Gist of Kurukshetra August 2020 Issue: Rural Economy

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August 2020 Kurukshetra:- Download PDF Here

TABLE OF CONTENTS

1. Rebooting Rural Economy
2. Agriculture Pivotal to Economic Revival
3. Doubling Farmers’ Income
4. Food Processing: Potential Driver of Agri-Business
5. Rural Self-Reliance Strategies
6. Empowering Migrants
7. MSMEs- The Catalyst of Development
8. Economic Participation of Rural Women

Chapter 1: Rebooting Rural Economy

Introduction:

  • India is predominantly a rural country with two- thirds of its population residing in the rural areas. Despite the substantial rise of urbanisation, nearly more than half of India’s population is projected to be rural by 2050.
  • 70 percent of India’s workforce resides in the rural areas and the rural economy constitutes 46 percent of Indian economy (NITI Aayog, 2017).
  • Therefore, boosting the rural economy is a key to overall growth and inclusive development of the country. The success of India’s economy is strongly rooted in the rural areas.

Doubling of Farmers’ Income (DFI) by 2022 :

  • The Government of India has set a target of doubling the farmers’ income (DFI) by the year 2022 and has constituted an Inter-Ministerial Committee on Doubling Farmers’ Income to examine and prepare the blueprint.
  • The Committee has identified seven sources to double farmers’ income by 2022 which include the following:

Within the Domain of Agriculture

  • Improvement in Crop productivity
  • Improvement in livestock productivity
  • Efficiency in the use of resources/savings in the cost of production
  • Increase in the cropping intensity
  • Diversification towards high value crops; and
  • Improvement in real prices received by farmers

Outside the Domain of Agriculture

  • Shift from farm to non-farm occupations (like vegetable-fruit food processing, which are high value-yielding)
  • Several steps have already been taken to implement the recommendations of DFI Committee:
    • Progressive market reforms, amending the Essential Commodities Act to remove commodities like cereals, pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities.
    • Supporting contract farming, promulgating of Model Contract Farming Act.
    • Providing e-NAM facility to farmers and up-gradation of Gramin Haats.
    • Increasing water efficiency through Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) – “Per drop more crop”.
    • Better insurance coverage to crops under Pradhan Mantri Fasal Bima Yojana (PMFBY).
    • Making loans available to farmers at a reduced rate of 4 percent per annum and extending the facility of Kisan Credit Card (KCC) to include even animal husbandry and fishery sectors.
    • Increase in the Minimum Support Price (MSPs).
    • Providing old age pension of Rs 3000 to the eligible small and marginal farmers.

Aatmanirbhar Bharat Abhiyaan:

  • The world has witnessed unprecedented crisis in the areas of consumption, manufacturing, exports, and capital flows due to the pandemic and the associated lockdowns.
  • The government of India launched “Self-Reliant India Mission” with special focus on health care, employment and financial support of the poor and vulnerable sections in the form of direct financial assistance, food and livelihood support.

Some of the important initiatives under the Aatmanirbhar Bharat Abhiyaan involve the following:

  • 25 lakh new Kisan Credit Cards sanctioned.
  • Support of Rs 4,200 crore has been provided under Rural Infrastructure Development Fund.
  • Wage rate under MGNREGA has been increased awareness drives are being undertaken to enrol returning migrants under MGNREGA.
  • Free food grain supply is being provided to the migrants.
  • Under the Pradhan Mantri Kisan Yojana, Rs 2000 has been transferred directly financial support to the rural farmers.
  • 10000 crore has been assigned to the unorganised food processing industries.

Government schemes:

Prime Minister’s Employment Generation Programme:

  • It is a credit-linked subsidy programme that aims at generating employment opportunities through establishment of micro enterprises in rural as well as urban areas.

Pradhan Mantri Awas Yojana – Gramin:

  • This scheme is in line with the Government’s commitment to provide ‘Housing for All’ by 2022 in the rural areas.

Pradhan Mantri Kaushal Vikas Yojana:

  • It is the flagship scheme of the Ministry of Skill Development and Entrepreneurship (MSDE) to enable a large number of Indian youth, both rural and urban to take on industry-relevant skill training that will help them in securing a better livelihood.
  • Under this Scheme, training and assessment fees are completely paid by the Government.

