CHAPTER -IV PERFORMANCE OF RURAL INDUSTRIES IN INDIA AND TAMILNADU

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1 89 CHAPTER -IV PERFORMANCE OF RURAL INDUSTRIES IN INDIA AND TAMILNADU 4.1 RURAL INDUSTRIES IN INDIA India lives in its village. Rural India is the real India. Agriculture prosperity which is subject to vagaries of nature is unable to provide full employment to rural people. Rural people thus migrate to urban areas creating problems to themselves and to the government. Umpteen labour enactments could not provide the kind of security to the labour that is available in the setting areas. Hence, economists have suggested to setup industrial units in the rural areas to solve the problems of seasonal under employment and also to improve the standard of living of the rural masses. 4.2 RURAL INDUSTRIES IN THE PRE AND POST INDEPENDENCE PERIOD PRE INDEPENDENCE PERIOD Prior to independence, small scale industry in India occupied and almost insignificant place in the national economy. The commonly used term was cottage industry /handicrafts. In the opening decades of this century, relatively small scale organised industries ( production units employing workers) began to develop at a brisk pace under the impact of the rapid development of capitalism.

2 The number of rural industrial units in India prior to independence in given in Table 4.1. TABLE 4.1 RURAL INDUSTRIES PRIOR TO INDEPENDENCE ( ) Employed Percentage of Rural Year Number. Employed Number i. Industries to total, 1 in thousands in thousand I s Industries I I I I Source: Report on India Social and Economic Development (l8th - 20th Centuries) 1975 p.142 From the Table 4.1 it is clear that the percentage of rural industries to the total industries had increased prior to independence. It was percent in 1917 and within a span of 30 years, prior to independence the percentage of rural industries was Even before India's independence, Gandhiji and the Congress had strongly supported rural industrialisation. In the early part of the century, Dhadabhai Naoroji pointed out the importance of cottage industries. The Bombay plan for economic development suggested that the production of consumer goods should be carried on in the rural industry sector. Mahatma Gandhi in his famous constructive programme in 1922, emphasised on village industries for rural upliftment. The

3 91 National planning Committee ( 1943 ) gave an important place to the development of village and cottage industries POST INDEPENDENCE PERIOD INDUSTRIAL POLICIES OF INDIA AND RURAL INDUSTRIES - A REVIEW The Industrial policy of 1948 considered cottage and small scale industries to be vital for the national economy. This was due to two reasons - such industrialization helped in the utilisation of local resources and they helped to increase the production of essential consumer goods. The need for promoting industrial cooperatives was stressed. The Industrial Policy Resolution 1956 emphasised the role of small scale industries and reserved the number of products for rural industrial sector as 180. These two industrial policies have failed to give adequate importance for the development of rural industries, though Gandhi strongly supported the establishment of rural industries. Only the industrial policy of 1977 had given much importance for the promotion of rural industries. The Industrial policy, 1977 created another sector called the 'Tiny sector'. The Janata government gave a fitting place to the rural industrial sector. The reversed number of products was raised from 180 to 807. Technical change in the traditional sector was encouraged. It gave a definite shape to the comprehensive rural industrialisation policy. It proposed to set up in each district an agency called District Industries Centre.

4 92 The new industrial policy of 1980 strengthened the existing arrangements to finance the rural industrial units and made charges to ease the credit problems of the sector. The industrial policy of 1990 assisted large number of artisans engaged in rural industries and expanded the activities of Khadi and Village Industries Commission. Special marketing organisations were created at the centre and state levels. Agro processing industries received high priority in credit allocation from financial institutions. The Industrial policy of 1991 introduced a new scheme of integrated infrastructural development to promote industrialisation in rural and backward areas. The industrial policy of 1998 announced a package of policy initiatives to the small scale sector. August 2000 package raised the exemption limit to Rs. one crore. An amount of Rs. 441 crore was allotted for Khadi and Village industries. Having analysed the industrial policies in relation lo rural industries, the researcher feels that the policies have accorded relatively more protection and support to the modern small scale sector than to the rural based traditional sector. A large section of the rural industrial units remain untouched by the government. The failure of the industrial policies can be attributed to the capitalistic structure of the economy. The rural industries sector has received verbal support from all the important leaders of the country since independence. But such support has not found expression in the industrial policies.

