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  The Performance of Khadi and Village Industries (KVIs) in India
Dr. Kandarpa Kumar Barman
Biswajit Das
December 01, 2013 | Dr. Kandarpa Kumar Barman,Biswajit Das  , Dr. Kandarpa Kumar Barman, Biswajit Das, KVI

ABSTRACT

The paper is based on secondary data, collected from Board of Industrial and Financial Reconstruction (BIFR), Govt. Of India and attempts to explore the performance of Khadi and Village Industries (KVIs) in India during the period 1994-2010 with respects to the performance variables like production, employment and sales. The statistical tools like percentage, compound growth rate and correlation coefficient has been used to study the association between the variables. Also, the projection has been made in respect of the performance variables through the use of least square principles. The study reveals that compound growth rate of employment, output and sales are 5.022 per cent, 11.023 per cent and 28.846 per cent respectively per annum. However, there are exists strong positive correlation between the performance variables. The projected growth of employment, output and sales for 2016 will be 195 lakh, Rs 22455.64 crore and Rs 29453.86 crore respectively. It reflects positive expectation and scope for further employment, output and sales to rise in future in the KVI sector.

Introduction

The Khadi and Village Industries (KVIs) play a significant role in the Indian economy. This sector contributes about one third of the total income of the rural households. The Khadi and Village Industries Comission (KVIC) had all along played a commendable role at the grass root level, to provide employment opportunities to the entrepreneurs and unemployed in the rural areas of the country to uplift their socio economic status. The employment in khadi programme has reached to 9.81 lakh persons in the year 2009-10. The production of khadi has also steadily increased to Rs.628.97 crore during the same year. Similarly, village industries programme have also shown remarkable progress by registering production of Rs.17508 crore which created employment to 98.72 lakh person. The sales of khadi has increased to Rs.867.01 crore in 2009-10, whereas for village industries increased to Rs.23254.53 crore. (BIFR, GOI, 2010). Again, in the backdrop of declining capacity of agriculture sector in absorbing the ever increasing additional labour force in the rural non farm sector, KVI programme stands as one of the most acceptable alternatives. The Government of India continued its whole hearted support to this sector and provided funds worth Rs.919.2 crores under plan fund during the year for the smooth implementation of the programmes.

KVIC and Employment generation

To generate employment opportunities both in rural and urban areas of the country through setting up of new micro enterprises, KVIC launched Rural Employment Generation Programme (REGP) in 1994. However, subsequently the Ministry of Micro, Small and Medium Enterrises (MSMEs) launched a new credit linked subsidy scheme called Prime Minister Employment Generation Programme (PMEGP) on 15th August 2008 by merging the Prime Minister Rojgar Yojana (PMRY) and the REGP that were in operation. It is implemented by KVIC as the nodal agency at the national level. At the State level, the scheme is implemented through the State KVI directorates, State KVIBs and DICs and banks. The scheme brings together widely dispersed traditional rural and urban unemployed youth and provide them self employment opportunities to the extent possible at their place and has thus helped in arresting migration of rural youth to urban or outside areas. It enhances the wage earning capacity and contributes to increase in growth rate of rural and urban employment. So far as the macro level employment generation of KVIs in India is concerned it shows a rising trend in the village industries and falling trends in the khadi sector. The status of employment in KVIs sector in shown in Table-1 It reveals that additional employment in the KVIs increases at faster rate due to the implementation of REGP/ PMEGP in the country which lead faster rise in employment opportunities. Again, State wise number of persons benefited through estimated employment generated under REGP and PMEGP in India reveals that estimated employment generated under REGP is 595451 in 2006-07 and rose to 975651 in 2007-08 and 255070 in 2008-09 under the newly introduced PMEGP scheme. The State like Assam placed in rank one in respect of number of project sanctioned as well as in employment in the North Eastern (NE) region. It generated employment to 30912 persons in 2006-07, 48303 persons in 2007-08 under REGP and 12280 persons in 2008-09 under PMEGP)

In spite of being a food surplus nation where buffer stock are more than the stipulated level that is required for food security, thousands still die of malnutrition and hunger. While the objective of food security has been reached, the fundamental individual right for food has not. According to National Family Health Survey (NFHS-3) conducted in 2005-06, 20 per cent of Indian children under five years old were wasted (acutely malnourished) and 48 per cent were stunted (chronically malnourished). The HUNGaMA (Hunger and Malnutrition) Survey conducted by Nandi Foundation [http://www.naandi.org/CP/HungamaBKDec11LR.pdf] conducted across 112 rural districts of India in 2011 showed that 42 percent of children under five are underweight and 59 percent are stunted.