Ayushman Bharat:

  • World’s biggest health scheme which aims to provide health coverage to over 100 million poor and vulnerable families.

Pradhan Mantri Matsya Sampada Yojana (PMMSY):

  • This scheme aims to enhance fish production to 22 LMT with an investment of over Rs. 20,000 crore in next five years.

Way Forward:

The following measures can help in providing the much needed impetus to rural development.

  • Improving the infrastructure availability in rural areas by connecting villages physically and digitally
  • Grooming and promoting youth as Entrepreneurs or encouraging Self-employment should be focused upon through skill development and disbursement of bank loans to the farmers/farm workers, etc.
  • Encouraging Farmer Producer Organisations.
  • Adopting sustainable eco-friendly agriculture practices through promotion of organic farming.
  • Development of cluster-based specialized farming should be promoted.
  • Livestock, fisheries, dairy, vegetables, fruit and food processing are more labour-intensive and high value-yielding sectors must be encouraged.

Chapter 2: Agriculture Pivotal to Economic Revival

Introduction:

  • To avert a sharp economic downturn in the face of the crisis brought about by the pandemic, the Indian government has already started considering new ways to revamp the economy.
  • India, being largely an agricultural economy, has to focus on rural areas that have immense potential to reboot and revive the economy.

Role of Agriculture in Indian Economy:

  • The agriculture sector contributes 17 percent of GDP and employs 60-70 percent of the Indian population directly or indirectly.
  • Agriculture continues to be the main source of livelihood, especially for the 68.84 percent of Indian’s living in rural areas.
  • The country houses nearly 1/4th of the world’s farmers and contains a substantial portion of the world’s arable land.
  • Currently, India is the world’s top producer of pulses, milk; 2nd largest producer of wheat, rice, vegetables, fruits and the 3rd largest producer of food-grains.
  • According to NITI Aayog, the agriculture sector is expected to buck the trend of contraction and is expected to grow at the rate of three percent in the coming fiscal year 2020-21.

Challenges:

Reverse Migration:

  • The country is facing the twin challenges of preventing the spread of disease in the short run and accommodating a large number of the returning migrants in the rural economy in a productive manner.
  • Large scale reverse migration has become a major challenge for the State’s economy, social fabric and general law & order situation.

Limited role of Women in Farming:

  • Today women constitute over 40 percent of the agricultural workforce in India. However, only less than 10 percent of India’s land is owned by women and still, their access over resources remains very low as compared to their male counterparts. There is a need to correct this anomaly.

Low return for the farmers:

  • The agriculture sector in India is mainly hampered by high transaction costs and low access to credit and agricultural produce markets. The price discovery by the farmers continues to be very low.

Way forward:

Skilling:

  • Developing skills among farmers in modern farming and other agricultural activities would apart from increasing employment avenues for these farmers would also help move towards self-sufficiency in domestic food production
  • The need of the hour is to re-skill these laborers depending on their existing skill-sets, experience and education.
  • This will provide an impetus to a culture of vibrant entrepreneurship in the rural areas which could help reboot the rural economy.
  • New skill sets would also help make agriculture attractive to the next generation.

Diversification of activities:

  • High value yielding sectors like the culturing of fish, mushroom processing and honey production should be encouraged.

Contingent Crop Planning:

  • To make agriculture more profitable and sustainable, we need to develop crop plans based on different Agro-climatic and Agro-ecological zones.

Ensuring economic viability of agriculture:

  • There is the need to make farming more viable for small land holders by creating a climate resilient low-cost farming system and ensuring an agri-market with robust demand and export potential.

Promoting food processing sector:

  • The current situation provides an opportune time to tap the world food market as suppliers. This would require the need to massively upgrade our agricultural infrastructure and available technologies.

Initiatives in Rural Areas:

  • Building of water harvesting structures.
  • Plantations of trees.
  • Land development activities.

