1.1 Background
1.1.5 The Rural Scenario
Perhaps Fields’s (2005) comments on labour markets in low-income countries concisely sum up the rural employment scenario in India. He observes that in such economies the number of good jobs was limited, so workers took up bad jobs rather than stay unemployed. His second observation is that the problem of working poverty is more severe than open unemployment. On the face of it, rural India offers more employment opportunities compared to urban areas, as the NSS 68th Round Report (GOI, 2012) reveals that rural unemployment rates (for usual status, current weekly status and current daily status) are lower than urban unemployment rates from 1972-73 to 2011-12. The fact is as a rural labourer will “do whatever work is available from whomsoever”, the rural employment situation looks better (Tulpule, 1998).
Several scholars (Unni and Raveendran, 2007; Abraham, 2009; Dev, 2017) have commented that the nature of jobs generated in the rural unorganised, non-agricultural sector was short-term and of low quality. Basole (2017) too, underscores the issue of poor quality employment generation in rural India “….ongoing severe crisis of quality of livelihoods in the rural sector to the extent that 70% of agricultural households cannot meet their (low) consumption needs even given diverse sources of income”. Abraham (2009) shows that underemployment increased in the rural economy, in the period 1999- 00 to 2004-05. Underemployment (Current Daily Status) increased from 7.2 per cent in 1999-00 to 8 per cent for males and 8.7 per cent for females in 2004-05, these figures being the highest since 1983. This reinforces the low quality of jobs in the rural economy. Generation of regular, productive employment has become a necessity. The need for the same is seconded by the fact that there has been a rise in the number of people taking education in rural India, especially in the last two decades (Chadha and Sahu, 2002, EPW Editorial, 2011; Choudhury, 2011; Thomas, 2012; Mehrotra, 2018).
The problems arising out of rural underemployment and unemployment will be further compounded in the future when rural India has a pool of educated unemployed or underemployed youth.
Perhaps a concerted focus and action on rural industrialisation is a way out of this rural mare’s nest. Papola and Misra (1980) sounded their concern on a rural industrialisation approach based on the promotion of traditional industries (an objective in the initial Plans), as it is unlikely to generate necessary levels of employment and income. Papola (1987, cited in Bhalla, 1993b) in his inter-region, inter-district comparisons on agricultural development and rural industrial activity barely found one rural industry and concluded that “rural industrialisation should not be treated as an adjunct to agricultural
Basole (2017), to increase employment levels and revive the rural economy there needs to be a refocus on rural industrialisation.
The factors that motivate us to examine in detail the rural organised manufacturing industries segment, as part of our research are:
i) One can analyse the growth of the rural organised manufacturing industries segment based on the average profit rate and profitability trends of this segment. To our knowledge this has not been done before. Existing studies, which have dealt with the rural economy have not examined profit rates to assess the growth of the rural economy as a whole or any part of it.
ii) Few studies (Sau, 1989; Felipe and Kumar, 2010; Basu and Das, 2015; 2016a) analysed profit rates to understand growth; but they do not provide rural and urban break-up. Our study will fill this gap as well.
iii) Overall, we observe that scant attention has been given to this segment, in existing literature.
Rural organised manufacturing industries9 form a small but distinct segment of the rural non-agricultural sector in India. It is evident from ASI Report (1998-99 to 2007-08)10 that there is the presence of industry groups -industrial code 15 to 37 - not only in urban India but also in rural India. This implies that the rural industrial sector has evolved beyond traditional industries. Papola and Misra (1980) pointed out that these industries not only produce agro-based products and consumables but also intermediaries and final products.
Table 1-13 is a product related classification of industries 15-37. It is evident from Table 1-13 that most of the rural industries in India, during our study period belonged to the
9Rural organised manufacturing industries is subsequently referred to as rural industries.
10Our analysis is limited to the period 1997-98 to 2007-08 as disaggregated data on rural industries is provided by ASI only for the
consumer goods category. It is observed that the rural industries cater to a wide variety of consumer goods ranging from food products, textiles to high-end electronic gadgets like televisions and computers. It appears from the nature of the produce that some of these industries deployed sophisticated technology.
Our calculations based on ASI data show that at the aggregate level, both the output and profits of rural industries have been rising and they have registered higher output and profit growth rates than urban industries.
Table 1-13 Classification of Industries Based on Type of Produce
Type of Produce Industry Code
Raw Material 20,23,24,27
Consumer Good 15,16,17,18,21,22,24,25,26,30,32,34,35,36
Intermediaries 17,19,20,21,26
Investment Goods 28,29,31,32,33,36
Source: Categorised based on Time Series Data on ASI (1998-99 to 2007-08).
Albeit workforce size in the rural industries segment was a mere 3.2 per cent and 2.8 per cent of the total size of the rural non-agricultural workforce in 1999-00 and 2004-05 respectively, its performance (refer Chapter 4) was noteworthy compared to the agricultural sector and better than urban industries. It comes across as a bright spot in the rural economy.