[Kurukshetra August Summary] Unlocking Rural Industrial System – Explained, pointwise

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Rural India can be seen as a resource for drawing immense human capital with 68.8% of India’s population and 72.4% of the workforce. These areas offer immense opportunities to develop rural industries that can be used to support India’s future growth. In rural areas, businesses operate primarily in agriculture, forest, handloom and small-scale industries. A spree of schemes has been implemented across ministries that support various small and micro-level enterprises in rural areas. This has led to some industrial development. However, much more needs to be done to unlock the potential of rural areas. 

What is the current status of the rural economy?

Agriculture and allied sectors grew at a growth rate of 3.6% during 2020-21 with a share of 18.8% in the total Gross value Added (GVA) in 2021-22. 

Allied sectors including animal husbandry, dairying and fisheries play a vital role in the economy and are steadily emerging to be a progressive contributor to the overall growth of the agriculture sector. The livestock sector has been growing at a Compound Annual Growth Rate (CAGR) of 8.15% (at constant prices) from 2014-15 to 2019-20. Production of milk, egg and meat is growing at a CAGR of 6.28%, 7.82% and 5.15% respectively from 2014-15 to 2019-20.

About two-third of rural income is now generated in non-agricultural activities and more than half of the value added in the manufacturing sector in India is contributed by rural areas. It is contrary to the common perception about predominance of agriculture in the rural economy. 

How are the rural industries classified?

There are different types of rural Industries in India, classified on the basis of scale and primary functions. According to the Eighth Plan, four groups of industries are classified that can be expanded or developed in rural areas:

Traditional Village Industries: These include Khadi, leather tanning, woodwork, artisan industries, cotton cloth, handloom, power loom and fabrics, handicrafts, coir, sericulture and wool development, etc.

Heavy Industries: These include mini-steel plants, fertilizer plants which use biomass, pesticide manufacturing plants using biological inputs, ancillary engineering units, etc.

Medium Group Industries: These include mini-cement plants which use molasses or coal as energy, minor paper plants, etc.

Light Industries: These include animal feed and fodder industries, industries producing binding materials like hinges, screens, doors, windows frames and roofing materials etc.

What is the need to focus on the development of Rural Industries?

First, it will help in the economic development of the country and move it a step closer towards achieving a US$ 5 trillion economy.

Second, it will lead to employment generation in the hinterland regions thereby helping in reducing unemployment rate among rural youth. It would result in three kinds of employment opportunities viz. regular employment for relatively better educated; casual employment of a daily wage type for less educated; and self-employment for entrepreneurs. Further, India has one of the largest working populations in the world which demands dignified jobs, else demographic dividend can easily get converted into demographic disaster.

Read More: Reaping the demographic dividend

Third, with better livelihood opportunities, the social indicators of rural regions and the overall nation will improve. This includes poverty levels, hunger rates, literacy rate, life expectancy rate etc.   

Fourth, it will also curtail forced migration to urban regions in wake of good job opportunities thereby reducing pressure on urban resources and decongesting them.

Fifth, it will also release pressure on agriculture that currently employs the majority of rural youth and in many cases showcases disguised unemployment. Further, a robust industrial sector will also ensure employment in off season months.

Sixth, it will allow farmers to do more contract farming especially if industries like food processing, apparel etc. get developed; as their main input is an agricultural commodity.

Seventh, it will improve standard of living as the industrial sector requires development of robust infrastructure and services to support it. Hence, these would get automatically developed along with industry thereby improving living conditions.

Eight, rural areas have a high female labor force participation rate in comparison to urban counterparts therefore rural industry can generate a high degree of women empowerment. In 2011-12, workforce participation rate for urban male and urban female was 54.6% and 14.7% whilst rural male and rural female participation were 54.3% and 24.8% respectively. 

What steps have been taken by the Government for the promotion of Rural Industries?

Prime Minister’s Employment Generation Programme (PMEGP): PMEGP is a credit-linked subsidy scheme initiated for setting up new micro-enterprises in rural as well as urban areas of the country. It is supported through Khadi and Village Industries Commission (KVIC), State Khadi and Village Industries Board (KVIB) and District Industries Centre (DIC).