Promoting Farmer’s led Organizations:

  • Given the need to reduce the importance of middlemen in agricultural trading there is the need to encourage farmers to do direct marketing of their produce.
  • One potential solution is the formation of Farmers Organizations and promoting group or cluster farming through them to ensure better prices recoveries.

Conclusion:

  • The agriculture sector is likely to emerge as a major player in ensuring livelihood and availability of food grains as other avenues of income are likely to be disrupted. The strengthening of farm sectors shall pave the way for decent livelihood, food and nutritional security.
  • The villages need to be reshaped as a pivot of economic growth in order to reduce undue pressure on the cities and to act as a saviour in the crisis situation.

Chapter 3: Doubling Farmers’ Income

Introduction:

Despite India having achieved food self-sufficiency and also emerging as a net exporter of agri-products, the growth has not been equitable in terms of income of the farmers.

Need for Doubling Farmers’ Income:

  • India has been an agriculture based economy. Though the percentage of population dependent on agriculture declined to 48 percent in 2011, from 85 percent in 1951, a sizable population is still dependent on agriculture for its livelihood.
  • Past strategy has focused primarily on raising agricultural output and improving food security. The strategy did not explicitly recognise the need to raise farmers’ Income and did not mention any direct measure to promote farmers’ welfare.
  • The farmers’ income has remained low, which is evident from the incidence of poverty among farm households.
  • The NSSO data on Consumption Expenditure Survey for year 2011-12 reveals that more than one fifth of rural households, with self-employment in agriculture as their principal occupation, were having income less than the poverty line.
  • The mission for doubling farmer’s income is not merely an initiative for welfare of a section of the population, but is a categorical imperative for ensuring the food security of the nation.

Challenges in agri sector:

  • There is growing agrarian distress in the country.
  • India’s yield averages for most crops do not compare favourably at global level.
  • The costs of cultivation are rising.
  • The magnitude of food loss and food waste is very high in India.

Strategies towards Doubling of Income:

  • Doubling real income of farmers till 2022-23 over the base year of 2015-16, requires annual growth of 10.41 percent in farmers’ incomes. The strategies to boost income of farmers can be divided under the following heads:

Reducing the Cost of Inputs in Agriculture

  • Irrigation, seeds, labour, fertilisers, pesticides, machinery and extension services constitute the factors of production in agriculture and constitute the major expenditure in farming. There is the need to work towards reducing the costs of these inputs.
  • Micro-irrigation along with the nutrients application should be made highly efficient.

Increasing the Sale Value of the Crops

  • Sale value of crops can be improved by shifting to high value varieties, reducing post-harvest losses, improving post-harvest management and marketing reforms.
  • The government launched electronic National Agriculture Market (e-NAM), which would help bring the existing Agriculture Produce Market Committees on a common nationwide platform to facilitate trading in agricultural commodities. This can increase price discovery by the farmers.

Crop Diversification

  • Crop diversification refers to the addition of new crops or cropping systems to agricultural production. Crop diversification towards horticulture is the need of the hour.
  • An upward push in minimum support price (MSP) in favour of proposed diversification crops would encourage crop diversification in India..
  • The staple crops (cereals, pulses, oilseeds) occupy 77 percent of the total or gross cropped areas (GCA) but contribute only 41 percent of total output of the crop sector.
  • The agro-forestry system is also recognised as an important Integrated farming practice to fulfil the necessity of food, fodder, fuel wood, fibre and timber.

Increasing the Productivity of Agriculture

  • India’s farm yields are much lower as compared to other advanced countries. Variation in productivity, with the same level of irrigation and low income level of the farmers is due to the lower levels of advanced technology being adopted and lack of modernisation of farms.
  • The use of high-yielding variety and hybrid seeds are very essential for a successful crop.
  • Seed Replacement Rate (SRR) is directly proportional to productivity of all crops. Therefore, higher the Seed Replacement Ratio, higher will be the production as well as productivity.

Sustainable Agricultural Intensification

  • Crop intensification may be achieved by using shorter season varieties, improving on-farm water and soil fertility management.
  • Evidence is growing about the scope of agronomic technologies like precision farming to raise production and income of farmers substantially. Similarly, modern machinery such as laser land leveller, precision seeder and planter, and practices like SRI (System of Rice Intensification), direct seeded rice, zero tillage, raised bed plantation and ridge plantation allow technically highly efficient farming.

