Rural Entrepreneurship-Opportunities and Challenges Essay

RURAL ENTREPRENEURSHIP IN INDIA OPPORTUNITIES AND CHALLENGES Abstract The rural population constitutes a major segment in India. The livelihood strategies of this vast segment depend primarily on agriculture and allied activities. Growth in this agriculture sector has shown a declining trend during the last one decade. This has made a huge impact on the domestic production, employment, etc. These problems can be tackled, to a certain extent, by developing entrepreneurship in Rural India.

This dissertation is concerned with the distinctive challenges and opportunities of developing entrepreneurship in rural locations, and also provides the necessary suggestions that can be used in this context. Introduction India is the 2nd most populous country in the world and has about 70% of its population in villages. But, in the recent years, the % of population migrating to urban areas has increased considerably.

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Various social, economic, political and ecological problems in rural areas in developing countries like India create challenges in employment and cause increasing migration towards cities, decreasing agricultural production and increasing food shortage. This is the scenario faced not only in India, but all over the world. According to the 2001 Rural Poverty Report (RPV), 75% of the world’s poor live and work in rural areas, and the majority will remain so for several decades (IFAD Rural Poverty Report, 2001; IFAD 2002). The International Fund or Agricultural Development (IFAD) stressed the need for developing poverty-reduction policies and programs with a primary emphasis on rural areas (IFAD Rural Poverty Report, 2001). Rural areas in developing countries are experiencing poverty and depopulation, are geographically more isolated, require infrastructure and subsidies, and have a lack of structural and institutional factors (IFAD Rural Poverty Report, 2001). A sustainable reduction in rural poverty necessitates the adaptation of further research and programs that help promote economic growth and development.

Prior research indicates positive strong relationships among entrepreneurial activity, economic growth and poverty reduction (UNICD Task Force, 2002). Hence entrepreneurship in rural areas has to be increased so as to improve the condition of rural India, thereby helping the nation in achieving overall growth and prosperity. Although agriculture today still provides income to rural communities, rural development is increasingly linked to enterprise development.

Since national economies are more and more globalized and competition is intensifying at an unprecedented pace, affecting not only industry but any economic activity including agriculture, it is not surprising that rural entrepreneurship is gaining in its importance as a force of economic change that must take place if many rural communities are to survive. WHY ENTREPRENEURSHIP Entrepreneurship plays an important role in the economic growth and development of nation. It is a purposeful activity includes in initiation, promotion and distribution of wealth and service.

An entrepreneur is a critical factor in economic development and an integral part of the socio-economic transformation. It is a risk taking activity and challenging tasks, needs utmost devotion, total commitment and greater sincerity with fullest involvement for his personal growth and personality. In brief, entrepreneurship is required for the following reasons: • To improve backwardness of the people. • Economic development of the region. • To analyse resource utilization. • Proper utilization of human potentiality. • Special attention to take up new activities. To create self-employment and generation of employment opportunity. • Eradication of regional imbalances. • Better economic gain. Entrepreneurship is usually understood with reference to individual business. Entrepreneurship has rightly been identified with the individual, as success of enterprise depends upon imagination, vision, innovativeness and risk taking. The production is possible due to the cooperation of the various factors of production, popularly known as land, labour, capital, market, management and of course entrepreneurship.

The entrepreneurship is a risk-taking factor, which is responsible for the end result in the form of profit or loss. Entrepreneurial orientation to rural development, contrary to development based on bringing in human capital and investment from outside, is based on stimulating local entrepreneurial talent and subsequent growth of indigenous companies. This in turn would create jobs and add economic value to a region and community and at the same time keep scarce resources within the community.

To accelerate economic development in rural areas, it is necessary to increase the supply of entrepreneurs, thus building up the critical mass of first generation entrepreneurs (Petrin, 1992), who will take risks and engage in the uncertainties of a new venture creation, create something from practically nothing and create values by pulling together a unique package of resources to exploit an opportunity. By their example they will stimulate an autonomous entrepreneurial process, as well as a dynamic entrepreneurship, thereby ensuring continuous rural development.

It is important to stress that rural entrepreneurship in its substance does not differ from entrepreneurship in urban areas. Entrepreneurship in rural areas is finding a unique blend of resources, either inside or outside of agriculture. This can be achieved by widening the base of a farm business to include all the non-agricultural uses that available resources can be put to or through any major changes in land use or level of production other than those related solely to agriculture. Thus, a rural entrepreneur is someone who is prepared to stay in the rural area and contribute to the creation of local wealth.