5 RURAL INDUSTRIES UNDER FIVE YEAR PLANS Though separate status was not given to rural industry on the basis of location its significance as a synonym of household cottage industry was accepted even in the first five year plan. Six All India Boards were established. This plan distanced the village industries from the small scale in general and recognised their special character. On the basis of Prof. Mahalanobis approach, the second five year plan looked upon rural industries as an integral component of national economy with the formulation of 26 pilot industrial projects. In 1962 a Rural Industries Planning Committee was set up. It gave much thought to the revival of cottage. village and small scale industries. During the third five year plan ( ) the Rural Industries programme was launched as a centrally sponsored scheme in 49 areas of India. This programme continued during the annual plans and the fourth five year plan period. ( ). During the fifth five year plan period ( ) an elaborate study of the scheme of rural industries project was conducted by the planning commission. The District Industries Programme was conceived as a centrally sponsored scheme on 1st May Rural Industrialisation was the main focus of development efforts in the rural areas during the sixth plan period ( ) In order to provide technical

6 94 support and input to rural industries a council for Advancement of Rural Technology ( CART ) was formed in NABARD was set up to provide refinancing facilities against loans and advance to artisans, small industries including village and cottage industries. During the seventh five year plan ( ) rural industrialisation was given adequate emphasis to check the exodus of artisans to urban concentration. The Eight Five Years plan ( ) also visualised the rural industrial sector as a major part of the manufacturing growth. In order to step up rural industrialisation a number of projects covering a variety of rural industries - food processing, pottery, leather items, ready made garments have been taken up by Khadi and Village Industries Commission. During the Ninth five year plan ( ), rural industries were provided incentives to facilitate their growth and employment. The Khadi and Village Industries Commission was organsationally and financially strengthened to generate more job opportunities. Technological development and up gradation received special attention. Table 4.2 indicates the amount allotted for rural industries under the different five year plans.

7 95 TABLE 4.2 PLAN OUTLAYS FOR RURAL INDUSTRIES IN INDIA Total Plan Plan Expenditure For Rural Percentage to Plan Period Expenditure Industries Total Plan (in crores) -(in crores) Expenditure II III Annual plan IV V VI VII VIII IX Source Government of India, Economic Survey, and Ninth five year Plan, Manning C.ommission, , Vol. 1. From Table 4.2 it is very clear that plan outlay for rural industries is meager. The percentage of allocation of the total plan expenditure ranges between 1.5 percent and 4 percent. This reveals that though certain industrial policies

8 stressed on the promotion of rural industries, the planners did not give due attention while allocating the funds. The researcher is of the view that there are fluctuations in the financial allotment for the rural industries development. Rural industrialisation has not received due importance during the five year plans and thereby it has not provided sufficient employment in rural areas. But Khadi and Village Industries is the only organisation to initiate many steps to promote village industries in India. 4.4 Role of KVIC and the growth of Rural Industries in India The Khadi and village Industries Commission was set up in The commission has the responsibility of planning, promoting, organising and implementing the programmers for the development of khadi and other village industries in the rural areas in coordination with State Boards, registered institutions, industrial cooperative societies and other agencies engaged in rural development. In 1957, the khadi and village industries commission took over the work of the former All India Khadi and Village Industries Board. The organisational set up of KVIC is presented in Table 4.2.1

9 97 ORGANISATIONAL SET UP OF KVIC + GOVERNMENT OF INDIA + MINISTRY OF INDUSTRY DEPARTMENT OF INIUSTRIES DEVELOPMENT KHADI AND VILLAGE INDUSTRIES COMMISSION Chairman Khadi and Chief Financial Vic-Chairman Village Member-Secretary Industries and Two members Advisory Board Executive officer (senior I.A.S. officer) Advisor (senior I.A.R.S officer) Deputy chief Deputy Deputy Executive chief chief officer-khadi Executive Executive officer- officer -village Industries Khadi Directors 1. All Village 1. Accounts 1. Cotton Khadi Industries 2. Inspection 2. Woolen khadi Directorate 3. Bio-gas 3. Dilk Khadi 2. Village Industries 4. Instrumentation 4. Cotton purchase and General 5. Legal Co-ordination 5. Research and 3. Director of 6. Vigilance Development science and Technology 7. Special 6. Polyvastra Recovery 8. Service Board