Augmenting Agriculture Income with Allied Activities

  • Synergic blending of crops, horticulture, dairy, fisheries, poultry etc would help provide regular income.

Decreasing the Per-capita Dependence on Agriculture Income

  • Income of farmers can be improved substantially by shifting extra workforce away from agriculture.
  • The employment diversification towards the non-farm sector is slow due to requirement of skill and certain education level. The government’s recent initiative on Skill Development can play a big role in improving skills of the farming community.

Additional information:

Steps for Doubling Farmers Income

  • The Finance Minister in her Budget speech of FY 2019-2020 has hoped to form 10,000 new Farmer Producer Organisations (FPOs) to ensure economies of scale for farmers over the next five years.

Pradhan Mantri Fasal Bima Yojana

  • The scheme includes comprehensive risk insurance from sowing to harvesting mainly to cover yield losses due to non-preventable risks like drought, dry spells, flood, inundation and pests.
  • It intends to increase crop insurance penetration from the current 25 percent to 50 percent in 2018 by increasing Central Governments allocation.

Chapter 4: Food Processing: Potential Driver of Agri-Business

Introduction:

  • Food processing industry is a rising sector in India.
  • The Simultaneous growth in the agricultural sector has provided due leverage to processing industries by maintaining a regular supply of raw materials (agricultural produce) in desired quantity and quality.

Significance of the food processing sector:

  • Food processing in India can have a positive impact on the national economy, especially the rural economy.
  • Food processing units/industries promote industrial growth in rural areas, create livelihood/ employment opportunities, check rural-urban migration and ultimately improve rural economy for greater socio-economic benefits.
  • From farmers’ perspective, food processing sector is a promise of prosperity as it opens several pathways for augmenting their profit and income. Significant rise in demand of agricultural produce for processing ensures better price to farmers, even during glut season.
  • This sector links the unorganized farming community with the formal industrial sector to advance rural economy capable of addressing critical issues of food security, food inflation, food wastage and nutritional security to the masses.

Statistics related to the sector:

  • During the last five years ending 2017-18 the food processing sector has been growing at an average annual growth rate of around 8.19 percent as compared to around 3.45 percent in agriculture.
  • The sector constituted as much as 9.17 percent and 11.07 percent of Gross Value Added (GVA) in manufacturing and agriculture sector respectively in 2017-18 (2011-12 prices).
  • It engages the largest number of persons as compared to other industrial sectors in the country.
  • Backed by the export promotion initiatives, the value of processed food exports during 2018-19 was of the order of US Dollar 35.30 billion accounting for about 10.70 percent of India’s total exports. However, the share of India’s food export in the world was 2.31 percent only(2018).

Potential for the sector:

  • The diversity of Indian food basket adds novelty and value to processed products especially for exports.
  • India can provide a perfect blend of traditional and hygienic foods, processed and packaged according to global standards.
  • The domestic 1.3 billion consumer base has helped create the world’s sixth largest food and grocery market on the domestic front.
  • As consumers are becoming more health conscious, the demand for nutritious food is growing proportionately.
  • Rising number of working women in urban areas and the growing trend of nuclear families are also pushing demand for ready-to-eat and frozen food.
  • Increasing urbanization and rise in disposable incomes has substantially increased spending on food products, resulting in multiple opportunities for investment and employment in various verticals of the food processing sector, such as value addition, transport, storage infrastructure, farming, retail chains and quality control.

Governmental efforts:

  • The Ministry of Food Processing has launched several policy, development and promotional initiatives to attract greater investment into the food processing sector.

Formalization of Micro Food Processing Enterprises:

  • Support is being provided to small-scale processors for market development, brand building and export of food products.
  • Ministry of Food Processing Industries has recently launched a scheme for formalization of micro food processing enterprises.
  • Capacity building of entrepreneurs is being undertaken through technical knowledge, skill training and hand holding support services. Credit flow to micro food processing industries is being strengthened.
  • Micro food processing enterprises are a major contributor to rural economy as nearly 66 percent of these units are located in rural areas and about 85 percent of them are family based enterprises supporting livelihood of households. These units play a significant role in checking rural – urban migration. The scheme of formalization makes them more productive, profitable and sustainable.

