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Govt Incentives for Small Businesses in Rural India

Special emphasis on the industrial development of backward, tribal and hilly areas has been the concern of the Government of India expressed in all the Five Year Plans and industrial policy statements. Realising that backward areas development is a long-term process, several committees were appointed to identify the criteria for identifying backward areas and also to suggest schemes to take up the Herculean task of balanced regional development.

The implementation of integrated rural development programme is one such attempt made by the government to develop backward areas. The rural industries project programme initiated by the Government of India was meant to develop small business units in select rural areas. Though the backward area development programmes varied from state to state, they cumulatively represented a significant package of incentives to attract industries in backward areas. Some of the common incentives offered to small scale industries in rural areas are:

  • Land – Every state offers developed plots for setting up of industries. The terms and conditions may vary. Some states don’t charge rent in the initial years, while some allow payment in installments.
  • Power - Electricity is supplied at a concessional rate of 50 per cent, while some states exempt such units from payment in the initial years.
  • Water – is supplied on a no-profit, no-loss basis or with 50 per cent concession or exemption from water charges for a period of 5 years.
  • Sales Tax - In all union territories,industries are exempted from sales tax, while some states extend exemption for 5 years period.
  • Raw materials - Units located in backward areas get preferential treatment in the matter of allotment of scarce raw materials like cement, iron and steel etc.
  • Finance - Subsidy of 10-15 per cent is given for building capital assets. Loans are also offered at concessional rates.
  • Industrial estates - Some states encourage setting up of industrial estates in backward areas.
  • Tax holiday - Exemption from paying taxes for 5 or 10 years is given to industries established in backward, hilly and tribal areas.

To sum up, it may be stated that the small business sector in India is getting the support of government through various institutions in different forms for different purposes. Despite special attention being given to backward areas, it is observed that imbalances in development are still there. There is a need to develop infrastructural facilities in these areas, as no amount of subsidies or concessions can overcome the natural handicaps caused by a lack of such facilities.


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11 Responses

  1. Dear sir,

    I want to start a ssi unit near bhiwandi in rural area pl guide me were should i start and what kind of govt support can I have in seting up an ssi unit. such as int subsidies,capital subsidies,loan for machineries etc.

  2. sir,
    I am graduate in commerce. i have lived in rural area in eastgodhavari dist andhrapradesh. I planed small scale industries establushed in my area. Labour is available in my area. please guide to my idea.
    thanking you sir.


  3. Dear Sir,

    I am Amjadkhan from Karnataka,India.I own a land of 3 Acre ,it is 16 Kms far from Tumkur(Dt.).I am an Accountant by Profession.[NRI].I want to Start Poultary Farm & Bricks Factory,for which i manpower.Currently i have an Ability to Invest 3-4 intension for Business is not only Profits,also Employment & Development up to Standards.PLease help me out for Sourcing Finance & Even if somebody looking to join as Partners also Encouraged.

  4. Dear Sir,

    I have planned to construct a marriage hall at Pune District. (Rural area) The capital requirement for the same is around 30-35 Lakhs and I need the complete finance from bank or any financial institution at subsidies rate of interest. I have purchased land there and working in a private organization.

    Please could you let me know to whom I can approach for loan and what other government requirements for constructing a marriage hall. For example: licenses requirement, approval from government bodies, etc.

    Please could you email you with your reply.

    Thank you.

  5. sir, which is the best industry to open for my customer. with subsidy.
    thanq sir,

  6. sir , v hav got cadec traning . . . . v hav got around 25 lac and i want to start an small scale in karnataka
    kindly suggest an idea to grow us

  7. sir i am running a plastic reprocessing unit in chennai and iwant to know about the subsidies given by the govt. for us . thank you

  8. Sir, I have some target to establish a small scale fruit juice industry and many other fooding, and organic vegitable farm in the remote areas of Darjeeling. The green house are very rare in this area, which is the most suitable thing for the production oorganic food and vegitable in all over India. Please suggest the helpful….
    with regards,

  9. i am a memmber grama panchayath I wish develop my village establishing small industries in each wards please advise which will be suitable for. I like
    readymade garments which may help to give more jobs

  10. Dear sir
    i m an MBA working for an MNC as 2nd line MANAGER
    sir i want to start a manufacturing unit for readymade garments to cater domestic markets and want to start a spice powder manufacturing unit in one of the most backward district of ORISSA ,MAYURBHANJ and want to provide employment for un emploied graduates
    so here by please advise me govnt organisations address n details so that i can ask for grants

  11. sir, i want to devlop a small scale industry in rural area .please help