Table-1:Employment, Production and Sales in KVIs in India (1994-95 to 2010-11)

Year

Total Production (Rs.in crore)

Total Employment (In lakh)

Total Sales (Rs.in crore)

1994-95

3624.06

53.46

4069.19

1995-96

4026.45

56.72

4429.13

1996-97

4416.26

58.35

4814.01

1997-98

4519.31

56.50

5065.28

1998-99

5122.37

58.29

5601.01

1999-00

6165.35

59.23

6769.20

2000-01

6923.26

60.07

7955.10

2001-02

7551.52

62.64

8901.74

2002-03

8569.37

66.45

10193.34

2003-04

9681.77

71.19

11575.21

2004-05

10920.43

76.78

13105.19

2005-06

12383.84

82.77

15276.02

2006-07

14028.71

88.92

17562.40

2007-08

16677.71

99.27

21543.48

2008-09

17338.87

103.91

22748.19

2009-10

18136.98

108.53

24121.54

2010-11

12828.08

111.19

16653.33

Total Value

162914.34

1274.27

200383.4

Source: Board of Industrial and Financial Reconstruction (BIFR), GOI, 2010

KVIC and Production

So far as production is concerned, the KVI sector performed well as evidenced from Table-1. The production of KVIs shows rising trends since 1994-95 to 2009-10, but it drops to 12828.08 crore in 2010-11 is due to the uncertainty over the continuation of the rebate policy for KVIs, which upset the production schedule and output. Similarly, high stock of unsold khadi and mismatch in khadi production also moulded such decline. Again, the project finance approach adopted in place of existing pattern approach for village industries units took the rural entrepreneurs some time to get used to and there was a shortfall in availing funds from banks and budgetary resources (Xth five year plan report, 2002-07) to the KVIs. Therefore, the production, employment and sales of the KVIC in 2010-11 has suddenly declined.

KVIC and Sales

The KVIC has also the responsibility for providing organized sales and marketing support. For village industries, sales and marketing is still unorganized. The KVIC has been carried on without any marketing effort or aggressive marketing strategy for the future. At present, KVIC has been providing supporting inputs to its NGOs, institutions for marketing of KVI products. These institutions have been provided funds for opening sales outlets and conducting exhibition-cum-sale to sell their products with an aim to penetrate in the domestic and foreign markets.

The Khadi and Village Industries Review Committee (KVIRC) have suggested the formation of a National Rural Industries Marketing Corporation (NRIMC) with necessary linkages at state, district and village levels. The State level Marketing Corporation and the District Supply and Marketing Societies (DSMS) can go a long way in building up linkages. The DSMS pattern has been developed in a few states marketing of products produced under rural development programmes and this can be extended to KVI sector as well. The States like Karnataka and Orissa where DSMS pattern has been in operation, performance has been found to be good. At the State level, it was tried out only in Gujarat. Thus, separate marketing institutional network for village industries of rural development programmes and KVI sector need to be established in the near future to widen the sale within the country and to facilitate exports, which established linkages with export houses. The main wings of the marketing corporation are commercial operations, marketing services and marketing planning. Marketing information system and development of data bank and research cells should be opened at the State level to pay adequate attention to the specialties of products of each State. Similarly, sales outlets, infrastructure facilities and common services needed for various industries are also pursued (Nagayya 2001)

In view of the favourable agro-climatic condition the Spice Board has shown interest for promoting spices processing units in the North Eastern Region jointly with the KVIC for promotion of spices processing units that will be taken up by the Governments or NGOs or individual. The main objective of the scheme is to develop marketing for these produces by establishing units to process the spices produced into value added products. The KVIC will be providing margin money under its margin money scheme for projects with investment up to Rs. 2.20 lakhs. Thus, this Spice Board-KVIC scheme being implemented in the North East encourages the growth of micro enterprise in the spices processing in the country (Roy,2001) If we observe the sales of KVIs in India since 1994-95 to 2010-2011 it was found that value of sales of KVIs has increasing trend since 1994-95 to 2009-10 except year 2010-11. The production is high, so employment and sales are also found high in KVIs sector and vice versa.

Table-2: Growth rate of employment, Production and sales (1994-95 to 2010-11) of KVIs

Variables

Instantaneous growth (At a point in time)

Compound growth rate (Over a period of time)

Employment in KVIs

4.90

5.022

Production in KVIs

10.45

11.023

Sales in KVIs

25.35

28.846

Source: Based on Table-1

The Table-2 compares the annual instantaneous and compound growth rate of three variables i.e. production, employment and sales of KVIs. The data during the period 1994-95 to 2010-11, the compound growth rate of employment in the KVIs has recorded positive growth of the order of 5.022 per cent per annum. It implies that numbers of entrepreneurs as well as workers in KVIs sector has been rising. Similarly, the growth rate of production and sales of KVIs sector has recorded 11.023 per cent and 28.846 per cent growth per annum, which is quite impressive growth rate. It is evident that the KVIs sector performs well in respects of all the three performance variables. If we observe the role of the KVIC in establishing new micro enterprises it reveals that the KVIC implemented PMEGP scheme has created large numbers of new micro enterprises as well contributed in production, employment and sales in entire KVIs sector.