Credit availability:

  • Government is providing financial support and declared several fiscal incentives for creation of common supply chain infrastructure.
  • Loan to food and agro-based processing units and cold chain has been classified under agricultural activities for Priority Sector Lending. ‘
  • A special fund of Rs. 2,000 crore has been set up in NABARD to provide credit at affordable rates.

Encouraging private investment:

  • With a view to attract and augment private investment for building desired infrastructure, the Government launched an integrated umbrella scheme – Pradhan Mantri Kisan Sampada Yojana in 2017.
  • The scheme is providing financial support to create and develop infrastructure for mega food parks, integrated cold chain and value addition, food processing and preservation capacities and agro-processing clusters.
  • To attract investment, Foreign Direct Investment (FDI) is permitted under the automatic route, and the sector has witnessed substantial FDI equity inflow.

Addressing infrastructural needs:

  • In the general budget (2019-20) the Finance Minister announced, “Indian Railways will set up ‘Kisan Rail’ through PPP arrangements. There shall be refrigerated coaches in express and freight trains to build a seamless national cold supply chain for perishables, inclusive of milk and meat”. To help improve value realization especially in North-East and tribal districts ‘Krishi Udaan’ will be launched by the Ministry of Civil Aviation.
  • The Government of India created a specific ‘Dairy Processing and Infrastructure Development Fund’ under NABARD with the objective to modernize and expand milk processing facilities across India.
  • Ministry is strategically promoting processing clusters and creating strong backward and forward linkages from farm gates to retail outlets for the benefit of farmers and processors.

Entrepreneurship encouragement:

  • Food processing sector, due to its close linkage with farms and farmers, provides a huge opportunity for entrepreneurship in rural areas.
  • Prime Minister Employment Generation Programme, ASPIRE (A Scheme for promoting innovation, rural industry and entrepreneurship) and SFURTI (Scheme for regeneration of traditional industries) are some of the specific schemes to address capital needs of agri-entrepreneurs.
  • Food processing sector has been identified as one of the key priority sector of the Government’s ambitious ‘Make in India’ campaign.

Conclusion:

  • India needs to develop its strategy in a way which takes care of small-scale players along with attracting big investments from domestic and global food giants.
  • Food processing sector is on the pathway of building a New India where the rural economy is as bright as its urban counterpart.

 

Chapter 5: Rural Self-Reliance Strategies

  • The Indian economy has recently witnessed huge reverse migration from urban to rural areas and the focus seems to have shifted towards making rural areas more resilient in the face of the crisis.
  • Some of the important measures taken to promote self- reliance in the rural sector include the following:

Structural changes:

  • Initiative towards formation of 10,000 new Farmers’ Producer Organisations (FPOs) will be a rural game-changer. The initiative will focus on social mobilization and economic emancipation of small, marginal and landless farmers.
  • Building on the Budget 2020-21 announcement, ‘one district-one product’ approach has been advocated. This approach encourages specialization and a prudent reaping of economies of scale.

Allied sector:

  • Animal Husbandry Infrastructure Development Fund of Rs 15,000 crore has been proposed. The Fund will be useful for ensuring enhanced investments, including private sector investments, in dairy, meat processing and animal feed plants.

Agricultural marketing reforms:

  • The amended ‘Essential Commodities’ Act proposes to balance producers’ and consumer’s interests and would act as a catalyst in attracting more investment into this sector.
  • The Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020, was promulgated in June, 2020. The Ordinance strives to create an ecosystem where farmers and traders will have the freedom of choice of sale and purchase of agro-produce and there will be barrier-free interstate and intra-state trade. This Initiative of the government would be able to assure appropriate price discovery of the agro-produce even at the farmers’ doorstep.
  • Another ordinance approved by the Cabinet is the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020, which advocates farmers’ engagement with processors, wholesales, aggregators, large retailers and exporters importance of providing gainful employment and to make the rural economy self-reliant.

