SME Secor In Rural India

BANGALORE, INDIA: The rural SME sector economy plays a vital role in providing employment and income for the poor and unemployed in rural areas. As the population pressure grows in the land-scarce and developing countries like India, the growth in the agricultural production cannot absorb the ever increasing rural labor force in agricultural employment. This leaves the rural non-farm sector in the form of rural SMEs to absorb those released from agriculture but not absorbed in the urban industries. Contributing more than 52% of the GDP and making available more than 75% of all labor force in India the rural sector is best poised for a rapid expansion in the small and medium industry arena.

The Future of Rural Entrepreneurship

India has been steadily growing as an economic power in the past two decades and has been able to create the bare necessary infrastructure required to sustain this rate of growth. The connectivity to remote areas has been improved to a great extent both in terms of physical accessibility by road and aril and virtual accessibility in terms of telecommunications and information technology. Combined with this there is a steady growth in the education among the rural population including professional qualifications among rural youth. This presents the ideal situation for enterprises to spring in the rural areas where the cost of operation, labor and availability of raw materials is substantially cheaper as compared to urban parts of the country.

Government Agencies set up to Promote Rural Enterprises

The government having realized the true potential of rural SME sector has initiated a large number of programs and schemes aimed directly at boosting entrepreneurial ventures in the rural parts of the country.

National Agricultural and Rural Development Bank (NABARD): This is the nodal agency that provides almost three fourth of all the financial assistance allocated by the government towards uplifting rural enterprise.

The Rural Small Business Development center (RSBDC): Sponsored by the NABARD this one its kind of a governmental initiative in the world. The center provides for managerial and technical support to the small and micro enterprises of the rural sector. It conducts training programs on rural entrepreneurship, skill up gradation, trainer training, awareness and counseling sessions across the country to enhance the productivity of rural SME units.

National Small Industries Corporation (NSIC): This central government agency is responsible for procurement and supply of indigenous as well as imported equipment and machinery on easy hire purchase terms for rural SMEs, distribute raw materials and export finished products of small and medium industries of the rural sector.

Small Industries Bank of India (SIDBI): This is the primary agency that distributes direct as well indirect finance to all SMEs and coordinates the functioning of similar bodies under various schemes launched by the government from time to time.

Rural and Women Entrepreneurship Development program (RWEDP): This agency aims at creating conducive business environment as well as build infrastructure and human capital which will aid the long term growth of small industries in rural areas.

Scheme of Funds for Regeneration of Traditional Industries (SFURTI): This body has the main objective of making the traditional industries of rural India commercially viable. Most small, micro and cottage industries are covered in its agenda.

District Industrial Center (DIC): Every district in the nation now has a DIC which is responsible for integrated administrative and financial help at the district level that shall help and facilitate the growth and development of rural SME.

Government Schemes to Enhance Rural Entrepreneurship

In order to keep up with the demand for rapid growth of rural SMEs the Ministry of Micro, Small and Medium industries has initiated several benevolent schemes which are proving to be wonderful stimulus in this field.

Entrepreneurship Development Institution Scheme

Rajiv Gandhi Udyami Mitra Yojana (RGUMY)

Performance and Credit Rating Scheme (Implemented through NSIC)

Product Development, Design Intervention and Packaging (PRODIP)

Khadi Karigar Janashree Bima Yojana for Khadi Artisans

Marketing Assistance Scheme

Obstacles for Rural Entrepreneurship

Lack of Knowledge: There is a distinct lack of knowledge of entrepreneurial opportunities among the rural youth. The better educated and trained youth mostly leave for urban destinations in search of employment.

Lack of Finance: Despite sustained efforts from the government there is a clear hindrance in obtaining capital to start a new venture in the rural areas. Non availability of adequate collateral security often mars the chances of rural youth in obtaining funds in time to set up their own venture.

Lack of Skills: There is an acute shortage of trained manpower in the rural areas to commence small industries. Adequate facilities for vocational training are yet no available to the majority of the rural population. Management of accounts, handling of human resources and many such other facets which are essential for running a successful enterprise are unheard of in most rural areas.

Lack of Infrastructure: In many areas the road connectivity is a major impediment in setting up of rural enterprise. Infrastructure requirements such as cold storage facilities, rail transport, electricity, etc are yet to be developed to a level which will promote entrepreneurship in remote localities.

Finance Options for Rural SMEs

As a direct result of the plethora of schemes and programs that have been launched by the government to encourage rural entrepreneurship in India, the financing of such a project is now easier than a similar venture in the urban areas. Gramin Banks, Local Cooperative Banks and all public sector banks have now been authorized by the RBI to finance project up to Rs. 2 Crore under any of the above listed schemes and then obtain refinance for the same from NABARD and SIDBI. Additionally most of the finance schemes with pragmatic periods of moratorium to help the rural venture stand on its feet and become economically viable. There are many subsidies of these schemes which make them extremely lucrative options for starting a rural SME.

Type of Rural Entrepreneurship in Demand

The various types of sectors and enterprises currently witnessing a boom in the rural areas can be broadly classified under the following categories:

Agro Based Enterprises: These include direct sale or processing of agro products such as jaggery, sugar industries, pickles, oil processing from oil seeds, fruit juice, diary products, spices, etc.

Forest Based Industries: Such industries include wood products, bidi making, coir industry, bamboo products, honey, making eating plates from leaves.

Mineral based Industry: Such industries include cement industries, stone crushing, red oxide making, wall coating powders etc.

Textile Industry: These include weaving, spinning, coloring, bleaching.

Handicrafts: Such industries include making of wooden or bamboo handicrafts that are local to that area, traditional decorative products or toys and all other forms of handicrafts typical to the region.

Engineering: Small and medium sized industries to produce agricultural machinery, equipment for usage in rural areas etc.

Services: There are a wide range of services including m0obile repair, agriculture machinery servicing, etc which are being undertaken under this category.

Tourism: These activities including conduct of ethnic, eco and rural travels and tours by local operators.

Keeping all the above factors in mind it can be safely assumed that commencing a rural SME venture is the ideal business idea in the current times. Factors such as easy and cheap availability of labor, simplified finance schemes and provision of government facilities for marketing of the finished goods or product will make rural SMEs highly competitive. However there still exists a lack of infrastructure in terms of accessibility and storage facilities which restricts the full potential of the sector. The private sector has now initiated many cold storage chain facilities across most parts of the country which shall address this issue in a couple of years.

Source: www.smallenterpriseindia.com