Projection of Output/Production, Sales and Employment in Khadi and Village Industries (KVIs) for the year 2016

A projection of output, sales and employment in the KVIs sector is made for the year 2016. For the projection of output, sales and employment in KVIs sector in 2016, data are collected from Board of Industrial and Financial Reconstruction (BIFR), Govt. Of India, 2010 as shown in Table-1 On the basis of the time series data (1994-2010), a projection of output is made for the year 2016. Output in year n is projected using two variable linear regression model given by

Y n= a + bT n -------------------------------------------- (1)

Where, T is time.

For Projecting Output in the KVIs sector Table-4 is constructed.

Table-4: Output and Sales in KVI Sector

Year

T (Year-2002)

Value of Output

Value of Sales

1994

-8

2227.531

1692.046

1995

-7

3146.989

2953.947

1996

-6

4066.447

4215.849

1997

-5

4985.905

5477.75

1998

-4

5905.364

6739.651

1999

-3

6824.822

8001.553

2000

-2

7744.28

9263.454

2001

-1

8663.738

10525.36

2002

0

9583.196

11787.26

2003

1

10502.65

13049.16

2004

2

11422.11

14311.06

2005

3

12341.57

15572.96

2006

4

13261.03

16834.86

2007

5

14180.49

18096.76

2008

6

15099.95

19358.66

2009

7

16019.4

20620.57

2010

8

16938.86

21882.47

Source: Based on Table-1

The estimated trend line for the period 1994 to 2010 is presented (for 17 years) in Figure-1

Figure-1: Trend of Output and Sales of KVIs (1994-2010)

Projected Output for the Year 2016

Projection of Khadi and Village Industries (KVIs) for 2016 is presented by equation-(2)
Y 2016 = a + bT -----------------------------------------(2)
Where, T= Target year: 2002
The coefficients are estimated through regression analysis with the help of MS EXEL
The coefficients estimated for KVIs sector are
a = 9583.194, b = 919.45 and T 2016 =2016-2002=14
Now , substituting a , b and Y 2016 in equation (2)
Y 2016 = 9583.20 + 919.46 T 2016 = 9583.20+ 919.46 (14) = 22455.64
Thus, the projected output of KVIs sector in 2016 will be Rs 22455.64 crore

Projected Sales for the Year 2016

The coefficients estimated for KVIs sector for sales are as follows
a = 11787.26, b = 1261.90 and T 2016 =2016-2002=14
Now , substituting a , b and Y 2016 in equation (2)
Y 2016(Sales) = 11787.26 + 1261.90 T 2016 = 11787.26+ 1261.90 (14) = 29453.86
Thus, the projected sales of KVIs sector in 2016 will be Rs 29453.86 crore

Projected Manpower requirements in 2016

The Labour-Output ratio model (Hinchliffe, 1987) projects manpower requirement on the basis of the estimated labour coefficients as
Ln = l Yn ------------------------------------------------(3)
Where, Ln is the projected labour requirements in year n
Yn is the projected Output by the Year n
l is the labour coofficient
Where, l= Lo/Yo, where, Lo and Yo being the current period labour and output respectively.
The manpower requirement in KVIs sector set up in 2016 is projected by
L2016 = l Y2016 where, l is the labour-output ratio and Y2016 =22455.64
Where, l = Lo/Yo = 111.19/12828.08 = 0.0086677 L2016 = 0.0086677 (22455.64) = 194.64 lakh
The manpower requirements in KVIs sector in 2016 will be approximately 195 lakh

Conclusion and Suggestion

The study reveals that the KVIC plays a vital role in the Indian economy, as the growth rate of output, employment and sales depicted. The growth rate of all the three performance variables is positive. It is quite impressive and has lots of potentiality for further growth of KVI sector in future. Again, the strong association between variables reflects the uniformly growth of employment, output and sales in the same direction and also high degree of perfect positive correlation. The projected growth rate for 2016 in the KVI sector in respect of all the variables shows positive expectation on more employment generation, output growth and sales in the upcoming years. On the basis of the study, following suggestion has been made

  1. The KVIC has to increase numbers of new micro enterprises through assisting new PMEGP units in collaboration with KVIB, DIC and Banks

  2. The KVIC requires providing adequate support of finance, marketing and sales at grass root level for the existing as well as first generation entrepreneurs.

  3. The disbursement of loans and grants should need to expand in the economy

  4. The KVIC state office or KVIB or DICC requires organising workshop, awareness programmes and exhibition regularly to attract for entrepreneurship development.

 

 

 


 
 
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