Agricultural procurement:

  • The total procurement of Minor Forest Produce for the financial year has reached Rs 2,000 crore. This procurement ensures direct benefit to tribal people.

Non-farm activities:

  • The Garib Kalyan Rojgar Abhiyaan aims at providing employment opportunities to the reverse migrants and also constructing durable public works.
  • For boosting non-agricultural activites, a package for micro, small and medium enterprises (MSMEs) has been announced.

Welfare related:

  • Pradhan Mantri Garib Kalyan package is aimed at distributing free food grains and providing cash to women and poor senior citizens and farmers, by using Direct Benefit Transfer.
  • The recent step-up of Rs. 40,000 crore in the allocation of MGNREGA is commendable.

Human capital:

  • For the self-reliance of the rural economy, it is essential to invest in human capital. For this purpose, investing in health and education assumes paramount importance. Accordingly, measures have been proposed for enhancing rural health and education.
  • For ensuring continuity of education despite the break from regular classes, PM eVIDYA, a programme for multimode access to digital/online education.

 

Chapter 6: Empowering Migrants

Introduction:

  • One of the most negatively affected sections of the Indian society during the pandemic induced crisis have been the migrant labourers.

Measures taken by the Government focused on Migrants:

  • An online dashboard “National Migrant Information System (NMIS)” has been developed by the National Disaster Management Authority (NDMA) for maintaining a central repository on migrant workers. This would facilitate inter-State coordination for smooth movement of migrants to their native places.
  • Implementation of ‘One Nation One Ration Card’ throughout India will help ensure food security for the migrant population.
  • The Government has promised a free supply of five kg of food grain per person and 1 kg channa per family which has recently been extended until November 2020.
  • The Government has permitted State Governments to utilise State Disaster Response Fund (SDRF) for setting up shelter for migrants and providing them food and water etc.
  • To help boost the rural economy, an additional Rs 40,000 crore has been allocated under MGNREGS. This could help provide for the increased work demand by the returning migrants.
  • The Skill Ministry has launched the Atmanirbhar Skilled Employee Employer Mapping (ASEEM) Platform for mapping the skills of the returning migrants.

Garib Kalyan Rojgar Abhiyaan:

  • Considering the possible lack of economic opportunities for migrants who have returned back to their villages the government has announced the Garib Kalyan Rojgar Abhiyaan.
  • Garib Kalyan Rojgar Abhiyaan is specifically for migrant workers who have returned to their villages owing to the dearth of livelihood opportunities in urban areas.
  • The programme is being steered by Ministry of Rural Development in coordination with 11 other ministries including “Panchayatl Raj, Road Transport and Highways, Mines, Drinking Water and Sanitation, Environment, Railways, Petroleum and Natural Gas, New and Renewable Energy, Border Roads, Telecom and Agriculture.”
  • The Garib Kalyan Rojgar Abhiyaan is being undertaken in 116 districts in the states of Bihar, Uttar Pradesh, Jharkhand, Madhya Pradesh, Odisha and Rajasthan including 27 aspirational districts.
  • The Garib Kalyan Rojgar Abhiyaan has the following objectives:
    • Provide for immediate employment opportunities to returnee migrant workers and similarly affected rural populations. The campaign will focus on undertaking 25 different types of employment opportunities
    • Saturate villages with public infrastructure and assets.
    • Set the stage for enhancing longer term livelihood opportunities.
  • The resource allocated for this campaign by the Government is 50,000 crores.
  • A web portal has also been created for the campaign in order to ensure transparency. The portal would aid in monitoring the effective implementation and completion of the work being undertaken under this program.
  • NITI Aayog will overlook the implementation of the program across 27 aspirational districts and set the benchmark.

Significance of the Abhiyaan:

  • The programme will bring economic, social and psychological security to a large proportion of migrant labourers.
  • Will aid in creating sustainable infrastructure across myriad sectors.
  • One of the biggest challenges facing the economy has been suppression of economic demand. The infusion of funds (50,000 crores) over 125 days will boost rural demand.
  • In the absence of this programme, there would have been a rise in rural unemployment. There was also a fear of the agriculture sector witnessing disguised unemployment.
  • This would go a long way in addressing the geographical rural-urban disparity in economic opportunities.

