Village industries as an element of rural development: The Indian strategy

Two convictions are vital to any large-scale antipoverty programme in the Third World:

· Poverty itself is the problem not the individuals who are poor. They represent immense human capital.

· The cause of poverty is not lack of money capital but underutilization of material and especially human resources.

Productive work opportunities outside the rural sector will not be able to absorb more than a small fraction of the natural increment in the rural population of working age in the coming decades. Most of these people will have to remain in the rural sector, that is to say, agriculture, rural industries and other rural services. Intensification of agricultural production could absorb some, but for a majority of the present and potential rural poor, other avenues have to be identified within the rural sector itself. In India, the National Commission on Agriculture estimated that against an expected increase of 111 million people in the total rural labour force by the year 2001, expansion in the various agricultural programmes is likely to generate employment for only about 52 million. Thus more than half the increase in the total rural labour force will have to be found productive work in nonagricultural rural sectors. The solution to this problem apparently lies in two concur rent approaches, one relating to pro motion of rural industries and the other to integrating this approach within an overall rural development strategy.

It has now widely been accepted that traditional crafts, rural industries and the informal sector, with their labour-intensive processes, have better scope for providing work opportunities to large numbers of people, provided they are efficiently organized and supported. As Dennis A. Rondinelli puts it, "The key to development clearly must be in the expansion of participation in productive activity, an objective that depends primarily on the ability of governments to accelerate the commercialisation of agriculture and to expand employment through pro motion of small-scale industries in both rural and urban areas. These two sectors - agriculture and small incus try - provide the greatest potential for achieving equitable growth in every Asian society."'

No definition

There has not, however, been universally acceptable definition of rural industry. Various terms are in use rural-based industry, small-scale rural sector, agro-industry, village industry cottage industry, decentralized industries, and others. One study in Asia differentiated these with reference to the total number of employees. Cottage industries and handicrafts are defined as employing up to nine per sons, small-scale from 10 to 49 per sons, medium-scale from 50 to 499 persons and large-scale more than 500 persons. More appropriately, village industry in India connotes an enterprise whose credit needs do not exceed R. 25 000. It includes employment of artisans and small industrial activities, for manufacturing, processing, preservation and servicing in villages and small towns; it uses locally available natural resources and human skills Although rural-based manufacturing activities include a wide variety of primary processing industries (i.e. agro-processing, activities allied to agriculture, mining, etc.), agro-inputs industries and rural consumer goods industries, it is to such decentralized village industries that the rural poor have better access.

What is wanted, according to Rajni Konari, is a revival of the rural, semirural and nonagricultural occupations that were "the chief casualty of the colonial period" and, by employing large numbers of people, "made for a society that was far less unequal and unjust than is the ease now."³ At the least, it is possible and necessary to provide a new basis for fulfilling the same economic functions, namely, making available work other than farming. The encouragement of self employed artisans, the cultivation of the finer arts and crafts in line with our rich and complex traditions, and the growth of new and small-scale industries for the manufacture of goods needed by the local people can provide the basis for this regeneration.

They operate on a tiny scale with meagre capital, employ simple technology and mostly hereditary family skills, depend on local raw materials and market their outputs in the nearby areas. In most Third World countries it is such rural industries that can help the rural poor to participate in productive activities. In India, a survey revealed that 91 percent of small industries had an investment in plant and machinery up to Rs0.1 million and that 73 percent of such industries came under the category of village industries. Six main activities absorb 69 percent of all those employed in cottage and village industries in India. They relate to (a) food products, (b) beverages, tobacco and tobacco pro duets, (c) cotton textiles, (d) textile products including clothing, (e) leather and fur products. A World Bank survey covering many countries reveals that within manufacturing most rural employment is accounted for by four broad groups of activities. They are (a) food processing, (b) textiles and clothing, (c) wood including sawmilling, furniture making and general carpentry and (d) metal, including blacksmithing, welding, fabrication and the making of tools and equipment.

