Cottage Industries for Achieving the Sustainable Rural Livelihood through Employment Generation in the North Eastern Region

Saket Kushwaha1, Ganesh2, Virendra Kamalvanshi3, Kerobim Lakra2 1. Professor, Department of Agricultural Economics 2. Research Scholars, Department of Agricultural Economics 3. Assistant Professor, Department of Agricultural Economics Institute of Agricultural Sciences, Banaras Hindu University, Varanasi, U.P., 221005.

Abstract
A livelihood in its simplest sense is a means of gaining a living. It means the activities, the assets and the access that jointly determine the living gained by an individual or household. Higher income, increased well-being, reduced vulnerability, and improved food security, more sustainable use of Natural Resource base are the outcomes of livelihood. Capacities, equity, and sustainability combine in the concept of sustainable livelihoods. Cottage industry is the one which is run by an individual with the help of his family members with very little capital. Small Scale Industries are considered to be one of the backbones of the economy in terms of employment creation. A Small Scale or a Cottage Industry is labor -oriented and labor intensive with relatively high labor-investment ratio. It is estimated that an investment of Rs.1.00 lakh, in fixed assets made in a small-scale industry may create, on an average, employment to 10-12 persons. The North Eastern region of India constituting 7.9 per cent of the total geographical area of the country is home to a population of 39 million people and is the home to more than 145 tribes and several non-tribal communities. Despite its immense potential in terms of natural resources, the region continues to remain the most backward in India. The area represents a huge opportunity for investment, both by private industries as well as entrepreneurs. Encouragement to small scale and cottage sector would serve to counter the seasonal un-employment of the agricultural labor force. There is need for convergence among a host of organizations/agencies operating in the region, which could be best achieved through a regional planning body like NEC. Key Words: Sustainable livelihoods, Cottage industry, Labor-investment ratio

Introduction
Livelihoods are the activities, the assets and the access that jointly determine the living gained by an individual or household. A livelihood in its simplest sense is a means of gaining a living. Rural livelihoods are dependent on natural resources as sources of income. Rural people can be smallholders, but also farm laborers and tenants. Livelihood outcomes are: more income, increased well-being, reduced vulnerability, and improved food security, more sustainable use of NR base. A livelihood comprises people, their capabilities and their means of living, including food, income and assets. Tangible assets are resources and stores, and intangible assets are claims and access. Livelihood is defined as adequate stocks and flows of food and cash to meet basic needs. Security

refers to secure ownership of, or access to, resources and income-earning activities, including reserves and assets to offer risk, ease shocks and meet contingencies. Concept of sustainable livelihoods Sustainable refers to the maintenance or enhancement of resource productivity on a long-term basis. A household may be enabled to gain sustainable livelihood security in many ways-through ownership of land, livestock or trees: rights to grazing, hunting or gathering; through stable employment with adequate remuneration; or through varied operations of activities. A livelihood is environmentally sustainable when it maintains or enhances the local and global assets on which livelihoods depend, and has net beneficial effects on other livelihoods. A livelihood is socially sustainable which can cope with and recover from stress and shocks, and provide for future generations. Three strategies that are essential for achieving sustainable livelihoods are building and protecting assets; encouraging governments and the private sector to act responsibly; and creating opportunities for poor people. Capacities, equity, and sustainability combine in the concept of sustainable livelihoods. Capabilities are both an end and means of livelihood: a livelihood provides support for the enhancement and exercise of capabilities (an end); and capabilities (a means) enable a livelihood to be gained. Equity is both an end and a means: any minimum definition of equity must include adequate and decent livelihoods for all (an end); and equity in assets and access are preconditions (means) for gaining adequate and decent livelihoods. Sustainability, too, is both end and means: sustainable stewardship of resources is a value (or end) in itself; and it provides conditions (a means) for livelihoods to be sustained for future generations. Small Scale Industries Small Scale Industries are considered to be one of the backbones of the economy in terms of employment creation. As concerned to India, with huge geographical spread-out; SSIs play a very important role in generating employment and income and to meet the local demand. During the last decade, however things have changed a lot. With the impact of globalization and de-reservation, the SSI sector has become prone to threats from global players and MNCs. In order to overcome such threats, the prime concern of the SSIs is to improve quality and reduce cost. As a result, the concept of SSIs is undergoing a metamorphosis and gradually SSIs are moulding as SMEs. That says that the investment in plant and machinery are going up to reach sophistication. Also instead of competing with each other, SMEs have started operating as clusters where they complement

each other. This increases their bargaining strength in terms of cost reduction, market accessibility and acceptability. Cottage industries Under section II B of Industries (Development and Regulation) Act 1951, Cottage revised from time to time to offset the impact of of inflation and and to meet do not small the use scale industries are defined in terms of investment in plant and machinery. The limit is Technological needs. Cottage industry is the one which is run by an individual with the help of his family members with very little capital. Most the cottage industries power. According to the Fiscal Commission (1949-50) cottage industry is an industry which is run either as whole- time or part-time occupation with the full or partial help of the members of the family. These industries are mostly run by the artisans in their own homes. The use of power and machines in these industries are very limited. The products produced in cottage industries are usually to satisfy the local demands. Number of hired-labour in this sector is very limited and the capital investment is also small. They are mostly located in villages and rural areas. According to the Economic Commission of Asia and the Far East (ECAFE) Cottage industries are those industries which are run fully or partially with the help of family members. In the words of Dhar and produce traditional Lydall cottage goods with the industries are mainly traditional industries which of cottage traditional techniques. Examples

