Khadi Gram Udyog : A Tool for Economic Empowerment - Current Affair for UPSC, IAS, Civil Services and State PCS Examinations

Khadi Gram Udyog : A Tool for Economic Empowerment - Current Affair for UPSC, IAS, Civil Services and State PCS Examinations

Why in News?

International Day of Yoga (IDY), which is celebrated annually on June 21 since 2015, is going green this year. For this purpose, the Ayush ministry has tied up with the Khadi and Village Industries Commission (KVIC), a body established by the government of India to promote and facilitate khadi and villages industries in the country.


Khadi owes its revival to the 'Father of the Nation', Mahatma Gandhi. He was great visionary who saw its potential as a tool to being self-reliant, independent and bringing villages back to life. In his words: ‘The spinning wheel represents to me the hope of the masses. The masses lost their freedom, such as it was, with the loss of the Charkha. The Charkha supplemented the agriculture of the villagers and gave it dignity.’

However, he soon understood that more than the production and sale of this hand-woven fabric, it’s the acceptance of the very fabric in our own daily lives that will bring the change. Gandhi made the 'Swadeshi Movement' synonymous with khadi. He promoted its simplicity as a social equalizer and made it the nation’s fabric. He said, "if we have the ‘khadi spirit’ in us, we would surround ourselves with simplicity in every walk of life". The ‘khadi spirit’ means illimitable patience. For those who know anything about the production of khadi know how patiently the spinners and the weavers have to toil at their trade and even so must we have patience while we are spinning ‘the thread of Swaraj.’ Said Gandhiji.

Introduced with the intention of boycotting foreign goods, khadi became a national movement under Gandhi. All India Spinners Association was launched with the intention of propagation, production and the selling of khadi in 1925. Techniques were improved upon, and employment to the scale of two lakh was created. After independence, the movement continued, and the All India Khadi and Village Industries Board was created, which later culminated in the formation of Khadi, Village and Industries Commission (KVIC). KVIC today is responsible for the planning, promotion, organization and implementation of programs for the development of khadi and other village industries in rural areas with the coordination of other agencies in rural development wherever necessary.

Since independence, the journey of khadi has been about maintaining a balance between traditions and modernity. Khadi stands for what’s traditional, but every tradition has to undergo change to stay relevant. India now celebrates Khadi Day on September 19th. As per the Indian Flag Code law the government will use khadi as only material. If a flying flag is made with any other material, the offense is punishable by law with imprisonment up to three years plus a fine.

Khadi and Village Industries Commission (KVIC)

Before independence, the development of khadi and village industries was entirely a nongovernmental effort under the guidance of Mahatma Gandhi. After independence, the government of India took the responsibility of bringing the development of khadi and village industries within the overall framework of the 'Five Year Plans'. Therefore, the government of India set up KVIC, which is a statutory organization by an Act of Parliament. This organisation came up in 1956 and it plays a pivotal role in the strengthening of rural economy by promoting and developing khadi and village industries. The khadi and village industries programme plays a predominant role in providing employment opportunities to rural artisans more specifically the socioeconomic weaker strata of the society. Since agriculture sector has been losing its ability to generate additional employment opportunities for the fast increasing workforce in rural areas, the importance of KVIC has increased to find an alternative and appropriate employment for rural people.

Up to 1987-88, KVIC was entrusted with twenty six village industries. However, through an amendment of KVIC Act in 1987, the definition of village industries was changed without altering the definition of Khadi. A village industry means any industry, located in rural area (population of which does not exceed 10,000 or such other figures which may be specified), which produces any goods or renders any services with or without the use of power in which fixed capital investment (in plant, machinery, land and building) per head of an artisan or worker does not exceed Rs.15, 000. KVIC has taken up thirty four new village industries from 1988-89, in addition to the twenty six village industries entrusted to KVIC up to 1987-88. There are also few more village industries identified for being taken up in future by KVIC.

The definition of village industries was modified in the Khadi and Village Industries Commission (Amendment) Act, 2006. As per clause 2 of the Act it proposes to amend the definition of “village industry”. The amendment proposed in the definition of “village industry” raised the fixed capital investment per head of an artisan or worker to an amount not exceeding one lakh rupees instead of fifteen thousand rupees under the existing provision. This will result in increase in the number of village industries which will be eligible for assistance by the KVIC.

