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Updated on August 9, 2011



In India the rural dwellers, who constitute more than 70 per cent of India’s population are facing the acute problems of unemployment and under-employment. The miseries of these people led Mahatma Gandhi to come out with the ‘Back to the village’ ideology with its emphasis on uplifting the poor. To stress the importance of the development of the rural areas and people who inhabited therein, he said, “Swaraj has no meaning for the millions if they do not know how to employ their enforced idleness. Gandhiji said that, “The economic development is meaningful if aimed at the lifting up of the small peasant and converting the small producer himself into an active participant in productive activity. Therefore, he said that the objective of real development means the development of the rural people.

The rural industries principally depend on rural production for their raw material and on the rural population for marketing their products. The process has certain essential conditions.
The scope of rural industrialization is considered basically a question of properly utilizing the rich but unexploited national resources in the rural areas. It is a process concerned with the involvement of industries in the development of an area and also participation by rural entrepreneurs in the growth of industries best suited to that specific area. The process of rural industrialization, however, is distinguished from the situation under which certain industries are transplanted in a specific rural area.

Rural industrialization term connotes that its sole objective should be uplifting of the rural lot by tapping vast material and human resources existing in the countryside. The process of rural industrialization should have its own features such as low investment of capital, labour intensity and use of simple technology by employing local human and material resources. Thus, a judicious mix of local manpower with the local resource is necessary to bring about a viable development in these areas.

An approach to Rural Industrialization

1. The rural industries provide immediate large scale employment and they also offer a method of ensuring a more equitable distribution of national income.
2. They facilitate an effective mobilization of resources, capital and skills which might otherwise remain unutilized, and
3. Some of the problems that unplanned urbanization tends to create will be avoided by the establishment of small centres of industrial production all over the country.

Therefore, the development of small industries was, thus, seen as a way of serving the following objectives:
1. Employment generation
2. An equitable distribution of income
3. Mobilisation of capital
4. Entrepreneurial skill
5. Regional industrial dispersal

The protective measures are further combined with direct subsidies to cottage industries in one form or the other along with the reservation of production spheres for the industries.
Second, the promotional policies and programmes are adopted to increase the productivity and competitive strength of village industries. The Second Five Year Plan (1956-61) stressed the need for the expansion of village and small industries at different levels so as to provide the facilities of raw materials, technical advice, credit, marketing, etc. The plan also suggested the policy of providing satisfactory arrangements for marketing research, rural electrification, improvement of the housing conditions of artisans, and of credit and finance, etc.

The Fourth Five Year plan (1969-74) document states that, “it would be necessary to improve skills and provide a combination of incentives and disincentives for securing decentralization and dispersal of small industries.

The fifth plan document of different small industries are to facilitate the attainment of some of the major tasks for the removal of poverty and inequality in consumption standards of these persons (artisans dependent of traditional industries) through the creation of large scale opportunities for fuller and additional productive employment and improvement of their skills so as to improve their level of earnings.

The Sixth Five Year Plan (1980-85) states: “The dispersal of small scale units far away from metropolitan areas and large cities had not taken place to an appreciable extent. Further, it states that, “in spite of credit expansion, the share of tiny units with investment up to Rs.1 lakh has been very little. The entrepreneurial development programme has not made significant progress.

The Seventh Five Year Plan (1985-90) the plan aimed at “the rationalization of the fiscal regime to ensure rapid growth; strengthening of infrastructural facilities at various levels.

The Eighth Five Year Plan (1992-97) also visualized this sector as a major part of the manufacturing growth since, “it yielded employment elasticity of 0.6 as against 0.15 in the organized sector during the period 1977-83”. Therefore, the government has proposed various policy measures for the smooth development of this sector. As for example, the investment limit in plant and machinery has been raised to Rs.60 lakh and Rs.5 lakh for small scale industries and tiny industries respectively.

Further, to facilitate location of industries in rural backward areas and to integrate agriculture and industry, a new scheme of ‘Integrated Infrastructural Development for Small Industries’ is being implemented with the active participation of State Governments and financial institutions. Besides, certain measures to strengthen the KVI and State Khadi and Village Industries Boards and improving the quality and marketability of their products with consumer preferences instead of merely depending on rebates and subsidies through the area development approach (that is the progreammes which have been tied up with DRDA, TRYSEM, and others related to weaker sections like Scheduled Castes/Scheduled Tribes and women) has been extended throughout the country.

Problems of Administration

The administrative set-up for executing the rural industrial development programme has been manifested with certain problems, such as the multiplicity of agencies (which result in the overlapping of the organizational structure, function, programme and schemes, etc., particularly at the field level of defying of the principle of integration of efforts), absence of adequate coordination, inconsistent personnel system (such as lack of adequate staff, particularly at the field level, maladjusted officials, lack of motivation among personnel), bureaucratization, red-tapism, corruption, favouritism and nepotism, the prevailing inefficiency, rigidly and delay in decision-making.

The prospects of rural industrialization though the KVIC although optimistic, can become the only when the programmes and policies are formulated in broader perspective and implementation is successfully carried on through proper co-ordination. To provide marketing support it is suggested to set up a marketing development corporation for this sector. In order to able the financial problem, it is recommended that the financial institutions should have a greater role to play in the expansion of rural industrialization and steps should be taken to promote smoother credit flow. In order to make the rural industrialization programme an effective instrument for removal of poverty and ameliorating the conditions of the rural weaker sections the need it to adopt appropriate strategy to meet the set objective and well harmonise the output, employment and technological suitability of the khadi and village industrial sector.


1. Joshi, P.C. “Gandhi and Economic and Social Development in India : A Research on Gandhian Thought”, p.63.

2. Srinivasan, S., “A Comparative Approach to Rural Industrialization Needed, “Kurukshetra, Vol.33, No.1, October 1984, p.76.

3. Papola, T.S., “Rural Industrailization Approaches and Potential, Himalaya Poloioching House, Mumbai, 1985, p.55.

4. Rangarajan, C., “Contours of the Eight Place”, Yojana, Vol.36, No.9, 31 May 1992, p.9.

5. The Five Year Plan (1951-56), Vol.11, Government of India, Planning Commission, New Delhi, p.316.

6. Third Five Year Plan (1961-66), Vol.11, Government India, Planning Commission, New Delhi, p.108.

7. Fifth Five Year Plan, op.cit., p.176.

8. Sixth Five Year Plan (1980-1985), p.188.

9. Mid-term Appraisal of Sixth Five Year Plan (1980-1985), op.cit., p.50.

10. Seventh Five Year Plan (1985-1990), op.cit., p.28.

11. Ashok Kumar, M., Rural and Industrialization in India, Mittal Publication, New Delhi, 1989, p.101.

12. Himachalam, D., “Development of Village Industries”, Khadi Gramodyog, October 1986, pp.67-70.


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    • profile image


      9 months ago

      Please anybody tell the importance of rural industrialisation.....

    • profile image

      Santosh Singh rawat 

      6 years ago

      Its realy good described..

    • profile image


      7 years ago

      very interest

    • profile image


      7 years ago

      its realy good


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