The Problem of Rural Industries

BY T. SATYANARAYANA RAO, M.A.

(Lecturer in Economics, Andhra University, Waltair)

I

The cardinal defect of the Indian economy has been its dependence on one industry–agriculture. Rapid industrialization by all possible means has been recognised to be the only remedy, and the pressure of public opinion has compelled the Government of India to adopt a policy of discriminating protection which has resulted in the development of a few important manufacturing industries on a large scale. The Swadeshi movement and the political awakening of the people have also given an impetus to industrialization.

But of late some thinkers doubt if industrialization of the centralized type on a large scale with the help of machinery on Western lines is desirable; they express the opinion that this process is fraught with all the evils of capitalism, like the conflict between capital and labour, the exploitation of workers by employers, the concentration of wealth in a few hands and all the other evils of industrialization, like over-crowding and unhealthy conditions in industrial centres, unemployment, etc. These people, headed by Mahatma Gandhi, have inaugurated a movement for the revival of rural industries and the decentralization of all industries with a few exceptions. The AIl-India Village Industries Association and the Gandhi Seva Sangh stand for this revitalization of cottage industries. The new Provincial Governments have also shown their readiness to help these industries by grants from their revenues (e.g. for Khaddar) and by charging the Departments of Industries first and foremost with the care of cottage industries.

The reorganisation and development of rural industries is important and should of course receive all earnest attention from the Government and the people. But some enthusiasts are carrying this policy too far, by advocating a complete replacement of all large-scale and mechanized industry by small decentralized units, except in transport, power and the like. They believe that large-scale industries bring in the capitalist who monopolizes all the profit, whereas in a system of handicrafts, the worker is also he entrepreneur and hence the profits go to him. A Large-scale industry produces things by the mass, with the help of very little labour, so that there is wide-spread unemployment and under- employment. Then there is the problem of finding a market for the goods thus produced, which leads to rivalry among nations, Imperialism, and war. By reverting to the old system of the self-sufficient village economy, where the craftsmen produce for local needs, the difficult problem of marketing goods is avoided. The evils of industrialization like overcrowding are eliminated. There is also the possibility of the agriculturist utilising his leisure in subsidiary occupations, thus augmenting his meagre income. These, and other arguments like the artistic superiority of handicrafts and the spiritual superiority of a system of village industries over one of mechanized industry, are put forward in favour of reverting to a decentralized craft system. It is also being proposed, of late, to make these crafts the basis through which education is to be imparted to our children in the elementary stage.

These proposals sound very simple and are attractive. It looks as though by adopting this programme of industrial decentralization, we should be able to solve all the major economic and political problems of the world. But on a closer examination, it will be found that the problem is not quite so simple.

First of all it has to be realized that the system of handicrafts which prevailed in this country, as well as elsewhere, has disappeared mainly as a result of competition from the machine with its superior technical efficiency. The machine has enabled man to produce at lower cost and to raise his standard of living. By increasing specialization and geographical division of labour. It has become possible to produce things on a mass scale and make them available even to the poorest of the poor. Cheap and fast means of transport, cheap clothing and food, and even articles formerly considered luxuries are available to the poor at low prices. Men have become accustomed to things like printing, motor-transport, and even electricity and the radio. Going on industrialization, particularly for a country like ours, is to make poor people still poorer by depriving them of efficient means of production and making their daily needs costlier than what they are.

The old, self-sufficient village economy does not exist now anywhere. Even in agriculture the production of money-crops for export and sale elsewhere has replaced the production of crops for local c6nsumption. It is no longer possible to confine production to the need of the local market, for the simple reason that due to competition all products should seek the best markets wherever they exist. The restoration of self-sufficiency is therefore practically impossible.

Then, will the elimination of machinery and concentrated industry remove the evils of capitalism? The machine is after all a tool, even if a large, intricate, and efficient tool. It has enabled people to produce wealth on a large scale. If this wealth is not transferred to the workers but retained by the capitalists, then that is not the fault of the machine, but of the system of distribution of wealth and ownership of property. It is by remedying the faults in the social system that the evil can be mended and not by changing the means of producing wealth. The exploitation of one class by another cannot be abolished by giving up machinery. One has only to look at agriculture, the most rural of all occupations and the smallest industry in point of scale, to see all the evils of capitalist rampant–oppression of the tenant and the labourer by the landlord and the money-lender. Similar is the condition of the artisan–he is entirely dependent on the capitalist-trader for the advance of raw materials, for the purchase of the finished good and for credit for other expenses. All the artisans in important cottage industries–the hand-loom, the brassware and the carpet-making–are found to be irredeemably indebted to the capitalist dealers, who dominate the whole industry. Their tools like the looms, do not belong to the artisans in many cases. All attempts at freeing them from the capitalists by means of co-operative organization have failed. The conclusion from all this is clear. As long as capitalist finance can be invested in land or cottage industries, or large-scale enterprises, the results are the same; the technical organization and the scale of industry are largely immaterial. The remedy for undesirable relations between employers and the employed lies in the Government successfully evolving a mechanism by which these relations are controlled and adjusted, or by the evolution of a superior type of social system.