Problems from competition

The problems faced by village industries mainly relate to competition from organized urban industries, limited marketing avenues, non availability of raw materials and poor credit rating with financing bodies. As the industries are widely dispersed, they cannot organize themselves into effective local organizations to take advantages of scale in purchasing raw materials and marketing finished products. Their access to new technology is also very limited.

Positive government support can remove many of these constraints. In India, promotion of village industries has been accepted as an important element in the national development policy, and several steps have been initiated to promote them. District Industries Centres provide all the needed support to this sector in each district. They investigate the resource potential of the area, supply machinery and equipment, arrange credit from financial bodies, provide help in marketing and undertake research, extension and training. A specialized national body known as Khadi and Village Industries Commission, supported by the Government, provides much needed assistance to these industries. A government programme known as Training Rural Youth for Self Employment (TRYSEM) aims to train 0.2 million rural youth every year, so that with the new skills and technology they can be self-employed, mostly in these industries.

Policy makers should express succinctly their basic approach to industrialization and the role they expect to be played by village industries. They should ensure that there is a fundamental compatibility between the goals of overall industrialization and of protection of village industries. They should create conditions to guarantee the essential viability of these industries through appropriate industrial licensing, location, pricing, reservation and credit policies. At the same time over eagerness to support them on ideological considerations should not result in a long-term drain on the economy in the form of subsidies, tax relief, restrictive licensing, etc. If this happens, it may prove counterproductive in the long run even for the beneficiaries.

No strategy for rural industrialization can succeed unless it is fully and effectively integrated with the overall rural development strategy of the country. Such strategies are emerging in many developing countries, and later experiments seem more successful than the initial ones. In India, recognition of the need to uplift village societies and the poor from centuries of stagnation has always been there since the beginning of planning in the early 1950s. The first such thrust began in 1952 with the organization of Community Development Programmes. The essence of these programmes was that villages who came together to bring about social change would be assisted in building up a new life for themselves and participate with increasing awareness and responsibility in the planning and implementation of projects that were material to their well-being.

Marginal impact

Despite substantial government support and good intentions, the impact of these programmes on rural life was marginal. As Gunnar Myrdal noted, "The disappointments thus have deep roots. From the start the philosophy underlying Community Development presupposed that the village was a unit with a basic harmony of interest among its members. This idea, though consistent with the Gandhian concept of village life, was and is unrealistic. Indian villages, even more than other south Asian villages, are torn by conflicts of interests among their economic and social groups. The original attempt to engender a popular movement was so strangled that responsibility for the operation of the programme inevitably passed from village leaders to civil servants. The long-standing clash of interests within the village hierarchy and the failure to draw up and carry through a consistent land reform programme - which if it could not have eliminated these cleavages, could at least have narrowed them - are the fundamental factors responsible for the fate of India's Community Development efforts.

MICROPLANNING

During the past decade several other rural development programmes were initiated in India. Microlevel planning became an accepted slogan of development planning. Several microplanning approaches - such as the "growth centre concept" and "minimum needs programmes" and specialized operational programmes (e.g.) the "Small Farmer Development Agency Programme," "Drought-prone Areas Programme," "Command Area Development Programme") were tried. Their limited success could be attributed to inadequate participation by the rural poor, lack of functional integration of activities in different sectors of the rural economy and absence of a technological base for improving the productivity of the rural poor.

Thus, despite all well-meant programmes to uplift the rural poor, about 40 percent of India's 684 million people at the beginning of the 1980s lived below the poverty line, mostly in village societies. They were small farmers, agricultural labourers, rural artisans, the unemployed and others who depended on the informal rural sector for a meagre living. Looking back, at the start of India's planning process in the early 1950s roughly half of her GNP was accounted for by the agricultural sector and the other half by the industrial and other sectors. After two and a half decades of planned development, their respective shares in GNP were 43 percent and 57 percent. But at both points the percentage of population depending on agriculture remained constant at 70 percent, indicating that their share in the GNP had fallen from 50 percent to 43 percent over the years. At 1970-71 prices, India's per caput national income rose from Rs.466 in 1950-51 to Rs.655.2 in 1976-77. Both during 1951 and 1977 per caput net domestic product from agriculture remained at around Rs.282, whereas from the manufacturing sector it increased from Rs.47.7 in 1950-51 to Rs.107.1 in 1976-77. Even the growth within the agricultural sector was region-specific and class-specific to the neglect of other regions and people. This explains how rural areas and the agricultural sector happen to harbour most of India's poor.

