Rural Entrepreneurship: Opportunities for Semi-Urban Youth

Abstract
Post liberalization India has registered impressive growth in GDP, income levels, life expectancy and food security. However, the benefits have been limited to urban centers. Poverty in rural India still remains a big problem and the bulk of new opportunities driven by liberalization remains out of reach of vast segments of population due to undeveloped infrastructure, lack of requisite skills and access to capital. The education system creates graduates who lack employable skills and falls way short of equipping students with skills and attitudes to enhance the quality of life for themselves, families and communities. This paper examines rural entrepreneurship as an effective means of job and wealth creation and seeks to develop broad guidelines about what can be done at an individual, community and institutional level to enable educated youth to exploit new economic opportunities thrown by twin forces of technological advances and market friendly government policies.

Pre-liberalization Economy
The rise of Indian economy is one of the most important world events of the last 50 years. Post independence, India was characterized by low per capita income and subsistence economy. The government preferred Soviet style socialistic model of economy with regulation and state control as distinguishing features. The ensuing License Raj led to slow growth for almost forty years post independence. The economic environment was characterized by permission and scarcity. Everything needed permission and everything was scarce. Consequently, in each sector, only a few licenses would be given which would enable just a few producers to build powerful empires. There too, the focus would be on getting licenses and managing authority rather than efficient resource use or innovation.

The huge public sector continued to make losses but could not be shut down. Between 1986 and 1991, government owned companies sucked in 39% of the gross investment but generated only 14% of GDP1. Infrastructure remained poor due to government monopoly2 and License Raj created a bureaucracy with singular lack of accountability3. Low GDP growth (3-4% per year)4 coupled with high population growth (2.5% per year)5 led to increasing poverty and vulnerability. To counter this, several poverty alleviation programs were designed and implemented during this phase. However, severe corruption owing to skewed incentive structures in the government system and vulnerability of the beneficiaries led to bulk of the schemes not fulfilling their objectives.

Post Liberalization
In 1991, Indian economy faced a severe balance of payments crisis and had to be reformed not without pressure from IMF. License Raj was done away with, tariffs and interest rates reduced and several public monopolies were abolished or at least downsized.6 Increased investment and open trade led to acceleration in economic activity. Entrepreneurial activity picked up all around. Indias manpower pool of trained workers exploited the opportunity presented by IT revolution and outsourcing. This ushered in a period of high growth in GDP, increased life expectancy, disposable income and living standards.

Regional disparities and Inaccessibility

However, severe regional and social income disparities remained and in several cases, got aggravated. Thus, while India is indeed worlds third7 largest economy, close to 40% Indians8 are poor, deprived of even

1 2 3 4 5

India: The Economy. BBC, 1998. http://news.bbc.co.uk/2/hi/south_asia/55427.stm ibid

An American's Guide to Doing Business in India, Eugene M. Makar (2007)

http://www.unc.edu/depts/diplomat/item/2006/0406/will/williamson_india.html ibid 6 Economic Reforms in India: Task Force Report. University of Chicago. http://harrisschool.uchicago.edu/News/pressreleases/IPP%20Economic%20Reform%20in%20India.pdf
7

Report for Selected Countries and Subjects. IMF. September 2011.

<http://www.imf.org/external/pubs/ft/weo/2011/02/weodata/weorept.aspx?sy=2009&ey=2016&scsm=1&ssd=1&sor t=country&ds=.&br=1&c=534&s=NGDPD%2CNGDPDPC%2CPPPGDP%2CPPPPC%2CLP&grp=0&a=&pr1.x=88&pr1.y=9>

the basic necessities. Unemployment in rural and semi urban areas continue to remain a big problem and though, big companies are creating jobs, they are localized to certain geographical areas and still leave out a huge proportion of job seekers.

Entrepreneurship as Job Creation Engine

The importance of entrepreneurship, small business and micro-enterprise in job creation is recognized the world over. American Census Bureau states that nearly all net job creation in the US since 1980 has been driven by firms operating less than five years9. In several countries like Canada, bulk of new job creation from 1990 to 1995 was driven by self employment and small enterprises. In United States, firms between one to four employees created a total of 35% of new jobs created in 199510. Indian state too recognizes the importance of self employment, entrepreneurship and small business in fighting poverty and creating positive economic effects. Central and State governments have launched several promotional schemes to support rural entrepreneurship in the form of financial assistance, credit schemes, collateral free loans and training. Several private bodies, NGOs and corporate houses under Corporate Social Responsibility (CSR) initiatives are undertaking projects to promote rural entrepreneurship

Entrepreneurship in non-Metros
The core question is how can youth from semi-urban and rural centers utilize the opportunities presented by liberalization and be an active participant in the ongoing economic growth. Government cannot provide employment to all job seekers. Small business and micro-enterprise are the only viable options through which inclusive growth can be obtained. The question thus transforms into how can youth from semi-urban centers set up businesses to create jobs and wealth and improve the standard of living at an individual, family and community level? Another way to address the same question is to explore why the rural and

New Global Poverty Estimates: What it Means for India. World Bank. <http://www.worldbank.org.in/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/INDIAEXTN/0,,contentMDK:21880725 ~pagePK:141137~piPK:141127~theSitePK:295584,00.html> 9 Job Creation, Look to Entrepreneurs. Amy M Wilkinson, CNN 2009 http://articles.cnn.com/2009-1204/opinion/wilkinson.jobs.smallbusiness.government_1_new-jobs-start-ups-job-creation?_s=PM:OPINION 10 Entrepreneurship and Job Creation, Sergio Arzeni (1998) http://www.questia.com/googleScholar.qst?docId=98682315

semi-urban youth have not been able to usher in a rural entrepreneurship revolution utilizing the government and private support. Successful entrepreneurial activity requires a certain ecosystem to thrive. Though, entrepreneurs have existed in the worst of economic environments, a sustained level of private enterprise activity requires certain conditions to be met. This includes but is not limited to right skills, access to capital, access to market, safety of life and property and a minimum level of infrastructure among others. A lot of these factors are more under government control (eg law and order, infrastructure etc) than individual but the responsibility to be proactive lies with the individual.