industries are khadi industry, handicrafts, handlooms, cane and bamboo base industries, pottery, black smithy etc. In India, the first official criterion for small scale industry dates back to the second Five Year Plan when it was defined in terms of gross investment in land, building, plant and machinery and the strength of the labour force. In 1955 Small Scale Industries Board defined small scale industry as A unit employing less than 50 persons, if using power and less than 100 persons without the use of power and with capital assets not exceeding rupees five lakhs. The Ministry of Commerce and Industries modified the above definition in 1960 on the recommendation of the Small Scale Industries Board. According to it small industries will include all industrial units with a capital investment of not more than rupees five lakhs, irrespective of the number of persons employed. Thus, this revision has enlarged the scope of employment opportunities in small scale sector, but

the investment ceiling remains unchanged. In 1972, the Government of India constituted a Committee for drafting legislation for small-scale industries, which suggested that the smallscale industries might be classified in to the following three categories. i. Tiny Industry: Tiny units are those in which the investments in fixed assets are less than Rs.1 lakh or Rs. 4000/- per worker and the annual turn-over does not exceed Rs. 5 lakh. ii. Small Industry: Small industry is one in which capital investment in fixed assets does not exceed Rs. 7.5 lakh irrespective of the number of persons employed. iii. Ancillary Industry: An ancillary unit is the one rendering services and supplying or proposing to render 50 percent of undertaking. The limit lakh. The Industrial Policy of 1980, announced on July, 23 has revised the ceiling limits of investment in plant and machinery for small scale industries. Accordingly, the investment limit in small scale industries has been increased with a view to develop these industries. In case of small ancillary industries, the limit has been revised from Rs. 15 lakh to Rs. 25 lakh and for tiny industries it has been raised to Rs. 12 lakh from Rs. 1 lakh. The Government has again revised the investment limit of small scale undertakings to Rs. 35 lakh in March 1985. As per the Industrial Policy Resolution of 1990, the investment limit in plant and machinery for small scale industries has been raised to Rs. 60 lakh and correspondingly for ancillary units from Rs 45 lakh to Rs. 75 lakh.In 1997, on the recommendation of Abid Hussain Committee, the Government has raised the investment limit in plant and machinery for small units and ancillaries from Rs. 60/75 lakh to Rs. 3 crore and that for tiny units from Rs.5 lakh to Rs. 25 lakh. In 2000, the Union Government has reduced the investment limit in plant and machinery for small scale units from Rs. 3 crore to Rs. 1 crore. However the investment ceilings for tiny industries remain unchanged to Rs. 25 lakh. In accordance with the provision of Micro, Small and Medium Enterprise Development (MSMED) Act, 2006, the micro, small and medium enterprises are classified into two classesits production or total services, as the case may be, to other units for for investment in fixed assets of such an industry is fixed at Rs. 10 production of other articles. Moreover, such a unit should not be owned or controlled by any

i. Manufacturing Enterprises: The enterprise engaged in the manufacture and Regulation) Act, 1951. The manufacturing enterprises are

or

production in terms

of of

goods pertaining to any industry specified in the First Schedule to the Industries (Development defined investment in plant and machinery. ii. Service Sector: The enterprises engaged in producing or rendering of services and are defined in terms of investment in plant and machinery. The North Eastern region The North Eastern region of India constitutes an area of 2.62 lakh sq.km, i.e., 7.9 per cent of the total geographical area of the country is home to a population of 39 million people (2001 census) with a literacy rate of 68.5 percent (2001 census) and is the home to more than 145 tribes and several non-tribal communities. Despite its immense potential in terms of natural resources, the region continues to remain the most backward in India. The area represents a huge opportunity for investment, both by private industries as well as entrepreneurs. As far as North East is concerned, SSIs still seem to be plagued with a host of problems and not being able to move forward. A study recently done on status of SSIs shows that although the rate of growth in terms of numbers of units registered has been higher than the all India average, the status of SSIs can be termed as unhealthy in terms of size, bank finance, market penetration, entrepreneurial quality, etc. Table 1. Number of handicrafts artisans in the North Eastern States of India, 200405: Sl. No Name of States In Lakhs Percentage of Artisans 1 Arunachal Pradesh 1.57 0.15% 2 Assam 2.05 2.07% 3 Manipur 4.01 5.55% 4 Meghalaya 1.68 1.44% 5 Mizoram 0.69 0.10% 6 Nagaland 1.83 1.80% 7 Tripura 2.91 3.64% 8 Sikkim Source: Economic Survey Manipur 2008-09 Role of Cottage Industries in Increasing Employment

