployed youth. It leads to increase the wage earning
7. Enterprises by State/UTs: Table -7, shows the capacity of artisans, reduction in unemployment level
percentage distribution of enterprises by State for each and migration of rural youth to urban areas. The Scheme
sector. Uttar Pradesh reported the highest share in the is implemented by Khadi and Village Industries
number of enterprises (14.20 %) followed by West Bengal Commission(KVIC), as the nodal agency. For
(13.99 %). However, West Bengal topped in the rural sector implementation of the scheme, the government has
with 17.44 %, followed by Uttar Pradesh (14.93 %), Bihar incurred expenditure of Rs. 2118.80 crore during the year
(7.39 %), Andhra Pradesh (5.99 %) and Maharashtra (5.94 2018-19.
%) among the top five states in the number of enterprises.
 A Scheme for Promoting Innovation, Rural Industry
& Entrepreneurship (ASPIRE):The objective of
Table 7: Percentage distribution of enterprises by State/UTs scheme is to create new jobs to reduce unemployment,
for each sector boost grassroots economic development, promote
State Rural Urban Total
entrepreneurship culture and promote innovation to
Uttar Pradesh 14.93 13.43 14.20
strengthen the competitiveness of the MSME sector.
West Bengal 17.44 10.36 13.99
Tamil Nadu 4.90 10.86 7.80 Under this a network of Technology centres are setup for
Maharashtra 5.94 9.22 7.54 sharing practices and developing human resource; Scale
Karnataka 5.42 6.71 6.05 up Business Accelerator programme; implement
Bihar 7.39 3.38 5.44 incubation and commercialization of Business Ideas
Andhra Pradesh 5.99 4.66 5.34 Programme through technical/research institutes,
Gujarat 3.05 7.52 5.23 including those in the field of agro-based industry. The
Rajasthan 3.93 4.56 4.24 government has incurred expenditure of Rs. 219.34 crore
Madhya Pradesh 4.18 4.25 4.22 during the year 2018-19 for implementation of the
Telangana 4.02 4.20 4.11 scheme.
Kerala 3.29 4.24 3.75  Credit Guarantee Scheme for Micro and Small
Odisha 4.58 1.61 3.13 Enterprises (CGTMSE):The Scheme facilitates credit
Jharkhand 3.72 1.23 2.51 to Micro and Small Enterprises MSME units through
Punjab 1.89 2.75 2.31 collateral-free credit facility (term loan and/or working
Assam 2.61 1.18 1.92
capital) extended through banks and financial institutions
Haryana 1.18 1.90 1.53
to new and existing MSMEs. It is the only of its kind
Delhi 0.03 3.00 1.48
Chhattisgarh 1.51 1.15 1.34
guarantee scheme which has covered more than 31 lakh
Jammu & Kashmir 1.06 1.18 1.12 beneficiaries in last 18 years cumulatively Under this
Uttarakhand 0.65 0.66 0.66 3505612 proposals have been approved for guarantee
Himachal Pradesh 0.97 0.25 0.62 cover of Rs. 182790.06 crore, as on 31st March, 2019,
Sub total 98.68 98.30 98.53  Credit Linked Capital Subsidy Scheme (CLCSS):It
All India 100 100 100 aims at technology up gradation of Micro and Small
Enterprises by providing 15 percent capital subsidy
Schemes for reviving traditional industries and rural (limited to a maximum of Rs 15 lakh). It intends to
entrepreneurship upgrade the plant and machinery of micro and small
enterprises with state-of-the-art technology, with or
The government runs numerous schemes to support and without expansion, and for new enterprises as well.The
develop rural industries; targeted at providing credit and scheme has been successful in enabling MSEs in
financial assistance, skill development training, technology upgradation. Since, inception of the scheme
technological and quality up gradation, infrastructure 62827 MSEs have availed subsidy of Rs. 3888.12 crore
development and marketing assistance. The brief discussion till 31st March 2019.
of some of the major government schemes are as follows.
 Scheme of Fund for Regeneration of Traditional Besides the schemes discussed above, other schemes are
Industries (SFURTI):It is as a cluster-based scheme mentioned as under:
aims to organize traditional industries and artisans into  Scheme for Micro & Small Enterprises Cluster
competitive clusters by providing support for their long Development Programme (MSE-CDP)
term sustainability, with improved equipment, training,  Entrepreneurship and Skill Development Programme
capacity building and design, common facilities centres, (ESDP)
marketing support, etc. The scheme invites applicants  Scheme for providing financial assistance to Khadi
from non-government organizations (NGOs), institutions under MPDA
government institutions private sector bodies with  Financial Support to MSMEs in ZED certification
expertise to undertake cluster development. Out of the
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 Market Promotion & Development Scheme (MPDA) halting migration of rural youth, manufacturing output,
 Coir Industry Technology Upgradation Scheme (CITUS) developing infrastructure, raising standard of living thereby
 Domestic Market Promotion Scheme (DMP) removes poverty. Entrepreneurial activities have enhanced
 National Manufacturing Competitiveness Programme in the rural areas with the passage of time, still it is far less
(NMCP) as proportionate to urban areas. Latest survey depicts that
 Technology and Quality Upgradation Support to MSMEs 51% Micro, Small and Medium Enterprises are owned by
 Procurement and Marketing Support Scheme (P&MS) rural entrepreneurs and that too concentrated at micro level
enterprises. Since independence, the government has
 Scheme of Information, Education and Communication
implemented different policies and schemes for the support
and development of rural entrepreneurship but could not
Problems of Rural Entrepreneurship
attain the desired results. There is need to appraise the rural
Since independence, the rural entrepreneurs have been
entrepreneurship development schemes and programmes by
facing several problems in spite of taking several steps by
the government in order to get the desired results in rural
the government to eradicate the problems. Even in today’s
areas.
competitive business world, their problems are more or less
same. Some of the major problems faced by rural
entrepreneurs are as under: References
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 International Journal of Science and Research (IJSR)
ISSN: 2319-7064
ResearchGate Impact Factor (2018): 0.28 | SJIF (2018): 7.426
manufacturing, trade and other services sectors,
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