By Pradeep S Mehta
With a little push, rural
small-scale industry can propel jobs and growth, while
modernising farming as well
The Make in India campaign seems
to be focused on big industries in big cities. But it is
time to see how micro, small and medium enterprises in rural
India can be a force multiplier. Whenever anyone mentions
the word ‘rural’, what springs to mind is farming. But more
than 65 per cent of rural labour is engaged in non-farm
livelihood activities, or the Rural Non-Farm Economy (RNFE).
The majority of rural labour is
involuntarily engaged in low-skill, low-paid, tertiary-level
jobs. Their lot can be improved if a synergy is created
between Make in India and Make in Bharat.
RNFE consists of all
non-agricultural activities in rural areas: from household
and non-household manufacturing to trade and commerce and
other services. At present, this sector is dominated by
tertiary activities. One of the major development challenges
before us is to create an enabling environment for the
growth of micro-, small- and medium-sized manufacturing and
service enterprises in rural areas.
Infrastructure needs
This is the only sustainable way
to provide better quality jobs to our rural youth. These
opportunities can act as disincentives to their migration to
cities in India and abroad. Our work in RNFE in States as
diverse as Assam, Karnataka, Odisha and Rajasthan brings
this out.
Under a UNDP-supported programme
titled Insights into Indian States, we found that despite
the existence of significant bottlenecks such as lack of
access to credit and weak market linkages due to poor
infrastructure, this sector contributes significantly to
reduction in rural poverty.
We also found strong linkages
between the growth of this sector and the implementation of
the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).
Where implementation of MNREGA is strong, the RNFE sector
did relatively well and poverty numbers were down. The
proposed improved version of MNREGA should take this
dimension into consideration. It should look at how MGNREGA
can help create modern infrastructure for the RNFE sector,
now largely oriented towards tertiary activities, so that
the sector can take to manufacture of mass-based products.
We found that the manufacturing
growth within the RNFE sector is not particularly dependent
on government incentives. It is driven by the
entrepreneurial spirit of the rural people. At the same
time, due to infrastructural problems (such as roads and
power) and weak marketing linkages, micro-, small- and
medium-sized manufacturing units are unable to realise their
potential for horizontal and vertical expansion.
Developing synergies
The sector needs an enabling
environment for business. One of the ways is to provide
better infrastructure to address the problems of production
and market linkages. Micro-, small- and medium-sized
enterprises are more constrained than large ones in the
establishment and running of their businesses. Removing
those constraints (addressing the ‘ease of doing business’
issue) will make them competitive.
Therefore, the national
manufacturing policy should help rural entrepreneurs explore
linkages with large-scale manufacturing. The objective
should be to establish strong linkages between micro-,
small- and medium-sized enterprises in rural areas and big
industries in manufacturing zones. Large-scale initiatives
such as in the upcoming economic and industrial corridors
should be viewed in this light. This approach is against the
traditional concept of looking merely at
agriculture-industry linkages to understand the development
and transformation of an economy.
There must be special emphasis
on setting up agro-based industries and encouraging
large-scale production of mass commodities. Many such
commodities are imported into India, which are in the nature
of inessential imports. The Centre has taken the right
decision to regularly monitor such imports and reduce them
over time.
Such imports are both an
indicator of the eroding competitiveness of Indian
manufacturers and the inadequacy of domestic standards. We
must apply improved standards equally to domestic
manufacturing and imports of similar products. Hopefully,
India’s new foreign trade policy will address the menace of
inessential imports of sub-standard goods.
The Make in India campaign
should create an enabling environment for developing strong
linkages between large-scale manufacturing and smaller
enterprises in rural areas. The effective implementation of
the manufacturing policy and the foreign trade policy can
strengthen the synergy between Make in India and Make in
Bharat.
The Chinese experience
We have estimated that effective
implementation of India’s trade policy can generate 15
million new jobs annually, much of it in the RNFE sector.
This approach can also help usher in modern farming
practices.
Rising employment in
manufacturing activities in the RNFE sector will put
pressure on the cost of production of agriculture. The way
to address the issue is not through short-term incentives
but by modernising the farm sector. This will lead to
stronger linkages between agriculture and industry, which
can act as a generator of growth and employment.
Over the last two decades, China
pursued rural industrialisation at great speed through the
development of township and village enterprises (TVEs) that
led to China becoming the factory of the world. The
co-operative culture in Chinese villages was crucial in
enhancing TVE development. From 1986 to 1998, the average
asset scale of TVEs increased about tenfold. In this
process, the collective TVEs, in which land, labour, capital
and materials were owned by the community, also played a
significant role. India could learn from the successes and
shortcomings of TVEs to realise the goals of Make in India
and Make in Bharat.
Unlike China, India is a
democratic, quasi-federal country, and therefore the Centre
will have to incentivise the States to join this twin
campaign. The proposal to replace the Planning Commission
with a new entity by merging the Interstate Council,
Programme Evaluation Organisation, Aadhar and Direct Benefit
Programme will be a good platform to create ownership among
States in any such national endeavour.
The writer is secretary-general
of CUTS International. Co-authored with the deputy executive
director, Bipul Chatterjee
This news can
also be viewed at: http://www.thehindubusinessline.com/
|