Additional information:

  • Part IV of our Constitution under Directive Principles of State Policy Article 41 states that the State shall, within the limits of Its economic capacity and development, make effective provision for securing the right to work, to education and to public assistance in cases of unemployment, old age, sickness and disablement, and in other cases of undeserved want.”

Chapter 7: MSMEs – The Catalyst of Development

Significance of MSMEs:

  • MSMEs are the strongest drivers of economic development, innovation and employment for the global economy. These enterprises are responsible for significant employment and income generation opportunities across the world and have been identified as a major driver of poverty alleviation and development.
  • Formal and informal MSMEs make up over 90 percent of all firms and account for around 70 percent of total employment and 50 percent of the world GDP.
  • MSMEs are also crucial – socially and economically. Because these enterprises are wide dispersed across rural areas, they are extremely important for rural economic development and they have the ability to absorb a significant large number of workers. These enterprises play a key role as a place for entrepreneurship and business skill development in rural areas.
  • In the emerging markets, most formal jobs are generated by SMEs which create seven out of 10 jobs.

Indian context:

  • The MSME sector contributes in a significant way to the growth of the Indian economy. The sector contributes about 45 percent to manufacturing output, more than 40 percent of exports, over 28 percent of the GDP while creating employment for about 111 million people.
  • The MSME sector tends to play a great role in employability in the rural areas to augment the agro-based economy.

Governmental efforts:

MSME act, 2006:

  • In order to enable identification and facilitate development of MSMEs Government of India had enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.
  • The MSMED Act, 2006 has provided the legal framework for identifying the concept of ‘enterprise’ which includes entities both in manufacturing and service sectors and has categorized the enterprises into three tiers viz., Micro, Small and Medium.
  • A revision in MSME definition was announced in the Atmanirbhar Bharat package on 13th May, 2020. The definition, limit of micro manufacturing and services units has been increased. The new definition will pave the way for strengthening the growth of the MSMEs.

Prime Minister’s Employment Generation Programme:

  • It is a credit-linked subsidy programme aimed at generating self-employment opportunities through establishment of micro-enterprises in the non-farm sector by helping traditional artisans and unemployed youth.

Scheme of Fund for Regeneration of Traditional Industries:

  • It is a cluster-based scheme for development of khadi, village industries and coir clusters by providing them with improved equipment, common facilities centers, business development services, training, capacity building and design and marketing support, etc.

Scheme for Promotion of Innovation, Rural Industry and Entrepreneurship:

  • This scheme was launched in 2015 to set up a network of technology incubation centres, to accelerate entrepreneurship and also to promote start-ups for innovation and entrepreneurship in agro-industry.

Credit Guarantee Scheme for Micro and Small Enterprises:

  • The scheme facilitates credit to the Micro and Small Enterprise units by covering collateral- free credit facility (term loan and /or working capital) extended by eligible lending Institutions to new and existing micro and small enterprises.

Credit linked Capital Subsidy Scheme:

  • This scheme facilitates technology up-gradation of small scale industries, including agro & rural industrial units by providing 15 percent upfront capital subsidy, limited to maximum of Rs.15 lakhs.

Solar Charkha Mission:

  • The mission provides training in producing cloth – to rural people which in turn, allows them to earn a better livelihood. Another appealing factor of this programme is that the looms and spindles used during the training are completely powered by solar energy.

Other measures:

  • The Ministry of MSME has put in place a very strong hand-holding mechanism for MSMEs and for this a new web portal in the name of Champions – Creation and Harmonious Application of Modern Processes for increasing the Output and National Strength.
  • State Bank of India is working on setting up an e-commerce portal for marketing of products manufactured by micro, small and medium enterprises (MSMEs) in the country. As per the plan in the pipeline, the portal called Bharat Craft would be jointly run by the bank and the government.