10 98 The specific functions of the Commission are: - To plan and organise the training of persons engaged in the production of khadi and village Industries - To help in the sale and marketing of products of khadi and village industries - To build up a reserve of raw materials and to supply them to persons engaged. - To promote and encourage co-operative efforts among manufacturers of khadi and village industries - To arrest and do research on the production and development of khadi and village industries IMPLEMENTING AGENCIES OF KVIC: The policy and programmes of khadi and village industries commission are executed through the State Board, the registered Institutions and the cooperative societies at the field level. The number of implementing agencies is shown in Table. 4.3

11 Year TABLE 4.3 IMPLEMENTING AGENCIES OF KVIC State Registered Total Boards Institutions Cooperatives Individuals ,037 19,371-20, ,715-24, ,941-2, ,127 31,000-32, ,500 28,913-32, ,869 30,122 7,80,000 8,15, ,215 30,225 7,98,000 8,33, ,728 30,342 8,12,000 8,48, Source: Kfladi and village Industries Commission, Annual Reports, and Table 4.3 shows that there were 37 state Boards, 5728 registered institutions, 30,342 cooperatives and 8,12,000 individuals during the year as against 15 state Boards, 1,037 Registered institutions, 19,371 cooperative during the year Cooperatives showed a steady increase from 1965(1 9,371) to 2002 (30,342). The Registered institutions showed or fluctuating trend. With regard to individual agencies, they have increased from 7,80,000 in to 8,12,000 in Due to the steps taken by KVIC, the village industries started to flourish in India.

12 Performance Of Village Industries in India. The performance of village Industries from to is shown in Table 4.4 TABLE 4.4 PERFORMANCE OF VILLAGE INDUSTRIES IN INDIA ( ) (Rs. in crores) YEAR PRODUCTION SALES EARNINGS EMPLOYMENT ' = = JL1UI1. F-UI1IUI FWIJUILj UI t\vil.., Ui! 0-! 0 t0uu1-(j(j. Table 4.4 reveals that the value of production and sales of rural industries showed an increasing trend from 1975 to The value of production was Rs crores during and it increased to Rs crores during

13 Similarly sales showed an increasing trend. The earning during the same period increased from Rs crores to crores in It is clear that the sales value was higher than that of the production value because of the use of accumulated stock of the rural product. The credit goes to KVIC for the instructions and encouragement given to KVIB to start more sales centres. 4.6 RURAL INDUSTRIES IN TAMILNADU Tamil Nadu occupies a prominent place in the map of 'rural industries in India. The share of Tamilnadu in all India production of Khadi and vilage Industries has been significant. It holds the first place in industries like khadi, match, polymer non-edible oils, soaps and bee-keeping. In the state, the responsibility is vested with khadi and village Industries Board (KVIB). The distinguishing features of rural industrial units of TamilNadu are - The non-agro industries account for nearly 70 percent of the total number of units. - Over two-third of the entrepreneurs have an investment in plant and machinery of below Rs.50,000. As many as 50 percent, employed less than 10 workers each.

14 102 - In the aggregate only 59.2 percent of the installed capacity was effectively utilised. In units engaged in manufacturing metal products and parts, the utilisation is only 48.5 percent. - Many of the Rural industries in Tamilnadu are in the nature of ancillaries to local large scale units GROWTH OF RURAL INDUSTRIES IN TAMIL NADU The growth of rural industries in TamilNadu is given in Table 4.5 TABLE 4.5 REGISTERED RURAL INDUSTRIES IN TAMILNADU ( ) ource:,cviu annuai reports.

15 103 Table 4.5 shows that there was growth in the number of registered rural industries. It increased from 86,500 units during to units in The reason was that the Tamil Nadu government and voluntary organisation gave an impetus to rural industries PERFORMANCE OF RURAL INDUSTRITES IN TAMILNADU In Tamil Nadu, the KVIB implements its programmes through its own units. The board helps in the introduction of improved technology, new design and training programmes. Palm gur and ghani oil enterprises account for 60 per cent of aggregate production. The carpentry, blacksmithy and village leather industry account for another 18 percent of the total production village. Pottery, hand pounding of cereals and pulses as well as production of non-edible oils and soap contribute to another 11 percent. The rural industry projects sponsored by the government of India covered the industrially backward districts of Salem, Tirunelveli, Ramanathapuram, Chengalpattu and Dharmapuri. The Khadi institutions like Sarvodaya Sanghams, the Gandhi. Ashram at Tiruchencode and the Gandhi Nikatn ashram at T.Kallupatti also entered the field of village industries in a big way. Village industries assumed significance because their products met the daily requirements of consumers.