Women entrepreneurs are covered as a Special Category under the PMEGP scheme. They are entitled to 25% and 35% subsidies for setting up projects in urban and rural areas, respectively.

Scheme for Promoting Innovation, Rural Industry and Entrepreneurship (ASPIRE): The ASPIRE programme was launched in 2015 and includes training and incubation support to prospective entrepreneurs in the agro-rural sector through rural Livelihood Business Incubator (LBO), Technology Business Incubator (TBI) and Fund for start-up.

Innovation and Agri-Entrepreneurship Development: It was started in 2018-19 under Rashtriya Krishi Vikas Yojana (RKVY-RAFTAAR). It provides technical and financial support in nurturing the incubation ecosystem.

Pradhan Mantri Kisan Sampada Yojana (PMKSY): It has been implemented by the Ministry of Food Processing industries (MoFPI) since 2017 for development of the food processing sector. Its components include: (a) Mega Food Parks; (b) Integrated Cold Chain and Value Addition Infrastructure; (c) Creation /Expansion of Food Processing and Preservation Capacities; (d) Infrastructure for Agro-Processing Clusters etc. 

Scheme of Fund for Regeneration of Traditional Industries (SFURTI): It was initiated to recognise the talent, creativity, and enterprise of hard work of rural artisans in a variety of fields. It covers a wide range from food products to handicrafts; leather products to ayurvedic medicines. It organize traditional industries and artisans/small farmers into clusters and provide them with sustainable employment by making their products competitive through value addition.

How have the Government schemes performed till now?

Prime Minister’s Employment Generation Programme (PMEGP): Since its inception up to December 2021, about 7.38 lakh new micro-units have been assisted utilizing margin money subsidies of INR 17,819.23 Crore. About 80% of the assisted units are in rural areas and about 50% units are owned by SC, ST and women categories.

Scheme for Promoting Innovation, Rural Industry and Entrepreneurship (ASPIRE): A total of 31 Livelihood Business Incubators (LBIs) were sanctioned during the financial year 2020-21 and now 61 LBIs have become functional. 54,801 persons have been trained in LBIs across the country as per impact assessment data till December 2021.

Innovation and Agri-Entrepreneurship Development: A total of 799 start-ups in the field of agriculture and allied sectors including agritech startups are supported by Innovation and Agri-entrepreneurship Development programme.

Pradhan Mantri Kisan Sampada Yojana (PMKSY): The Ministry of Food Processing Industries has approved 41 Mega food Parks, 353 Cold Chain projects, 63 Agro Processing Clusters, 292 Food Processing Units under corresponding component schemes of PMKSY.

Scheme of Fund for Regeneration of Traditional Industries (SFURTI): 434 clusters have been approved from the year 2015 to November 30, 2021, with a Government of India grant worth Rs. 1,106 crore that will benefit about 2.50 lakh artisans. 

What more steps can be taken going ahead?

First, the focus should be on supporting start-ups in agriculture and allied sectors through NABARD. It will boost developmental projects and investment in rural areas.

Read More: [Kurukshetra January Summary] Agri-startups and Enterprises – Explained, pointwise

Second, it is also vital to improve the marketing links between the village entrepreneurs and the larger business firms located in the towns/cities. Such strategic alliances or partnerships can contribute to the sustainability of small villages and tiny enterprises in rural areas.

Third, other important considerations that need to be focused on include human resource development, financial/credit facilities, research and development etc. It will help in making the activities self-sustaining in the changing competitive environment.


Rural Industries are key to unlock advancements in economic and social development of India. Supporting rural industries through thoughtful policy interventions, supporting innovations, incentivising start-ups, and digitalisation, can create employment opportunities in rural India. Moreover, it will be a good step in the direction towards realizing Atma Nirbhar Bharat.

Syllabus: GS II, Government policies and interventions for development in various sectors and issues arising out of their design and implementation; GS III, Indian Economy and issues related to growth, Inclusive growth and issues arising from it.

Source: Kurukshetra August 2022

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