India’s khadi and village industries that provide employment to over eight million rural workers and artisans are set for an overhaul in the years ahead. This important sub-group of the rural non-farm sector (RNFS) has been overlooked by the Indian consumer at one level, and is hampered by institutional and marketing constraints at the other. Given the asymmetry between the size of the rural population (72 per cent) and the low contribution of agriculture and allied activities to the gross domestic product (18 per cent), there is an immediate need to revive the RNFS. As the Eleventh Five-Year Plan rightly notes, “village industries have an important role in generating employment at a comparatively low cost.” The Plan identifies the khadi and village industries as one of the sectors with “prospects for high growth in output and creation of new employment opportunities.” Limited access to institutional credit and raw materials and the lack of proper marketing strategies are among the major handicaps that keep village artisans trapped in poverty. The Plan calls for a concerted effort “to change the mindset” and create a setting where people buy khadi “not as a ‘national duty’ or ‘act of charity’, but because it is fashionable, admired the world over, and intrinsically of high value.”
Against this backdrop has come a $150-million loan from the Asian Development Bank that aims at enhancing income and employment in the RNFS by revitalising khadi and village industries. “Enhanced sustainability of khadi, increased employment generation and incomes, increased artisan welfare, and development of select traditional village industries,” are the main elements of the Khadi Reform Package. To be implemented over the next three years, the package seeks to realign the khadi sector with contemporary market realities. Establishing the identity of the product through a “Khadi mark” and emphasising its niche as a hand-spun and hand-woven product “produced through fair trade practices” mark a critical change in the marketing strategy, wherein the private sector will have a role. This offers wide potential to enter international markets — the lack of access to them has been a lacuna in the current marketing setup. The new line of thinking for new khadi ventures — either through the Producer Company Model, or through the Entrepreneur Model — will mean a significant shift towards making artisans, spinners, and weavers stakeholders in their enterprises. The reform package, if implemented properly and with sensitivity to economic conditions, will ensure a new future for a traditional, but ailing, economic segment of rural India.