Then there is the question of unemployment. It is argued that large-scale industry would after all give employment to a fewpeople, while decentralized industry would employ many more. If the arguments of the enthusiasts for village industries are to be taken seriously, the stopping of all technical progress will help a good deal in solving the problem of unemployment. Nobody would seriously contend, for instance, that the replacement of railway-trains by bullock-carts would increase employment. No doubt, with every step in technical progress a section of people hitherto employed will be displaced. But if social conditions are well adjusted, It should be possible to re-absorb these people elsewhere. The only result of scrapping advanced methods of production will be to contract the scope of production and thereby aggravate the problem of unemployment rather than relieve it. If we decide to give up our large-scale industries, the result will be that our artisans will be undersold by foreign producers, and the artisans as well as the people who would have been employed by large-scale industries will have to seek employment in agriculture. Everybody may ‘employ’ himself in doing something, but that would fetch him hardly any ‘Income.’

It is argued by Dr. Vera Anstey that Indian industry has not absorbed an increasing share of the growing population of India in spite of the fact that industrial production has increased to a very large extent with the help of a protective tariff. From this she concludes that a small section of industrial workers is maintaining its standard of living at the expense of the masses, and opines that it would be better to follow a policy of encouraging agriculture and small scale industries.¹ These conclusions are not correct; for the experience from which they are drawn relates to a period of severe economic depression, in which industry has everywhere disgorged a number of workers from employment. Under these conditions it is quite creditable that Indian industry has been able to employ at least the same proportion of a rapidly increasing population. Nor have the prices of Indian products remained as high as the protective tariff would in theory have enabled them to stand. The problem of unemployment is probably the most fundamental problem of our economic system, and it cannot be cured merely by changing the technical organization of industry. It is concerned more with problems of investment and the decisions of entrepreneurs concerning vital problems in production. Its solution involves very radical changes in the organization of the monetary mechanism and in the direction of industry. To imagine that it would be solved merely by replacing large industrial units by small ones is to underrate the enormity of the problem.

Industrialization has no doubt led in the past to evils like overcrowding and slums, but these are not inevitable. With proper planning and Government control these can easily be prevented.

Thus we see that the scrapping of machinery does not eliminate the most important evils of capitalism. It only means that capitalism employs small machines in many places, instead of concentrating large machines in a few places. The faults of capitalism are not those of the means of production it employs, but of the system of the ownership and usage of these meansin the present social order. It is only by a radical alteration of these features of our social order that the most urgent problems of our day can be solved.

Even granting that a decentralized system of production is better in some ways than a centralized system, it has to be asked how far it is possible to revive it under present conditions.

The fundamental difficulty of establishing such an industrial system for this country lies in the consequent technical efficiency to a very serious extent. In the modern competitive system, unless we adopt the most efficient methods of production, we will be undersold by the foreigner. If we try to protect ourselves by means of tariff walls, either the foreigner or an Indian capitalist, or both together, will start the industry within the country and reap enormous profits. If we are to prevent such developments by the use of political power (which we do not at present possess) there is no reason why the same power should not be used to organize and control a well-planned and efficient modern productive system without the evils that have cropped up elsewhere.

In a poor country like India, cheapness of articles is the primary condition of their consumption, and coupled with novelty and attractiveness, the appeal is irresistible. That is the reason for the enormous popularity of cheap Japanese articles which are sold by the million in spite of a high tariff, the Swadeshi movement and even anti-Japanese feeling. The cheap goods of Japan, textiles and toys, bicycles and torches, footwear and rubber goods and several other fancy articles which have penetrated into the remotest of villages, provide ample proof of this tendency. Poor people cannot afford to think of anything else than the balancing of their own budgets; they do not mind even if the cheap articles they purchase do not last as well as costlier ones. Their problem is one of making both ends meet within a small income. That is why even the artisan who produces hand-made goods of high quality goes in for cheap machine-made articles. The great extent to which ply-wood has entered into the making of furniture, and the replacement of silk by artificial silk, with serious consequences to the industry of sericulture are examples of cheap products replacing costly ones. In a competitive economic system, the only way in which one can help oneself is by buying the cheapest product, consistent with quality, and leaving as large a margin of unspent income as possible for other purposes.

