Rural Industrial Entrepreneurship
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Rural Industrial Entrepreneurship The Case of Bardhaman District in West Bengal Subrata Dutta Promotoren : Professor Dr. Henk Folmer Hoogleraar in de Algemene Economie Wageningen Universiteit, Nederland Professor Dr. Wim J.M. Heijman Hoogleraar in de Regionale Economie Wageningen Universiteit, Nederland Co-promotor : Professor Dr. Amita Majumder Economic Research Unit Indian Statistical Institute, Kolkata, India Promotiecommissie : Professor Dr. Arie Kuyvenhoven, Wageningen Universiteit Professor Dr. Gerrit Antonides, Wageningen Universiteit Dr. Han H.L. Oud, Universiteit van Nijmegen Dr. Sudha Loman, Wageningen Universiteit Dit onderzoek is uitgevoerd binnen de 'Mansholt Graduate School of Social Sciences' Rural Industrial Entrepreneurship The Case of Bardhaman District in West Bengal Subrata Dutta Proefschrift ter verkrijging van de graad van doctor op gezag van de rector magnificus van Wageningen Universiteit prof. dr. ir. L. Speelman in het openbaar te verdedigen op woensdag 9 juni 2004 des namiddags te 16.00 uur in de Aula Subrata Dutta Rural Industrial Entrepreneurship: The Case of Bardhaman District in West Bengal Ph.D. Thesis, Wageningen University, Wageningen, The Netherlands, 2004 ISBN 90-8504-046-9 Key words: Rural Development / Rural Industry / Entrepreneurship / Non-farm Sector / Non-agricultural Sector / Culture / LISREL Model / Simultaneous Equations System / Bardhaman (Burdwan) District / West Bengal / India All rights reserved To My mother, my wife (Sumita) and my son (Sagnik) Acknowledgements It was Professor Asim Chaudhuri of Rabindra Bharati University, Kolkata, who brought me to academia. So, at the very beginning, I pay my gratitude to him. I remember, as a teacher in Bachelors and Masters, he drew our attention by his fascinating lectures on classical political economy. I had a hidden passion for studying lives but found no sincere indulgence. Four years after I completed my Masters in economics, coincidentally one day I saw Professor Chaudhuri at the library of the United States Information Services at Kolkata and he encouraged me to switch over from non-academia to the area of research. I entered. But the new world was not that interesting to me simply because I lacked something. What was that something? – Something like a clear vision that helps one pierce the depth of ideas first, then bridge the ideas with aims, and finally reach the aims. So, it’s a journey. And making the journey worth is an art, and, of course, science too. That is what I could first perceive when I came in touch with Professor Henk Folmer at Wageningen University in the Netherlands. He is the main supervisor of my study. I owe my gratitude to him since he is the person from whom I learned how a complete research work should be designed and carried out. His repeated critical notes on my drafts stimulated me to improve the thesis a lot. In my eyes, he is a dedicated scientist. Not only as a supervisor, but also as a human being he is a very nice and fantastic person indeed. I am indebted to my second supervisor Professor Wim Heijman of Wageningen University because he introduced me with Professor Folmer in 2000. I remember that first I started my Ph.D. study at Maastricht School of Management (MSM) in 1999. But I had to look for a supervisor outside of MSM because there was no faculty available in the area of my interest, i.e. development economics. So, I met Professor Heijman while he was visiting MSM as a guest faculty and that was the beginning of our journey. During the period of study, Professor Heijman controlled many aspects of organisation, which have been helpful to carry out the work smoothly. My co-supervisor in India, Professor Amita Majumder of the Economic Research Unit, Indian Statistical Institute, Kolkata, helped and encouraged me a lot during the study. Her valuable guidance right from vii preparing the questionnaires to completing the thesis considerably enriched the whole work. Without her continuous support, especially during the estimation of the LISREL model, I could not have finished this study. I express my sincere gratitude to Professor Majumder. I am sincerely grateful to Dr. Han Oud of Nijmegen University, the Netherlands, for his valuable suggestions during estimation of the LISREL model. Without his help too, it would not have been possible for me to finish the study. I have learnt a lot from him since he is one of the few experts in LISREL. I have been introduced with Professor Gerrit Antonides at our department in Wageningen University just two weeks back and I am really thankful to him for his constructive remarks on my thesis. My special thanks go to Dr. Rein Haagsma, Dr. Sudha Loman, Dr. Pierre van Mouche, Dr. Johan van Ophem, and Dr. Jan