Rural Business Hubs: Models and its Unique Features

Posted on April 23, 2012 in Society

By Dr. Amrit Patel:

With its rapidly growing economy, India is now recognized as an important economic power. Concerns on who are the beneficiaries of this hitherto unseen economic development has been engaging the minds of the Government for some time. In November 2004, the Prime-Minister Dr. Manmohan Singh had observed that “the benefits of rapid economic growth unleashed through the reforms of the last two decades into two distinct zones, one a modern, competitive, prosperous one and the other a stagnant, backward one.” He also visualized the Panchayats as the medium to transform Rural India to 700 million opportunities.

The Ministry of Panchayati Raj developed theses ideas into the Rural Business Hubs initiative which aims at developing an integrated relationship between rural producers and business partners for mutually beneficial cooperation, the entire process being facilitated by the Panchayats. This initiative is build on the idea of convergence of resources available under Central/State Governments Schemes, institutional credit and partnerships at once level. The Ministry Planned to promote at least one RHB in each of the 6000 Development Blocks of the country.

Unique Feature: [1] Linking rural producers with the wide market through a professional marketing partners and developing this integrated business relation benefiting both sides and therefore, sustainable. [2] Panchayats/ Rural Local Self Governments- the democratic grass root level institutions playing the key role of planning and implementing plans for economic development, where in the plans are based on local resource endowments, felt needs of people and relative absorptive capacity. [3] Based on economic activity not charity. [4] Any economic activity could be taken up but RBHs are ideally suited for Agriculture/Horticulture/Handloom/Handicraft marketing where production is decentralized. [5] Located in Rural areas. [6] Generating rural employment/livelihood.

The 4-P Model: The RBH initiative has been developed in partnership with the Confederation of Indian Industry (CII) as a 4-P Model (Public-Private-Panchayat-Partnership) with clearly laid out roles and responsibilities for each of the identifying skills and endowments of people and natural resources, address the concerns of local inhabitants, establish and sustain community linkages, extend institutional support to viable business initiatives that economic development plan emerging from RBH initiative with the decentralized district planning process. The business partners would perform the roles of identifying local skill/ products that have wider market potential, prepare Business plans acceptable to the Community and provide sustainable local employment. The Central/State Government would support the initiative through conducive policy regime, dovetailing gaps in infrastructure etc.

A National RBH Council Co-Chaired by Minister PR and past President CII and Minister of State (Commerce) as Vice Chairman, is leading the initiative since December 2004, Similar Councils have come up in 15 States.

Convergence: The initiative works on convergence of resources from Central/State Governments Financial intuitions and other partners. The Exim Bank has signed MoU with Ministry through which the Bank will provide assistance in identifying exporters, especially from the SME sector, who can source the products from RRBHs with transparent pricing being ensured. The Banks will also provide enhanced visibility to identified RBH products in international markets by linking them with the Bank’s rural portal and displaying them at their overseas offices. The International Finance Corporation (IFC) has extended financial assistance to CII for identifying RBHs in North Eastern Region and three RBHs have been initiated, based on this study. The National Research Development Corporation (NRDC) under Department of Science and Technology has converged with the RBH initiative on Sumak Carpets in Nagaland and TIFAC has done so in case of essential oil project in Bihar, Spices Board is involving the PRIs in their joint initiatives with ITC in the North East while Export Promotion Council for Handicrafts is doing so in Bastar, NABARD in Bihar, Eatern Zone Cultural Centre Kolkata in Purulia, Handloom Export Promotion Council in Nagapattinam and Punjab National Bank In Bharatpur. Convergence has been achieved in case of a few special SGSY projects in Karnataka and World Bank assisted DPIP in Rajsthan.

RBH MoUs: 131 MoUs across 15 States have been signed so far setting up RBHs. 28 of them involving Sumak Carpets, Pottery Products, handloom, handicraft, fresh fruit and vegetable and processing of agri-produces are functional. Another 22 covering folk arts, handicrafts, compressed bricks, vermin compost and agri processing are ready to take off. Partners have been identified and the RBH process in under way in case of 27 other proposals covering handloom, handicraft, woolen products, agri produce, bio Diesel, essential oil etc. The Ministry in consultation with the state Governments has identified 33 focus districts for setting up RBHs. District level Workshop have been held in seven of these districts and potential economic activities identified. Similar Workshops are scheduled in the remaining district. CII has constituted a National Council consisting of rural facing companies interested to set up RBHs. First meeting of the Council was held recently. Members of this Council are expected tp participate in the district Workshops and identify economic activities for setting up RBHs in their area of interest.

ABOUT THE AUTHOR: Dr. Amrit Patel holds a doctoral degree in Rural Studies and Masters in Agricultural Science. He has extensive research and teaching experience with Gujarat Agricultural University and College of Agricultural Banking of Reserve Bank of India. He has extensive rural banking and micro-credit experience with 25 years with the Bank of Baroda and 10 years as consultant for the World Bank, Asian Development Bank, and International Fund for Agricultural Development. He has worked in Tajikistan, Azerbaijan, Bangladesh, Uganda, Kenya, and India. Dr. Patel has published 3 books on optimal farming practices, use of tools in farming, and rural economics and has contributed over 500 papers on these subjects.