Then there is the argument that mass production leads to the struggle for markets, to Imperialism, war, and violence. Here again, the solution lies not in curtailing production but in organizing production for use rather than profit. The worst thing a country can do to prevent Imperialist violence is to remain industrially undeveloped, thereby offering a tempting field for exploitation by industrially advanced nations. We do not prevent mechanized industry by ourselves not adopting it. Whatever the philosophy of non-violence may mean, it cannot be a philosophy of weakness, either physical or industrial.

The conclusion one would be led to from the above arguments is that there are overwhelming difficulties in the way of establishing any large system of decentralised rural industries in the place of organized modem industries, and that, in the interests of increasing production and raising the standard of living in this country, we have to resort to the most up-to-date and modem methods of mechanized production. We have also to emancipate ourselves from dependence on foreign countries for machines and build up our own machine-making industries.

Hence it is clear that large-scale industry has come to stay in India, and that the industrialization of the country will depend, to an increasingly large extent, on these industries. These industries should be carefully planned, located at suitable centres, and should aim at producing the many things needed by the Indian masses at very low cost. The attempt should not be merely to replace things which are now being imported, but to study and understand the needs of the people and cater to those needs, which will mean producing much more than we now import, and employing a very large number of people.

But then what is the place of rural industries in the Indian economy? Undoubtedly they occupy a very important place. Out of a total number of 26 millions of industrial workers and dependents in the country, only about 1.5 million are factory workers. This clearly shows that an overwhelming part of our industrial population is employed in small-scale industries. In a vast country like ours, where people have mostly in villages far off from market centres, in spite of all improvement in communications, the local artisan and small handicraftsman are bound to continue to occupy an essential place. And then again, just as it is possible for a small factory to compete successfully with large one and carry on, it is also possible for small cottage industries to compete successfully with large-scale industries, either because of the special nature of their products, as in the case of artistic handicrafts, or because the cheapness of labour offsets the technical advantage of the machine, as in the case of the hand-loom industry. While every cottage industry that has once lived cannot be resuscitated, and while every existing industry cannot be maintained, it is clear that several of the existing cottage industries are likely to live successfully and new industries can arise, adapt themselves to new conditions and work successfully. The path of wisdom lies, not in trying to bring up every small-scale industry without reference to its economic possibilities, but in selecting those which can be made to work successfully and to support them. Here, as in the case of large industries, what is required is something like a policy of ‘discriminating protection.’ Indiscriminate support of every cottage industry, without reference to its economic possibilities, is more a source of discredit than of help to the movement.

II

Rural industries can conveniently be considered under three classes. Firstly, there are industries which supply subsidiary occupations to the agriculturists during their spare time. Secondly, there are the activities of the village artisans like the carpenter, the blacksmith, the oil-crusher, the goldsmith and so on. Thirdly, there are industries which are organized on a small scale in rural and urban centres, and produce for local consumption, sale at markets and even export, like hand-loom weaving.

The importance of subsidiary occupations lies in the fact that, under present conditions, agriculture does not absorb all the available time of the agriculturist. The available spare time is sometimes exaggerated, but the Agricultural Commission’s, estimate of two to four months in a year can be taken as correct. Even this spare time is occupied in many cases by agricultural operations like manuring, carting, repairing houses, attending to cattle, and so on. The Madras Provincial Banking Enquiry Committee is of the opinion that, except in dry areas, the spare time is not too much, and point out that while the big ryot who employs farm-servants will not care for cottage industry, "to urge the smaller ryot who works on his own land to take up other occupations also, is in many cases to invite him to neglect agriculture."² The Agricultural Commission also express the opinion that the problem of surplus population on the land has to be tackled mainly by improving agriculture and shifting a part of the population definitely into other industries. Subsidiary occupations are no doubt important in dry areas, but "the difficulty is to find a profitable industry which can be carried on in the village with little capital and taken up and dropped according to season."²

The processes for preparing agricultural produce should offer convenient subsidiary occupations for the agriculturists; but even here rice-mills, cotton-presses, flour-mills, and oil-mills have spread allover the country-side. The movement in favour of hand-pounded rice for reasons of health will help the labourers to some extent in competing with the mills, but the fact that these mills have become important links in the chain of marketing agricultural produce makes them very powerful rivals to compete with.