A Small Scale or a Cottage Industry is labour -oriented and labour intensive with relatively high labour-investment ratio. A given amount of capital invested in this sector of industries is likely to provide more employment, at least in short run, than the same amount invested in a large industry. It is estimated that an investment of Rs.1.00 lakh, in fixed assets, in a large industry may create, on an average, employment to 2-4 persons whereas the same amount of investment made in a small-scale industry, for the same purpose, might do so for 10-12 persons. This is one of the main considerations for an overpopulated and developing country, where millions of people are either unemployed or underemployed, to utilize the possible potentiality of this sector for providing employment opportunity not only to the educated and technical manpower but also to the unlimited labor force which have been increasing, day by day, at a relatively low capital cost and very short gestation period. Table 2. Growth of Registered Permanent (PMT) Industrial units Employment, investment and production Year No. of No. of Average no. of Investment Average Units Employment Employment (Rs.in crore) investment per unit per unit (Rs. in thousands) 20009635 49792 5.2 35.05 36.38 01 20019744 50364 5.2 36.07 37.02 02 20029867 51123 5.2 37.70 38.21 03 20039993 51842 5.2 39.37 39.39 04 200410151 52857 5.2 41.38 40.76 05 200510264 53719 5.2 43.27 42.16 06 Source: Economic Survey Manipur 2008-09 Further, the encouragement to small scale and cottage sector would, no doubt, serve to counter the seasonal un-employment of the agricultural labor force and thus utilize it which otherwise would go waste. The small-scale industrial sector has employed a total of 191.4 lakh people in 1994-95 and this number has consistently risen to 282.6 lakh people in 2004-05. Within the manufacturing sector itself, small and cottage industrial sector contributes about four-fifths of manufacturing employment in India. Given the acute unemployment, underemployment and disguised unemployment problem in India, creation

of employment opportunities will depend crucially to the development of small scale and cottage industries. This would be clear from the fact that while employment in the industrial sector as a whole including large scale, medium scale and small scale has increased by only 2.21 percent per annum over the period from 1972 to 1987-88, employment in small-scale sector grew at the rate of 5.45 percent per annum over the same period. As far as the future prospects of small-scale and cottage industry is concerned, the rural non-farm sector accounting for about 22 percent of rural employment can play a crucial role in the further expansion of employment opportunities in the rural areas. An important constituent of this sector is the manufacturing activity consisting mainly of textile based and agro-based products and units producing construction materials. In urban areas employment potential seems to be the largest in the non-household and tiny units of the manufacturing. Obviously, the growth rate of small scale industrial sector has been faster both in terms of output and employment. In other words, the output employment ratio for the small-scale sector is 1:1.4. The rapid growth of the small-scale industries has a great relevance in our national economic policies. The growth of small-scale sector improves the production of non-durable consumer goods of mass consumption. As such, it acts as an anti-inflationary force. If a big push is given to the small sector, it can become a stabilizing factor in a capital-scarce economy like India by providing a higher capital output ratio as well as a higher capital employment ratio. Conclusion The creation of employment has a multiplier effect on the economy in rural areas, by the creation of aggregate demand which creates a favorable environment for entrepreneurs, which can again increase the job opportunities in the area. Thus, it finally creates a means for livelihood by improving their income. To achieve this, there is an immediate need for holistic approach, which calls for synergy form different sectors. A host of organizations/agencies are operating in the region providing all type of services. In certain cases this has resulted in duplication of efforts. Therefore, there is need for convergence, which could be best achieved through a regional planning body like NEC. It is suggested that road map be charted out for promotion of local entrepreneurship with specific targets and all stakeholders take due responsibility be it in the

areas of training, finance, marketing, technology, infrastructure etc. with strict monitoring. References A. J. Uddin. (2007), Industrialisation in Northeastern Region. Mittal Publication, New Delhi. ISBN-81-8324-186-7. Annual Report (2008), North Eastern Development Finance Corporation Limited. Guwahati (India). Business Standard Report (2011), Benefit from MSME Development in North East. New Delhi January 25. Chawii. Lian. (2007), Natural Resource Based Income and Livelihood Improvement Initiatives Economic Survey Manipur 2008-09. Mishra, P.R. and Sarin, M., 1988, Social security through social fencing, Sukhomajiri and Nada, North India, in Czech Conroy and Miles Litinoff (eds) The Greening of Aid: Sustainable Livelihood in Practice, Earthscan, Lon don, pp 22-28 Robert Chambers and Gordon R. Conway, 1991, Sustainable livelihoods: practical concepts for the 21st century, IDS Discussion paper 296. Schmitz, (1995), Collective Efficiency: Growth Path for Small Scale Industry. Journal of Development Studies, Routledge, Vol. 31, issue.4: pp.529-566. Schumacher, E.F., 1973, Small is Beautiful: a study of Economics as if People Mattered, Abacus Edition (1974) published by the Penguin Group. in North East. www.mdoner.gov.in/.../14NaturalResourceIncome7872117900.pdf