Atmanirbhar Bharat Abhiyaan provisions:

  • COVID-19 pandemic has severely impacted the MSME sector as small companies tend to be vulnerable during an economic crisis because they have fewer resources with which to adapt to a changing context.
  • To ensure immediate relief to MSME sector, following important announcements have been made under Atmanirbhar Bharat Abhiyaan:
    • Rupees three lakh crore collateral-free automatic loans for MSMEs has been formally launched to meet operational liabilities, buy raw material and restart businesses.
    • Amendments in General Financial Rules have been carried out and implemented, mandating no global tenders for procurement up-to Rs. 200 crore and this will open up new business avenues for Indian MSMEs.

Conclusion:

  • Micro, Small and Medium Enterprises (MSMEs) are among the lifelines for the self reliance in the rural India.
  • Innovations, infusion of new technologies, skilled manpower and availability of finances in the MSMEs can transform the lives in the rural landscape of the country.

Chapter 8: Economic Participation of Rural Women

The Government has started several schemes to ensure women’s economic participation, especially in the rural areas. Such schemes have empowered women and have resulted in positive externalities for the community and increase in family welfare of the women who are employed.

Concerns:

Low Labour force participation:

  • The annual Periodic Labour Force Survey (PLFS), 2018-19, indicates that only 19.7 percent of women in rural areas are a part of the labour force.

Quality of work:

  • While the Labour Force Participation Rate (LFPR) of women in rural areas is marginally better than that of women in urban areas, opportunities for women in rural areas is limited to a handful of sectors.
  • About 71 percent of women in rural areas were engaged in the agriculture sector while 9 percent were in the manufacturing sector and 6 percent were in the construction sector.
  • Among the rural female workers, almost 60 percent were self-employed and 23 percent were casual labourers and only 11 percent earned regular wages or were salaried employees.

Factors contributing to low LFPR of women:

  • Lower literacy rate among women in the rural areas is a reason why women’s job opportunities are mostly limited to the agriculture sector.
  • Social aspects too like patriarchy have contributed to the low female LFPR.
  • The biggest stymie is social stigma that is associated with women who want to work outside their homes.
  • In addition, majority of the burden of family care falls on women’s shoulders and having children is another deterrent to women joining the formal work force.

Governmental efforts:

  • There have been several Government schemes and efforts that have been launched to improve women economic participation in the rural areas.

Education:

  • Over the years, the Government has taken active steps towards improving the literacy rates among women in rural India.
  • With India’s average literacy rate of 78.1 percent, only 65.7 percent women in rural areas above the age of seven were literate as of 2019.

Mahila e-Haat scheme:

  • Mahila e-Haat is an initiative for women entrepreneurs and self-help groups for showcasing their products that are made or manufactured by them on an online platform. This is a unique way to improve the access of rural entrepreneurs to market, increase digital financial Inclusion and empower women.
  • This scheme helps empower and strengthen financial inclusion of Women Entrepreneurs in the economy by providing continued sustenance and support to their creativity.

MGNREGA:

  • This scheme has worked in favour of rural women by providing them paid employment at par with men.
  • MGNREGA was also found to be associated with the economic independence and increase in wages of women in rural areas. Reserving one-thirds of the jobs for women in the scheme was found to be associated with an increase in labour force participation of women.
  • The scheme has empowered women in rural areas . There is an increase in women’s participation in local governance processes; an increase in children’s education and the bargaining power of women in a household.

Way forward:

  • Social norms that prevent women from working outside their homes and relocation must be addressed through a formal structure that protects the rights of these migrant workers and ensures their safety and security.
  • Initiatives like women’s hostels are a great way of ensuring a safe place for women to stay and work.
  • It is important to ensure that formal contracts cover benefits like paid leaves, access to health insurance, and access to formal financial systems that are digitally enabled to avoid leakages in salary transfers.

Conclusion:

  • The Constitution grants equal status and protection to women through equal rights, and the Government must make all efforts to help ensure good women economic participation which can help change their social stature.
  • India’s growth story is incomplete without the economic and social growth of women. There is the need to create a work culture that is equal, safe and inclusive where women-single, married or with children-can work without discrimination.

 


August 2020 Kurukshetra:- Download PDF Here

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