Development through Entrepreneurship: A Rural Insight

Wednesday December 29, 2010,

4 min Read

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Rural entrepreneurship can be defined more broadly as the enthusiastic willingness of a villager to organize his or her economic activity, whatever it may be (a business, a job, an investment etc) with the help of appropriate technology and practices conceived for a sustainable living. It is intimately linked with sustainability and self dependence. The fact that it is/has vastly contributing/contributed towards creating employment opportunity for the local populace is well known. Along with employment; sales, economic and income growth are also consequences of entrepreneurial development. Employment generation programmes are often linked with entrepreneurship development. The basis for employment generation and entrepreneurship development in rural areas is to enhance the improvement of the living condition of the people, and also, in the process stem rural-urban migration. It is a natural phenomenon that the poor look to the labour market, common property resources and non-farm enterprises, and in a situation where rural non-farm economy becomes stagnant, the result is unemployment, out-migration, urbanization of poverty and the break-up of families.

The rural infrastructure is devoid of world-class R&D. As per the traditional beliefs, better innovations and a superior R&D exist in a feedback loop. However, empirical analysis has shown that the relation between innovation and R&D is minimal. In other words, lesser R&D infrastructures can give rise to greater innovations. In fact, theoretical developments have hypothesized that small firms, particularly in the rural setup are more innovative because they are better able to appropriate new knowledge, especially knowledge generated in by public research. Individuals and small firms are more adept at exploiting these knowledge spillovers and thus generating innovations without bearing much of the development costs. Also, their ability to link up in the better way with the local infrastructure proves beneficial.

The following illustration describes the three dimensions of entrepreneurship - the conditions which lead to entrepreneurship, the attributes of entrepreneurial individuals, firms and regions, and the impact or consequences of entrepreneurship.

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Impacts of entrepreneurship can be divided into three categories:-

  • Impact on Individual – Self Realization, Income
  • Impact on Firm – Firm Productivity, Growth, New Sectors, Size Distribution
  • Impact on Region – Competitiveness, Economic Growth

Entrepreneurship is not just a part of economic development, but a basis of long-term economic development. It (particularly Rural Entrepreneurship) is highly place-based. Not only is it shaped by spatial attribute, and not only does it transform the socio-economies of places, but more fundamentally, economic development is less likely to occur in the aggregate if space is not effectively organized into regional entrepreneurial systems

In the succeeding text, an example from Indian Agriculture is cited to specify the impacts of rural entrepreneurship on individuals, firms and regions. In a country like India, where Agriculture is the backbone of the economy employing 70% of its working population, rural entrepreneurship is particularly crucial to development. As per, out of the entire force employed in the agricultural sector, 68% are cultivators, while 32% are farm workers. In this very proportion of 32%, there exists Disguised Employment, severely hampering the productivity of the rural locality. Disguised Employment refers to groups of people working on the farmland which when taken off the farm do not affect the farm output. Here, rural entrepreneurship comes to the rescue. It can take off the excess labor from the farms that causes disguised employment. It has been seen in the recent past that despite enough food stocks with government warehouses, people are dying of starvation. This indicates problem with the public distribution system. The question is - do we have to depend on government public distribution system? The response is - people taking up entrepreneurship themselves in the form of Trading and Cooperatives; for improving the distribution. Some of the generic instances of Rural Entrepreneurship relating to development are:-

  • Better distribution of farm produce resulting in the rural prosperity. Formation of big cooperatives like Amul for optimum utilization of farm produce.
  • Entrepreneurial occupation for rural youth resulting in reduction of disguised employment and alternative occupations for rural youth. Formation of such new sectors, leads to a massive impact on the locality.
  • Optimum utilization of local resource (like tapping a waterfall flow for energy generation, utilization of coconut shells in the coir market, etc) in an entrepreneurial venture.

The above instances benefit the individual, firm and the region as a whole, as a part of a chained process. Summing up, rural entrepreneurship and development are two massive sets. The intersection of these sets has produced elements known as sustainability, self dependence, increased productivity, skill development, better resource utilization and positive social and economic impacts, among the rest.

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