Issues and Challenges

Principal problems restricting the development of rural and semi-urban entrepreneurship include: a) Paucity of funds Access to capital is scarce in the rural areas despite several government schemes. Many times, the beneficiaries are unaware of the government schemes, which makes them easy targets for corrupt officers. b) Middlemen Middlemen exploit rural entrepreneurs because they have control access to market. This trend becomes more visible in sectors like handicrafts, carpet manufacturing etc. c) Lack of Skills Lack of employable skills in young graduates is a well documented problem. Apart from some rare exceptions, the education system hardly provides practical skills to be successful in real life. Successful entrepreneurship needs adequate skills11 which the current system is unable to impart. d) Non conducive environment Years of colonial rule and subsequent License Raj have deeply ingrained a dependency culture in our psyche. Consequently, the only job options visible to rural and semi-urban educated youth are

11

Savla, Bhakti. Entrepreneurship in rural Areas of India. Nov 11, 2009. <http://www.indiastudychannel.com/resources/94291-Entrepreneurship-Rural-Areas-India.aspx>

government jobs which, more often than not go to one who can pay up rather than the most deserving. Entrepreneurship as a viable means to economic self sufficiency and empowerment of individual, family and community is not even considered. The attitude of family and community towards entrepreneurship is also not very encouraging. More parents would be happier with their children settling as a 9 to 5 government babu than struggling as a fledgling entrepreneur.

The Road Ahead

It is clear that with limited jobs in government, geographical localization of jobs in big companies and pressures of urbanization, new jobs need to be created in semi-urban and rural centers. Grass root entrepreneurship is the only viable means to do this.

Individual Action
We as individuals need to realize that the primary responsibility of improving our lot and securing the future of our children lies on us and not the government. We need to readjust our mental models to the changed realities of a post-liberalization India where opportunities abound but to access them, a fresh perspective and new skills are required. Specifically, we need to begin looking at entrepreneurship as a viable option for wealth creation, be more tolerant of failure and stop looking at the government to provide jobs. The government on its part has launched several promotional and supportive schemes under multiple ministries. Several of these schemes offer collateral free loans and can provide easy access to capital in at least some industrial segments. Prevalent red tape and corruption in government offices still threatens to be a bottleneck but with legislations such as RTI and an assertive social media, an enterprising youth today has several tools to break through. Moreover, with advancements in technology and improved access to information, a lot can be done at a lot less expense now. The cost of setting up a startup has decreased significantly which just spells more opportunity for an enterprising youth.

Institutional (College) Action

The first step has to be recognition of entrepreneurship as a viable career option for rural and semi-urban youth. This is where colleges and Universities can play a significant role. Entrepreneurship as a career

option is very relevant for students of liberal arts and humanities. Establishing an Entrepreneurship cell in every college can go a long way in educating students about entrepreneurship, options and challenges, building awareness about government schemes and possibly, even collectively bargaining with government agencies to facilitate access to credit and capital to deserving young graduates. Such cells can be set up with minimum expenditure and key activities could be: a) Building awareness about entrepreneurship as a career option for young graduates b) Building awareness about government support, educating about the process of getting funded and possibly even documentation and planning support c) Interaction with successful local entrepreneurs and mentorship programs d) Providing basic computer and internet infrastructure to build elementary computer skills and also enable search for information about business and support opportunities e) Partner with NGOs and private bodies active in promoting rural entrepreneurship f) Skill building programs depending upon financial resources availability

Colleges which have better access to financial resources can also engage in the following activities to provide greater support: a) Entrepreneurship training programs formal and informal b) Elementary incubation support can also be given to student startups at the least, office space and basic operating infrastructure can be provided.

Community Action
As a community, we need to realize that we owe it to our future generations to provide them better standard of living and greater access to opportunities. All of this is connected to financial independence and entrepreneurship has to be the major driver of the same. The attitude has to change from that of dependency to proactive action. The government doesnt do this has to change to I must do this. As a community, we need to be more confident, more ambitious and more encouraging of entrepreneurs and more proactive.

Conclusion
Post liberalization economy offers multiple avenues for growth and economic well being but several sections of the population are unable to exploit them. Selective access to opportunity is resulting in skewed

growth patterns and continued poverty and vulnerability. In rural and semi-urban centers, entrepreneurship and micro-ventures are expected to be primary engines of future economic growth. To usher in sustained and widespread entrepreneurial activity in non-metro centers, positive action is required at individual, college and community level. While individuals need to inculcate a fresh perspective and be more open to new opportunities, colleges need to provide education, awareness, interaction with local entrepreneurs and elementary IT support to enable access to information and ideas. Community needs to adjust expectations and be more encouraging of young entrepreneurs

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