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(GIST OF KURUKSHETRA) Redefining Rural Landscapes

(JANUARY-2024)

Redefining Rural Landscapes

Introduction:

India is the 3rd largest startup ecosystem in the world, with more than 1 lakh registered startups (DPIIT – Startup India). Traditionally centered in urban hubs, the startup culture is now permeating the hinterlands, ushering in a new era of innovation and economic transformation. This phenomenon reflects a broader trend of decentralisation and inclusivity, where startups are leveraging technology to bridge the rural-urban divide.

Background:

The current scenario witnesses a surge in startups catering to rural needs, ranging from agritech and e-commerce platforms to healthcare and education services tailored for rural communities. These ventures not only address local challenges but also create employment opportunities, fostering sustainable development.
The startup ecosystem as a whole, especially in rural areas, has seen unprecedented growth with a big Government push since 2014, when the government launched schemes like Startup India, Atal Innovation Mission (AIM), MeitY Startup Hub (MSH), BIRAC, and DST-supported schemes, among others. Many schemes were curated, especially to encourage rural entrepreneurship.

Key highlights about the various schemes:

1. Atal Community Innovation Centres (under Atal Innovation Mission) -

AIM’s ACIC initiative was launched in 2020, with the objective of creating community innovation centres for rural entrepreneurs. The initiative encourages grassroots innovation and directly supports community-based entrepreneurs by establishing enabling infrastructure in Academic Institutions and NGOs. Till now, AIM has established 14 ACICs across the country that have cumulatively supported more than 200 community-based startups.

2. Start-up Village Entrepreneurship Programme –

Ministry of Rural Development is implementing Startup Village Entrepreneurship Programme (SVEP) as a sub-scheme under the DAY-NRLM with the objective of helping the rural poor to set-up enterprises at the village level in non-agricultural sectors. A total of 1,97,168 enterprises across 23 States/UTs have been supported so far.

3. Skill India Mission-

Under this mission, Ministry of Skill Development and Entrepreneurship (MSDE) has been delivering skills through various schemes viz. the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) and the National Apprenticeship Promotion Scheme (NAPS), among others, majorly to rural youths across the country. Third party evaluations of these schemes have shown that 70.5% of PMKVY 2.0 beneficiaries (2016-20) received placement in their desired skill sector.

4. ASPIRE –

The scheme implemented by Ministry of MSME aims to provide training and incubation support to prospective entrepreneurs in agro-rural sector through Livelihood Business Incubators (LBIs). As of FY 2022, 61 LBIs have become functional in the country. A total of 54,801people have been trained in LBIs across the country, out of which 15169 trainees became self-employed and 8928 trainees got employed in other entities.

Startsups in Rural India Life away from Metros

More than 100 crore Indians, or around 65% of India, live in rural areas. A total of 63% of workers in rural areas are self-employed, 1.6 times that of urban areas, mostly in agriculture and allied sectors. This aspect defines the rural community and has huge significance in the rural way of life. The challenge for startups is to understand the intrinsic values of rural India and make products and solutions that build trust among the people, cater to their needs and aspirations, while simultaneously creating employment opportunities for them. While branding and marketing may work for startups in urban areas, trust and word-of-mouth publicity have always worked better for established companies and may hold true for startups operating in rural India as well.

Role of Digitisation

Internet penetration and data accessibility have a huge role to play in developing startup ecosystems. India has one of the cheapest data rates in the world (USD 0.17 for 1GB). Over 50% of Indians are internet users, out of which around 40 crore people reside in rural areas.
By 2025, India will have 90 crore active internet users, and 56% of the new internet users will be from rural areas.

Challenges for Rural Startups

1. Connectivity with Suppliers in Urban Areas: Rural startups often face challenges in establishing seamless connectivity with suppliers, partners, and other stakeholders based in urban areas. Limited infrastructure, including transportation and communication networks, can hinder the efficient flow of goods and services. This connectivity gap may result in delays, increased costs, and logistical complexities for rural startups, impacting their overall operational efficiency.

2. Access to Financing: Access to reliable and affordable financing remains a significant hurdle for rural startups. Financial institutions may be hesitant to invest in ventures located in remote areas, citing higher perceived risks and a lack of traditional collateral. The limited availability of banking services in rural regions exacerbates the challenge, making it difficult for startups to secure the necessary capital for business expansion, technology adoption, and infrastructure development.

3. Lack of Support System and Ecosystem in Rural India for Startups: Despite various rural entrepreneurship enabling schemes introduced by the Government of India in the last decade, there remains ample room for improvement in establishing the essential support structure and ecosystem for the development of rural startups. The absence/lack of mentorship, networking opportunities, and incubation centres can impede the growth of rural startups. The dearth of experienced mentors and business incubators in proximity makes it challenging for entrepreneurs to receive guidance, access resources, and navigate the complexities of scaling a startup in rural India.

4. Difficulty in Finding Early Adopters in Rural Areas: Identifying and convincing early adopters is a critical phase for any startup. In rural areas, the challenge is amplified due to limited communication channels, lower income, and lower digital penetration. The traditional methods of brand communication such as word-of-mouth, community engagement, and local events become crucial.

5. Limited Funding Mechanism in Rural Areas:Despite gaining a customer base in rural areas, startups struggle with a virtually non-existent funding mechanism locally. The disparity is noticeable in the concentration of startup funding primarily within major urban centres such as Bangalore, Delhi, and Mumbai, collectively accounting for 92% of startup funding over the past nine years. Investors and venture capitalists tend to be concentrated in these urban centres, creating a significant gap for rural startups. This geographical imbalance limits the growth potential of rural startups, hindering their ability to scale operations and compete on a broader scale. This also leads to multiple rural startups with bright founders migratingto the bigger urban centres.

Conclusion

Migration of startups from rural areas / Tier 2 and Tier 3 cities to innovation hubs is an inevitable phenomenon, and while it cannot be entirely prevented, the key lies in establishing an enabling innovation ecosystem in rural areas. This ecosystem is crucial for sustaining early-stage challenges and overcoming the valleys of death that startups often face. The trajectory of a rural startup may not align with the conventional path to becoming unicorns.