To some degree, however, the economic goals of an entrepreneur and the social goals of rural development are more strongly interlinked than in urban areas. For this reason entrepreneurship in rural areas is usually community based, has strong extended family linkages and a relatively large impact on a rural community. Many examples of successful rural entrepreneurship can already be found in literature. Diversification into non-agricultural uses of available resources such as catering for tourists, blacksmithing, carpentry, spinning, etc. s well as diversification into activities other than those solely related to agricultural usage, for example, the use of resources other than land such as water, woodlands, buildings, available skills and local features, all fit into rural entrepreneurship. The entrepreneurial combinations of these resources are, for example: tourism, sport and recreation facilities, professional and technical training, retailing and wholesaling, industrial applications (engineering, crafts), servicing (consultancy), value added (products from meat, milk, wood, etc. ) and the possibility of off-farm work.

Equally entrepreneurial, are new uses of land that enable a reduction in the intensity of agricultural production, for example, organic production. EXAMPLES OF RURAL ENTREPRENEURSHIP Muhammad Yunus became an entrepreneur when he started a micro-loan program for the poor villagers in a rural part of Bangladesh named Grameen, with only US$26. The loan was divided among 42 villagers to assist them to buy small items such as combs, scissors, needles and other necessities to start their own home businesses. In the past 22 years, Grameen Bank has grown with over $2 billion loans granted.

It has now become a model for several micro-loan facilities. Yunus created banking and lending facilities in Grameen specifically for the poor villagers. Banking and lending money activities are not new but Yunus was the first to provide such facilities in a rural part of Bangladesh and that is definitely innovation and risk-bearing on his part as a social entrepreneur. Mr. P. K. Ravi, a mechanic by profession, has developed a mechanical pepper thresher which is popular among pepper growers in Karnataka, Kerala and Tamil Nadu. Priced at Rs. 0,000, the machine has become an instant hit, mainly because of its affordable price and efficiency. Compared to conventional threshers, Ravi’s invention has a number of advantages, the machine can be operated both automatically and manually. The Scientists of Peermadu Development Society (PDS), an NGO based at Idukki, documented the thresher in detail and recommended it to the National Innovation Foundation (NIF) for an award. Mr. Ravi was finally conferred a national award in 2007. “NIF has also sanctioned a loan from its micro venture innovation fund for scaling up his invention.

OPPORTUNITIES “Opportunity does not knock twice” is the age old saying. In the present day scenario, one has to create opportunities and not just wait for the opportunity to knock. In India, there are a variety of opportunities for rural entrepreneurship and many more can be created. One has to take inspiration from the existing opportunities and go ahead in creating new avenues. Only then will there be successful entrepreneurship. Some of the many entrepreneurial opportunities in rural India are discussed hereunder. ? Tourism Tourism is a booming industry in India.

With the number of domestic and international tourists rising every year, this is one hot sector entrepreneurs must focus on. India with its diverse culture and rich heritage has a lot to offer to foreign tourists. Beaches, hill stations, heritage sites, wildlife and rural life, India has everything tourists are looking for. The rural entrepreneurs must make the most of this by using innovative methods to attract tourists to rural areas and thereby generating revenues ? Ayurveda and traditional medicine India is well known for its herbal and ayurvedic products.

With increasing awareness about the ill-effects of allopathic medicines, there is a huge demand for cosmetics, natural medicines and remedies. The availability of various medicinal plants in the country side provide for better entrepreneurial opportunities in this field. ? Organic farming Organic farming has been in India since a long time. The importance of organic farming will grow at a fast pace, especially with many foreigners preferring only organic products. Entrepreneurs can focus on business opportunities in this sector.

There are many small-time farmers who have adopted organic farming but the demand is still unmet, offering many opportunities for those who can promote organic farming on a large scale. ? Textiles India is famous for its textiles. Each state has its unique style in terms of apparels. India can grow as a preferred location for manufacturing textiles taking into account the huge demand for garments. Especially, the demand for khadi, silk, etc.. is extraordinary. Kanchipuram, Banaras silk, are famous worldwide for their beauty and quality. Places like Tirupur and Ludhiana are now export hubs for textiles.