India's Sixth Plan (1980-85) defined one of its principal objectives as improving the quality of life of the people in general with special reference to the economically and socially handicapped. Consequently the need to recast the rural development programmes so as to secure faster growth of agricultural and nonfarm employment was also recognized. Thus a more comprehensive rural development programme, known as the Integrated Rural Development Programme, synthesizing various strategies found effective under past programmes, was launched in 1978-79 initially in 2 300 blocks and later extended to all 5 011 administrative blocks of the country in October 1980. A typical administrative block in India has about 30 000 families (150 000 people spread over about 100 villages) of whom 40 percent are poor.

The new programme recognized the "block" as the base level unit for planning and implementation. Thus local planning started from the bottom, reckoning the physical and human resources potential available within the region. The importance of linkages between different sectors of the rural economy on the one hand and between rural and other sectors on the other came to be recognized. It also provided an operational yardstick to identify a poor family so development activities could centre around them, working upward from the poorest. An income of Rs.62 per caput per month at 1975-76 price level (about Rs.3 500 per annum for an average family of five) was considered the minimum desirable consumption standard. Families below this minimum, known as the poverty line' are identified as rural poor on the basis of house to house surveys. Technically feasible and financially remunerative activities are suggested to these poor. Seeking the preference of the poor ensured that they participated fully in the activity. A wide variety of activities such as small livestock projects, appropriate rural industries and rural service units are identified. To make the activity financially viable, subsidies according to prescribed scales are provided.

This smoothed the flow of bank credit to the rural poor. Banking arrangements were also simultaneously revamped so that large number of small loans ranging from Rs. 1000 to Rs.6 000 could be given by banks to identified beneficiaries over a wide area. Over a five-year period, it means giving approximately Rs.38 billion as bank loans and 12 billion as subsidies to about 15 million clients spread over the entire country. This synchronization of credit planning with development planning is another unique feature of the programme.

Other needs

The new programme also took care of the other infrastructural needs like extension, technical guidance, supply of inputs, marketing and development of local skills. Above all, it viewed development as a total process linking investment activities of the rural poor with public investments in other sectors by the State. Jawaharlal Nehru, the then Prime Minister of India, while initiating the community development movement, had said, "The Community Projects envisage coordination of a number of activities. They cannot be separated or viewed as isolated activities. The object is to build the human being and the group and to make him and the group advance in many ways. Therefore, the activities in the Community Project must be closely coordinated and worked to this end."

The new programme is another step to achieve this coordination. The target is to assist 600 poor families in each block annually, approximately 400 families through agricultural activities, 100 families through cottage and village industries and 100 families through other informal rural sectors. For all of India over a five-year period it would help 15 million families of 75 million people to leave poverty behind.

In short, India's Integrated Rural Development Programme involves the whole rural population, and its principal goal is the eradication of poverty. Dr. Ranaan Weitz attributes to it four characteristics:

"It is action-oriented through the formulation of projects which are adjusted to the conditions prevailing in each particular area. It is coordinated in the sense that it coordinates policy, investment and manpower programming between the local and the area level on one hand, and the objectives and constraints at the national level, on the other. It is, therefore, a coordinated approach from the top down and from bottom up. It is also comprehensive in the sense that it takes into account within the rural space all the relevant sectors of the economy and uses the inter-relationship so as to identify and exploit the linkages and the external effects between those sectors, namely agriculture, industry and services. It should be described as democratic in the sense that active local participation is an integral part of this approach."⁵

India's Integrated Rural Development Programme, which has matured over the years, reflects all these approaches and in fact is a unique experiment on this scale anywhere in the world for mass eradication of poverty. It attempts to trigger the development process through the very people to whom the fruits of development have been denied. They are helped to contribute to development and in the process to share its benefits.