Rouwendal of our department in Wageningen University for offering me all kinds of study support I requested for and a very nice academic atmosphere at Wageningen. I also convey my thanks to Professor Asok Maiti and Dr. Subhendu Chakrabarti of the Indian Statistical Institute for their moral support. I am also thankful to Dr. Wilbert Houweling of Wageningen University for his several helps. I am grateful to the Maastricht School of Management (MSM) for their all-out support during this study. Especially, the comments of Professor M. van Beugen and Dr. L. Alcorta on my proposal are gratefully acknowledged. I thank Mr. Jos Linssen and Mr. Ron Soeren for they have taken care of several official aspects of my study. I acknowledge the support of Ashish Kumar (India), S.P. Premaratne (Sri Lanka), Osama Isdudi (Palestine) and Md. Mewan (Sudan) – my Ph.D. batch mates at MSM. The support I have received from the two great ladies, i.e. two secretaries of our department at Wageningen University – Ms Annelies Coppelmans and Ms Margaret van Wissen, is really unforgettable. It is difficult for me to express my feeling of gratitude towards them in words. Many many thanks to them for what they have done for me. I thank my Ph.D. batch mates at Wageningen—Judith Cornelisse (the Netherlands), Muyeye Chambwera (Zimbabwe), Pius Odunga (Kenya), Hoang Nguyen-Huy (Vietnam), viii Morteza Chalak (Iran)—for their friendship and support. Especially I want to mention the name of Judith for she has provided me with enormous support. Anybody will be proud of having a friend like Judith. I thank the fieldworkers—Dilip Rana, Pranab Datta, Tirtha Dey, Satrajit Goswami and Shirsendu Gupta—for their participation in data collection in Bardhaman district. I am deeply shocked that my father – who passed away last December—could not see this book. This dissatisfaction of mine will never be covered up. But the good news is that I have become a father in November last year. My son, Sagnik, has brought new lights to our family. My mother is the source of all my inspiration. My respects go to her for all her love and support. My wife never seriously complained for not providing her with even a little company; rather she provided me with direct helps (along with indirect support) during my study in several ways—sometimes in composing texts in word file, or in inserting data in excel file. I am really thankful to her for her all kinds of support. Special gratitude goes to my three aunts (my mother’s sisters) who have always loved me and taken care of me. I also thank all my other friends and well-wishers in India as well as in the Netherlands. Subrata Dutta Wageningen, 9 May 2004 ix x CONTENTS Acknowledgements vii Contents xi Abstract xvii Map of Bardhaman district xix 1 INTRODUCTION 1 1.1 Introduction 1 1.2 Poverty: The problem 2 1.3 Poverty in India (with special reference to rural poverty) 5 1.4 Rural poverty in West Bengal 8 1.5 Poverty alleviation 11 1.6 Definition of small-scale industries in India 12 1.7 What is misleading? 15 1.8 Definition of rural industry 16 1.9 Definition used in the present study 19 1.10 The objective of the study and the research question 20 1.11 Significance of the study 21 1.12 Organisation of the study 26 2 THE STUDY AREA 29 2.1 Introduction 29 2.2 Murshidabad: the starting place of British regime 30 2.3 Bengal in retrospect 31 2.4 A brief history of Bengali entrepreneurship 33 2.5 Agriculture in West Bengal 37 2.5.1 The growth debate 37 2.6 Industry in Wets Bengal 44 xi 2.7 Urbanisation and infrastructure in West Bengal 48 2.8 Urban centres and small-scale industries in West Bengal 51 2.9 Rural industrialisation and the role of infrastructure in rural towns 55 2.10 Bardhaman’s economy in retrospect: a glimpse 59 2.11 Recent Bardhaman: a glimpse 61 APPENDIX 2.1: Overall description of Bardhaman district 66 3 ISSUES RELATING TO RURAL INDUSTRIES: A REVIEW OF LITERATURE 71 3.1 Introduction 71 3.2 Agriculture-Industry linkage: The classical political economy framework 73 3.2.1 The Physiocrats and Adam Smith 73 3.2.2 Karl Marx 76 3.3 Categorisation of non-farm sector 79 3.4 Kuznets’s growth theory 82 3.5 Relationship between agriculture and industrial growth 86 3.6 Linkages: theories and debate 90 3.7 Japanese experience in brief 102 3.7.1 Agriculture/non-agriculture linkage 102 3.7.2 Transformation from traditional industries to modern industries 104 3.8 Reasons for household participation in rural non-farm activities 105 3.9 Secondary and seasonal employment in non-farm activities 106 3.10 Sectoral composition of rural non-farm employment 107 3.11 Hymer-Resnick model vs. Ranis-Stewart models 113 3.11.1 Hymer-Resnick model 113 3.11.2 The Ranis-Stewart models: colonials and post-colonials 114 3.11.3 Colonial archetypes 119 3.11.4 Post-colonial archetypes 120 3.12 Urbanisation