There are other subsidiary industries like dairy-farming, cattle-breeding, poultry-farming, bee-keeping, and vegetable gardening which go easily along with agriculture. They are also profitable, but the main difficulty here is one of marketing. In areas near towns these occupations are profitable, but elsewhere they cannot be pursued with profit unless considerable improvement is effected in methods of marketing and communications.

The subsidiary industry which is advocated by the most influential and popular political organization in the country is that of hand-spinning. This industry is now receiving subsidies from some provincial Governments. But this cannot be calculated upon as a permanent proposition, because of the very low yield from hand-spinning, and because of the very high prices of Khadi goods (under the new minimum wage plan) which make them prohibitively costly for poor people. Though Khadi sales have been increasing, due to political considerations, it is clear that only the rich and the middle class people are purchasing it, mainly in urban centres.

It may be asked why the agriculturist should purchase Khaddar. Why should he not spin and make his own cloth when he has nothing else to do? Viewed as a domestic occupation when the villager has nothing else to do, it is certainly a better way of spending one’s time than idling it away in gossip. But the peasant is hardly so very rational. The saving is so small that it does not catch his imagination. The peasant could save money in many other ways if he cared–he could give up smoking, he could walk or travel by cart or by boat instead of by bus, he could avoid factional troubles and litigation, and spend less on ceremonies. But he hardly does any of these things. In the same way he prefers to enjoy leisure rather than work at the spinning-wheel and save a few annas. Thus, as a domestic occupation in spare time, hand-spinning has a place, but it does not appeal to the ryot. As an industry it has no permanent place because its products are too costly in comparison even with handloom products.

Thus, the problem regarding subsidiary industries is one of organizing those which can be easily managed along with agriculture, and the products of which can be marketed at a profit. As it has already been pointed out, the industries which offer the best scope for organization in this connection are those concerned with cattle-breeding and animal husbandry.

Seri-culture is another industry which can be carried on as a profitable subsidiary occupation, but how far this industry would continue to be profitable depends on the extent of competition from artificial silk goods which are becoming increasingly popular.

Secondly, we have to consider the position of the village artisans. These people formed an integral part of the self-sufficient village economy of old. But with the breaking up of that economy their position has also considerably deteriorated. The products of organized manufacturing shops of the towns and imported goods are replacing their products to a great extent. Even the potter’s wares are replaced by cheap aluminium vessels and the cobbler finds it difficult to compete with cheap canvas-shoes and sandals turned out by the factory.

But the artisans still hold their position, because, after all, the villages are far off from urban centres, and there are so many small services which the villagers need. Their position can be strengthened by their adapting themselves to the new environment, using convenient factory products like ply-wood, sheet-metal, nails and bars and so on, to produce the articles needed by the villagers. They can also use small and simple power-driven machinery (especially if cheap electric power becomes available to them) and acquire the mechanical skill necessary to repair such machinery. The Agricultural Commission suggest that they can be used as agents to stock spare-parts by firms producing agricultural implements. Above all, what they need are technical and mechanical education and new ideas which can be useful in producing things suitable to new tastes.

Then there is the third type of rural industries, which are carried on by artisans either in their homes or in karkhanas, and which produce articles both for local consumption and sale elsewhere. It is this category that is generally in the minds of people when they speak of cottage industries. The most important of this large group of industries is hand-loom weaving. There are several other important cottage industries like the metal-ware industry, the slate and marble industry, the wood and underwood industries, the bamboo, cane, palmyra and other reed products, lacquer work, gold and silver-thread industry, the leather industries, the carpet industry, the ivory industry and so on. In the Madras Presidency alone twenty groups of these industries have been surveyed. ³

Several of these industries are, in spite of great handicaps, competing successfully with factory products. It is clear that many of them are economically sound and can be made to work better and more extensively with the help of technical improvements, finance and, above all, organization.

