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Non-farm Employment

             Some major problems that confront Rural Non-farm Employment are as follows.
             Changes in consumer preferences - The problems of low demand and excessive competition are the major problems that rural non-farm employment faces. They appear to be caused by a lack of ability to identify and connect to more distant markets, plus trouble getting the design, quality, and delivery up to standards demanded by consumers.
             The repercussions -It can therefore be expected that there would be a tendency for rural-based manufacture of basic consumption goods to decline, with an associated decline in the employment generated by such activities.
             Diseconomies of scale - The shift to services has occurred well before manufacturing matured, and the shift to larger scale forms of organisation has been extremely gradual. This has resulted in semi-capitalist forms of organisation and smaller scale units still dominate the non-agricultural sector in both urban and rural areas. This goes to show the structural stagnation in India's development.
             There are signs that even this gradual process of diversification of economic activity has lost momentum during the 1990s. This has resulted in stunted growth of the rural no -farm sector.
             Lack of Financial viability - Because of very low rate of savings, financial viability has become a serious problem.
             Unavailability of easy credit- Loans from government institutions or mandated lending by private banks often ended up in the hands of the wealthiest segment of the targeted group. Interest rate ceilings on specified types of loans are imposed as an incentive to invest but often result in credit rationing. Interest rate ceilings frequently also make it unprofitable to lend to small, rural non-farm borrowers those who can provide little information on credit worthiness and desire small loans, and have little collateral (and thus represent greater risks). This lowers the potential funds available to small and start-up enterprises, forcing them to rely more heavily on the informal market at much higher interest rates.

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