A boost to rural entrepreneurship {Development and Employment}

What is Entrepreneurship

Entrepreneurship is the activity of setting up a business or businesses, taking on financial risks in the hope of making a profit. This summarizes the entire concept very efficiently. Using this definition, an entrepreneur is a person of very high aptitude who pioneers change, possessing characteristics found in only a minuscule fraction of the population.

What is Rural Entrepreneurship?

Entrepreneurship based on the welfare and upbringing of the rural areas is Rural entrepreneurship. It is a pretty straight forward definition. However, it has a much deeper meaning to it.

Why were amendments made to the NABARD Act?

The amendments passed by Parliament to the National Bank for Agriculture and Rural Development (NABARD) Act, 1981 support the government’s push to boost the rural and agricultural sector.

The amendments recognise the vital role of micro, small and medium enterprises (MSMEs), as defined under the MSME Development Act of 2006, in rural entrepreneurship and are intended to make financing easier for them.

The 1981 Act was enacted to establish a development bank to provide and regulate credit and other facilities in order to promote and develop agriculture, small-scale industries, cottage and village industries, handicrafts, and allied economic activities in rural areas.

In March 2017, the Finance Ministry listed a slew of factors which necessitated amendments to the 1981 Act.


The government reasoned that as the current authorised capital of NABARD is fully paid-up, there was a need to increase it to enable the Central government to infuse additional equity as and when required.

The Reserve Bank of India (RBI) holds 0.4% of the paid-up capital of NABARD. The remaining is held by the Central government. This causes conflict in the RBI’s role as banking regulator and shareholder in NABARD, the statement said.

The government said its focus was on the employment potential in rural areas, medium enterprises, and handlooms. It proposed to include these enterprises in the ambit of refinancing activities of NABARD.

Basic Gyan and Analysis

Why Rural Entrepreneurship?

One of the major objectives of developmental policies in India is to provide employment to millions of unemployed rural youth.

The core of the problem in countries like India is surplus agricultural labour and closure of traditional village industries, resulting in increased unemployment in rural areas and migration of rural youth to urban areas in desperate search of jobs, in turn putting more pressure on the urban infrastructure and amenities

Role of Rural Entrepreneurship in India

The fundamental role is to provide employment opportunities and consequently, applying a check on migration. Industries in rural areas are mostly micro or tiny in structure and quick yielding.

In other words, their gestation period is much less as compared to large scale industries. Rural industries are also labour intensive and provide substantial employment opportunities to rural folks of all age groups. Few examples of such type of industries are Food Processing industry, Poultry industry, cottage and handicrafts industry, etc.

This also helps in balanced regional growth and promotion of artistic activities.


A promoter of rural enterprise faces a plethora of problems, usually called teething troubles when he sets up his enterprise.

First, the financial problem. Arranging working capital becomes a major task as he could run out of money to buy raw materials though he may not yet have earned any reputation in the market to get raw materials on credit. Similarly, he makes several production trials, improves quality, etc. This is not it.

There are also policy challenges faced by the enterprise.

Contribution of Rural Entrepreneurship to Indian Economy

  • It will provide employment opportunities.
  • It can help check the migration of people from rural to urban areas in search of jobs.
  • Rural entrepreneurship has the potential to promote artistic activities.




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