Typical of these industries is the hand-loom industry, which is widespread all over the country. It is estimated that in the Madras Presidency alone there were about 259,451 looms working in 1928, and in the whole of India, the hand-looms were producing after the war 1,190 million yards per annum. The output should be much more at present.⁴ In the Madras Presidency, it was estimated that the handlooms produced, in the decade ending 1920, five times the cloth produced by power-looms. This industry has certain advantages like the cheapness of labour, the low cost of looms, the specialised nature of the cloth produced by the weavers (like sarees of certain types), the comparative strength and durability of the hand-woven products, the inherited skill of the weaver and the assistance of his family. The main disabilities of the hand-loom industry and other similar industries have been (i) inadequacy of finance, (ii) control by capitalist middlemen, (iii) indebtedness to the middleman and consequent slavery of the artisan, (iv) lack of general and technical education, and hence ignorance of improved methods (v) addiction to drink and other bad habits (vi) lack of facilities for marketing, and (vii) bad management.

The problem of marketing is more important than all the other problems. While cottage industries have some technical advantages like cheap labour power, which enable the optimum technical unit to be small, as regards management, finance, and marketing, all the advantages lie with the large units. The Madras Provincial Banking Enquiry Committee say:

"The problem reduces itself largely to one of marketing. It is useless to increase production for local consumption. The requirements of the population in hand-woven cloths for wearing apparel are limited, and if they are to increase production and compete in other markets, a co-operative selling organization can be of great help, but standardization of the production and a guarantee of quality appear to be essential."

This means that for purposes of management, supervision, checking the quality of the weaver’s work, advancing material and collecting and marketing the finished products, an organization is needed. Such an organization will also have to study the markets, devise patterns according to demand, and place the orders with the weavers. The advantages of possessing such an organization can clearly be seen in the shoe industry as managed by the Batas, as well as in the successful organization of the Khadi industry by the A. I. S. A.

From this it is clear that finance, management, and marketing have to be centralized even in cottage industries. That is why the capitalist middleman has such a hold over these industries. The Special Officer who conducted the survey on cottage industries in the Madras Presidency came to the conclusion that "except in really rural industries such as making of products from bamboo and other reeds for domestic purposes, the assistance of the middleman is indispensable."

The starting of co-operative purchase and sale societies and the giving of financial help by the State in the shape of loans are generally recommended. The Departments of Industries are already doing some work in giving technical advice, in demonstrating better methods of production, and in imparting technical education. The State Aid to Industries Act has been amended in Madras with a view to making it more useful to industrialists. Co-operative purchase and sale societies have also been started but they have not been very successful. The Government of India have made grants to the Provinces to assist the handloom industry, and the cottage woollen industry. The Government of India’s grant was used in the Madras Presidency to provide a subsidy to the Weavers’ Provincial Co-operative Society. The society is expected to deal with weavers’ societies and co-ordinate their work, help them in marketing their goods with the advice of the expert Marketing Officer of the society, help them in designing new patterns of cloth and in adopting improved methods.

Though industrial co-operation has made much progress in countries like England, the experience in India has not been satisfactory. The condition of the artisan–his poverty, illiteracy and lack of character–as well as the risky and probably uneconomic nature of the industries chosen, has also been responsible for failure. Besides, the greatest defect in these societies has been the lack of managerial ability and marketing skill in their executive officers. The mere starting of a co-operative society does not impart either experience or skill to one of its members. Moreover, a co-operative society will have to start with borrowed finances which mean an interest burden from the beginning, whereas a joint stock company will pay dividends only after it earns them.

Hence, it may be better to start semi-capitalistic organizations like the A. I. S. A., in the shape of regional syndicates for groups of cottage industries. These syndicates can get capital by subscription from the public, and the Government can also subscribe a part of the capital. They will have to advance material to the artisan, supervise and control his production, take it, advertise it and market it. These regional syndicates may be federated into a central Syndicate for purposes of co-ordination and the export of products. It is only by such an organization, based thoroughly on business principles, that any significant revival of cottage industries can be expected.

The Madras Presidency is extremely fortunate in possessing a Minister for Industries who is well known for his experience of labour and large-scale industries, and who realises the need for a co-ordinated system of large as well as small industries all over the country. It is not too much to hope that under his wise guidance a thorough enquiry will be made into the problem of successfully organizing large and small industries on a well co-ordinated plan.

1 Dr. Vera Anstey: "India’s Economic Position and Policy in relation to thenew Constitution," in the Economica. August, 1936.

2 Report of the Madras Provincial Banking Enquiry Committee, Page 141.

3 Report on the Survey of Cottage Industries in the Madras Presidency.

4 In an article on "India’s Cotton Mill Industry" in the Statesman, Engineering Supplement, dated Sept. 1, 1937, cloth produced by hand-looms has been estimated at 1600 million yards as against 3500 million yards produced by the mills,