Importance of Village and Small Industries Sector in the Indian Economy

Indian economy is featured with large scale unemployment and poverty. Village and small scale industries play an important role in the country by providing employment opportunities in rural areas with less amount of capital. Other factors, which weigh in favour of this sector, are its capacity to attract small savings to productive channels, short gestation period, and its adaptability to rural and semi urban environment where infrastructure may not be fully developed. The village and small industries sector has been recognized as an effective tool for providing gainful self-employment opportunities. These industries are also considered an important instrument for promoting rapid industrial growth by providing greater employment opportunities in particular to women and weaker sections of society and for bringing about a reduction in regional disparities and removal of economic backwardness of the rural and undeveloped area of the country. The importance of village and small industries sector in the economy is evident from the fact that, this sector provides employment opportunities to about 23.6 million persons as against 4.5 million persons in the large and medium sector. In the sphere of exports, this sector accounted for about 45% of the total exports of manufactured goods from the country. The promotion of village and small industries continues to be an important element in the national development strategy, particularly due to its lower capital output ratio and higher employment intensity.

Place of Khadi and Village Industries in the Economic Development

Agriculture is the main source of livelihood for most of the people, and this sector is featured with chronic unemployment and underemployment. It is necessary that avenues of employment in the non-farming occupations have to be provided to tackle this problem. Khadi and village industries with its intermediate technology answer this need very well. The khadi and village Industries fulfill the social objective of providing employment to millions and ensure economic development, and help removal of the main obstacle to growth – the vicious circle of poverty. Khadi and village industries produce goods, which are articles of daily necessity like cloth, oil, gur, leather goods etc. Khadi and village industry help in the conversion of waste in to wealth. Gobar gas industry, handmade paper industry, non-edible oil, industry, soap industry are classical examples of production of wealth from waste. Thus khadi and village industries with its intermediate technology and emphasis on viability can fulfill the social objective of creating employment to millions and at the same time fulfilling the economic objective of producing saleable goods of daily use on a decentralized basis.

Challenges for Khadi and Village Industry

In spite of the huge spending by the government of India on khadi sector, there had been a decline in the production and sales of khadi and the employment generated by the sector in the last few decades. Moreover, the huge amount spent for the economic empowerment of the poor artisans is not reaching their hands.

The statistics provided by the annual reports of Ministry of Small and Medium Enterprises (MSME) showed that a rise in the plan and nonplan amount spent on Khadi sector during 1994-95 to 2014-15. But, the Comptroller and Auditor General of India (CAG) Audit report on KVIC also reveals that KVIC is ineffective in utilizing the plan and non plan funds for the Khadi sector promotion, clearly indicating the wastage of public monies.

According to the regulations of the MSME, only KVIC and KVIC certified institutions are allowed to produce khadi, creating significant entry barriers. The certification process of khadi is imposed by the government to protect the industry is not market friendly and does not cater to the interests and tastes of the customers.

Many weaving units, however, emerged only for getting KVIC rebates and other benefits but have not produced any khadi product. At the same time, this has also resulted in many piracy problems associated with khadi industry like producing spurious products in the name of Khadi through unofficial channels.

Khadi fabrics are available mostly in KVIC certified stores only, restricting the availability of Khadi products to the consumers. In addition to this, in the Khadi retail outlets, the working times are the government office timings in India, from 10 am to 5 pm. When the whole marketing is going e-commerce line 24×7 these days, the stereotypes in Khadi sector are not doing anything good for the marketing of khadi products. The marketing of khadi is mainly done by khadi institutions.

Khadi sector is an over-regulated one in India, where the entire production process, sales, distribution, and marketing is majorly regulated by the government through KVIC. The restrictive practices adopted by the government implemented through KVIC, have resulted in making the khadi industry ineffective, inefficient along with failing to deliver economic empowerment to the poor artisans working in the sector.

Way Forward

The khadi and village industries programme holds great potential for generating gainful employment opportunities for the rural poor, arresting migration of rural unskilled workers to urban areas and for promoting the strategy of sustainable development. It can also be a viable and effective social safety net to enable the poor to ward off the adverse impacts of structural adjustment and economic reforms on their wellbeing. However, this potential cannot be realised without addressing some basic challenges faced by the khadi sector.

The entry barriers in the market need to be removed and the fabric is made available to private retail stores, thereby the public is given a wider number of choices to opt. It is important to add here, that the opening up of khadi retailing to private players such as Raymond and Fabindia are good initiatives in this regard. However, at present, both require the prior permission of KVIC to retail khadi. This, is counterproductive and should be done away with.

Similarly, marketing techniques are also needed for the promotion of khadi rather than relying on outdated techniques. Here, the spinners and weavers should be allowed to work with private textile designers without the approval of KVIC. This will free up the labour market and will prevent leakages to middle men. The increase in the number of purveyors of Khadi will also prevent price monopolisation, and will increase the supply available. This will also prevent piracy problems associated with the khadi industry such as the production of fake products being sold as khadi through unofficial channels.

Export of khadi should also be looked upon for balancing international trade and commerce. At last khadi is indigenous to our country and it should be our duty to preserve, promote and propagate this worldwide.

General Studies Paper- III

  • Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.


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