A better understanding of the markets and customers’ needs can boost growth in this sector. ? Floriculture India’s floriculture segment is small and unorganized. There is a lot to be done in this lucrative sector. The global trade in floriculture products is worth $9. 4 billion. With a 8 per cent growth, it is expected to grow to $16 billion by 2010. India’s share in world trade is just 0. 18 per cent. This is a huge market to be tapped considering the rising demand for fresh flowers. More awareness and better farming and infrastructure can boost exports. ? Toys

Another evergreen industry is toy manufacturing. India has potential to manufacture cost effective and safe toys for the world. With Chinese toys being pulled up for toxins, the market for safe and good quality toys beckons Indian entrepreneurs. Especially, the hand-made toys in the rural India are a special attraction in the market. ? Biotechnology After the software sector, biotechnology opens a huge potential. Entrepreneurs can look at a plethora of options with the application of biotechnology in agriculture, horticulture, sericulture, poultry, dairy and production of fruits and vegetables. Energy solutions In a power starved nation, the need to develop cost effective and power saving devices is gaining more significance. There is a huge demand for low-cost sustainable energy saving devices as well. The government has already unveiled the National Solar Mission which has set a target of 20,000 MW of solar generating capacity by the end of the 13th Five Year Plan. Prime Minister Manmohan Singh had urged the industry to see the huge business opportunity and set up ‘Solar Valleys’ on the lines of the Silicon Valleys.

These solar valleys can become hubs for solar science, solar engineering and solar research, fabrication and manufacturing. So there is a big opportunity for entrepreneurs in this sector as well. ? Marketing of food products India’s mainstay is agriculture. Entrepreneurs can explore many options in the food grain cultivation and marketing segments. Inefficient management, lack of infrastructure, proper storage facilities leads to huge losses of food grains and fresh produce in India. Entrepreneurs can add value with proper management and marketing initiatives.

The processed food market opens a great potential for entrepreneurs be it fast food, packaged food or organic food. Fresh fruits and vegetables too have a good demand abroad. A good network of food processing units can help potential exporters build a good business. CHALLENGES ? A culture that does not support entrepreneurship. A supportive culture is vital for encouraging entrepreneurs. Without an environment that values innovation, entrepreneurs will become discouraged. Rural communities do value hard work and individualism, but can be skeptical of the changes and risks that entrepreneurs introduce into their communities.

Most of the rural population does not encourage risk taking. This leads to wastage of the skill and talents (physical and intellectual). ? Distance to market and services. Rural communities are isolated geographically from hubs that harbor large populations and provide services necessary to run a successful business. Technology is making it easier to meet this challenge, but it is still an obstacle for many entrepreneurs. ? Capital availability. The wealth available in rural markets is limited. It is, most of the times, not sufficient to meet the needs of the rural enterprises.

Most of the capital available for small businesses and entrepreneurs is located in metropolitan areas. Not only are entrepreneurs geographically distant from sources of capital, but the distance to market and services may make investing in their ideas seem unattractive to outside investors ? Non availability of support services. The smaller populations in rural areas make it difficult to access the services entrepreneurs need in order to succeed. For example, high-speed Internet access may not be available in a small town of 500 because the population is not large enough to support the service. Absence of other entrepreneurs. One of the most important aspects of entrepreneurship is learning from others who are encountering similar obstacles. The importance of networking cannot be stressed enough. From a technical standpoint, networking may lead entrepreneurs to resources they did not know were available. Networking can also offer entrepreneurs encouragement to continue their work, encouragement that may be especially important in a culture that does not value entrepreneurial activity. ? Absence of industry clusters. Industry clusters provide a source of competition and support.

While these two elements seem to oppose one another, they both boost the efficiency of businesses. Businesses clustered in the same region and industry compete with each other which fosters creativity and innovation. At the same time, the companies create opportunities for networking and resource sharing. Rural communities rarely encompass industry clusters and therefore cannot benefit from the resources they provide. ? Lack of Technical know how The level of literacy in rural population is very low as compared to the literacy level among their urban counterparts.

As such, the technical know how required to succeed in today’s global market is not available. This can be overcome by increasing the awareness of the rural population with regards to the technology available and its benefits. Providing constant training by the Government or NGOs will help the rural population to successfully overcome this challenge. ? Power Failure In most of the Indian villages, the power supply lasts only for a few hours. This is due to the vast demand and low availability. This problem can be solved when the alternate methods of power will be utilized.

Solar energy and Gobar gas can be substituted in the place of thermal power. This not only provides constant power supply, but also provides employment opportunities to people involved in manufacturing/constructing these alternate power units. ? Infrastructure Sickness The infrastructure of the rural areas in India is very poor. Be it the roads connecting rural and urban areas, or the telephone connections, the infrastructure has to be improved considerably in order to provide for better prospects in rural entrepreneurship. SUGGESTIONS Every activity has its own merits and demerits.