16 104 TamilNadu is perhaps the only state which took advantage of the several schemes of the Government of India for the advancement of village industries. A number of units have been aided under the schemes like IRDP, TRYSEM, JRY& special component plans for Scand Scheduled castes and Scheduled tribes. The Khadi and Village industries activities in TamilNadu are spread over 29 districts. The KVI programme in TamilNadu is implemented by various agencies like TNKVIB, TamilNadu Palmgur Development Board, besides KVIVC's registered institutions and 1676 industries cooperative societies. The performance of Rural Industries in Tamil Nadu is given in Table 4.6 TABLE 4.6 PERFORMANCE OF RURAL INDUSTRIES IN TAMILNADU (Rs. and persons in Iakhs) Year production Sales Employment Earning (Rs) (Rs) (Persons) (Rs) , , , , , , , , , , , , , Source: Annual Heports or KV!1, Mumbal.

17 From the Table 4.6 it is clear that there is an overall increasing trend in production, sales, employment and earning of Rural industries in TamilNadu. Production increased from Rs. 35, lakhs in to Rs.68, lakhs in Sales increased from 36, laks in to Rs lakhs in Employment rose up to lakhs in From the analysis of the performance of rural industries in India and Tamil Nadu, it is clear that there is a need to establish more and more of rural industries. A fundamental shift is occurring in the industrial structure itself. Rural enterprises and modern technology can coexist and rural industries are really suited for India and TamilNadu PROBLEMS OF RURAL INDUSTRIES Problem of Finance: The most important problem faced by these industries is that of finance. Partly, the financial problem of Rural Industries is a part of the wider problem of capital scarcity in the economy as a whole. The creditworthiness of rural borrowers is generally weak, and therefore, they find themselves face to face with reluctant creditors who may be induced to lend only at higher rates of interest.

18 106 Problem of Raw Materials: Another major difficulty facing the Rural Industries is the procurement of raw materials. Scarcity of raw material means a waste of productive capacity for the economy, and a loss for the unit. The problem has assumed the shape of an absolute scarcity, poor quality of materials, and a high cost. Because of scarcity, competition has increased, and those rural units competing with the large-scale producers have suffered severely. Problem of Power: The problem of shortage of power has become so widespread that for the last few years it has been among the most glaring and telling problems. But its impact is decidedly fatal on rural producers. Large industries manage to escape somehow. There are two aspects to the problem, one, power supply is not always, everywhere, available to the rural industry on the mere asking, and wherever it is available, it is rationed out, limited to a few hours in a day. It means that if a small rural unit can manage to take advantage of the supply at fixed hours, well and good, otherwise, it will have to let its capacity go unutilised, thus adding to cost. Problem of Marketing: Another major problem being faced by Rural Industries is that of marketing. Most of the Rural Industries, except a few urban-based units which act as ancillaries to the large industry, are forced to restrict their sales to the local market,

19 107 tailoring their supplies to the local needs. Not infrequently, a lack of demand and accumulating stocks leave with them no working capital to procure more raw materials and other physical resources to keep the production units moving. Ancillary industries have their own problems, like (i) delayed payments by parent units, (ii) inadequacy of technological support extended and / or supply of critical raw materials by parent units, (iii) non-adherence to quality and delivery schedules, thus disturbing the programme of the parent units, (iv) frequent changes in fiscal levies, and (v) absence of a well-defined pricing system and regulatory agency. Problem of dealing with Government Agencies: What is true of raw materials is true probably of assistance granted by the State to the industries. It is an admitted fact that no type of State assistance is available in relation to needs. Therefore, there is a general practice to ration it out. In the process of rationing there is ample scope for discrimination, made possible by Government rules, regulations and red-tapism. The Rural Industries sector still faces problems in exports which make it difficult for it to undertake exports in an organised and appreciable manner.