Similarly, rural entrepreneurship in India has many opportunities as well as challenges. Success can be achieved when one makes the best use of the opportunities available and finds methods to successfully overcome the challenges. However, the following suggestions aim at improving the situation of rural entrepreneurship in India. ? Make regions attractive. Initiatives should be developed to attract entrepreneurial people from other areas to set up businesses, using marketing and promotion of the districts to a targeted entrepreneurial audience and taking advantage of the local contacts they may have.

Local people currently living outside of the districts but who maintain family linkages should be a particular target group for such measures, because they will find it easier to recognise the quality of life and business opportunities the districts have to offer (e. g. lower living costs, access to grants, natural beauty) and may also have social reasons to return. ? Focus on identifying local and regional assets and converting them into entrepreneurial activity.

There is a tendency in economically challenged communities, including those in rural areas, to emphasize their problems and deficiencies, often as a means of attracting public sector investment and support. As a consequence, it becomes difficult to see opportunities that may translate into economic advantage. An intentional mapping of local and regional assets – even the poorest rural communities have some assets, whether human, social, physical, or financial – can yield possibilities that might attract entrepreneurial interest and help improve economic competitiveness. Embed entrepreneurship education into the school and college curricula, and into workforce training programs. Broadening education and career preparation to increase creating and growing businesses is potentially a powerful way to retain young people in rural communities. It also opens up new possibilities for dependent employees in trades and other professions, as well as those in agriculture and forestry, to consider how they can create their own business, particularly when they are not getting adequate rewards from their current employment and do not want to move away to the cities for better prospects. Generate local community support for entrepreneurship to increase the chances that entrepreneurs will be successful in their ventures. If people trying to start and expand their businesses are treated with suspicion or are not valued in the community, they will either abandon their venture or move elsewhere. Rural entrepreneurship has to be embraced by community leaders as an effective alternative to attracting companies to relocate from other places. Organise support services for entrepreneurs into effective networked systems for providing resources such as technical assistance and training, access to capital, land and buildings, and regulatory guidance. The aim should be to bring in ways that increase efficiency and reduce transaction costs while maintaining or improving quality outreach to dispersed rural entrepreneurs. Relationships and networks will be critical in ensuring that integrated and comprehensive support is available for those entrepreneurs with the motivation to create jobs and wealth in rural communities.

Particular attention will have to be paid to regulatory frameworks and the time it takes to obtain regulatory approvals. ? Connect rural entrepreneurs to external markets, regionally, nationally, and internationally so that they are not dependent upon stagnant local markets for their goods and services. Strategies are likely to include the use of information and communication technologies for e-commerce, collaborative marketing strategies that might be sectoral, geographic, or both, and the fostering of networks and exchanges between entrepreneurs across regional and national boundaries.

Technical assistance and training will need to be retooled to emphasise the importance of accessing broader markets for products and services. With the right support, good ideas and people can be nurtured through commercialisation to the point at which they can attract venture capital investment. Using the appropriate networks, rural-based entrepreneurs can be connected to resources and markets outside their own region to create successful businesses. ? Foster grass roots innovation.

More should be done to encourage innovation in agricultural and food industries, basic industries and services and in smaller, less capital-intensive companies. ? Expand technology support and activities. The establishment and further development of external R services could help SMEs in rural areas to innovate. It might be that a district perceives itself as too small to create by themselves the innovation support infrastructures necessary for SMEs. In this case, collaboration with neighboring districts or thematically related higher education institutions should be sought.

CONCLUSION India has a huge hidden potential in all its distant, obscure villages, in the fields of traditional arts and crafts, food industry and the like. The problem is that both the natural and population dividends are not being optimally reaped through proper skill enhancement and incentives. It is quite clear that rural entrepreneurship cannot be developed without significant training. Therefore, instead of just schemes (financial and developmental) as the carrot for entrepreneurship development an intensive training needs to be provided to the youth in rural India.

What’s required is to create a devoted team to take up rural entrepreneurship training as per integrated rural development program. To manage agricultural sector and non-enclave projects in rural areas, rural entrepreneurs need to apply entirely different management and administrative concepts. Otherwise we shall be only creating islands of apparent prosperity in the ocean of rural poverty. Rural entrepreneurship is the answer to removal of rural poverty in India. Therefore, there should be more stress on integrated rural development programs.

The problem is that most of the rural youth do not think of entrepreneurship as the career option. Therefore, the rural youth need to be motivated to take up entrepreneurship as a career, with training and sustaining support systems providing all necessary assistance. ENTREPRENEURSHIP: CONCEPT AND DEFINITION, Shri Achintya Kr. Baruah, M. Com, Associate Faculty Member, Indian Institute of Entrepreneurship, (Ministry of Industry, Department of SSI & ARI), Government of India

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