According to the 12th Five Year Plan, handicrafts and handlooms are a ₹24,300 crore industry contributing ₹10,000 crore to India’s export earnings annually. Handicrafts production was expected to double between 2012–2017 and exports were projected to grow at an annual rate of 18% in that period. According to a recent report by the IMARC Group, the global handicrafts market reached a value of US$ 583.4 billion in 2018. The market value is expected to grow exponentially and is projected to reach approximately US$ 1091.2 billion by 2024, expanding at a CAGR (Compound Annual Growth Rate) of more than 11% during 2019-2024.
Against this macro picture of untrammeled growth, how is the Indian artisan faring? According to the United Nations, over the past 30 years, the number of Indian artisans has decreased by 30%. In a 2016 report by AIACA under the Going Green Project funded by EU SWITCHASIA, the challenges being faced by artisans/entrepreneurs in the crafts sector in India are well analysed. Propelled by loss of markets, declining skills and difficulty catering to new markets, a large number of artisans have also migrated in distress situations to urban centres in search of low, unskilled employment in industry. Although the government has introduced a number of schemes, these have not translated into actual delivery of capacity building support to artisans.
Specific schemes to promote rural artisan entrepreneurship under the Ministry of Micro, Small and Medium Enterprises (MSME) include Prime Minister’s Employment Generation Programme (PMEGP), Scheme of Fund for Regeneration of Traditional Industries (SFURTI), a Scheme for Promoting Innovation, Rural Industry and Entrepreneurship (ASPIRE), Market Promotion Development Assistance (MPDA), Mahila Coir Yojana, for example. Social security entitlements for the artisans are sought to be addressed through insurance schemes administered by Life Insurance Corporation of India (for handloom and handicraft), health insurance for weavers. Ministry of Textiles also provides for the Technology Upgradation Fund (TUF), Integrated Handlooms Development Scheme (IHDS), Mill Gate Price Scheme and the Marketing Promotion Programme.
The Development Commissioner (Handicrafts) issues the Artisan Card that acts as a proof of identity and also facilitates the access to other government schemes. Within its ambit, the DC Handicrafts also promotes various schemes for rural artisans – Ambedkar Hastshilp Vikas Yojana (AHVY), Handicrafts Artisans Comprehensive Welfare Scheme and Infrastructure and Technology Development Scheme. The plethora of such schemes notwithstanding, the access to, awareness on and interest in these schemes are inconsistent. The processes of application are often tedious, involving time and resources, which are an obvious deterrent for smaller artisan groups/clusters. Information and awareness on eligibility and other requirements remains a challenge. From AIACA’s work with smaller artisan clusters, covering more than 110,000 craftworkers across the country, these are the most common reasons cited for not availing such schemes on the ground.
Further, the new GST regime, introduced in 2017, has brought in a number of changes that affect the handicraft industry. For example, ambiguous tax rates on different products or on the same products are creating confusion. The local money lenders and middlemen are still making money but when it comes to artists, there are taxes on raw material and on finished products too, rendering the overall production further non remunerative. Mostly, economically weaker sections are involved in crafts like weaving and handicrafts finishing. It is quite onerous for them to function online with HSN, GSTIN numbers, carrying their invoices across each stage.
AIACA has tried to address these concerns by providing trainings to enhance digital literacy skills with artisans, especially the younger age group who are more receptive to such inputs. A survey conducted by Dastkari Haat Samiti found that 90% of artisans are unaware of refund mechanisms and 75% are unaware of applicable tax rates. Indian handicraft industry is also a significant exporter of handmade items to countries like USA, United Kingdom, UAE, Netherlands and Australia. The application of GST has directly impacted the export demand which has decreased over 2017-18 since its introduction. The exports of handicrafts have primarily been affected by the continuous blockage of tax refunds. Since the refunds of input tax to exporters are not being given on time, this is affecting their cash flow, which in turn affects their ability to deliver supplies on time.
The question to ask is whether the 2019 Union Budget addresses the strategic concerns of this critical constituency. With a closer eye on specific budgetary provisions, the following are key commitments made that have the potential to impact the lives and living of the handicrafts sector:
1) Loans – Mudra And Others
₹350 crore has been allocated for 2% interest subvention for all GST-registered MSMEs on fresh or incremental loans. Under the Mudra Scheme, loans up to ₹1 lakh can be provided to women entrepreneurs.
While this investment seems to be encouraging overall for entrepreneurship, there are many practical challenges for these to reach smaller artisans and craft based entrepreneurs on the ground. The lack of penetration by scheduled banks into rural areas, lack of financial literacy and entrepreneurial skills amongst the artisans and lack of institutionalization of craft persons are significant inhibitors.
From AIACA’s experience of working with artisans to facilitate access for Mudra loans, there have been challenges in timely repayment of these loans overall and an inability, particularly for women, to exercise control over use and repayment related matters once these loans were taken in their name. Most of the loans applied for fell under the Shishu category (up to ₹50,000), which also corresponds with trends noticed in the official data coming in for 2018-19. An analysis overall states clearly that there has been a 50% increase in the non-performing assets of Mudra loans in the first 3 quarters of the last fiscal – a fact that led to banks going slow on loans through the year and resulted in unmet targets for 2018-19 under Pradhan Mantri Mudra Yojana (PMMY).
Apart from an enabling fiscal and tax environment that is required in order to drive entrepreneurial activities by artisans, there is a need to work on driving behavior change with both men and women in order to ensure equity of access and control over financial resources. This has been a particular observation in AIACA’s own work with women artisans; many of whom are relegated to non-remunerative positions in the craft value chain because of socio-cultural norms and their engagement in ancillary work. There is a strong case to be made for this in the country as well – women entrepreneurs present a strong ‘volume’ business case as there are over three million women-owned businesses in India and only about 3% of these businesses access finance from formal financial institutions. The financing gap for women-owned businesses is 73% of total requirements or approximately ₹6.37 trillion.
2) New Clusters And Schemes
100 new clusters are to be setup during 2019-20 with special focus on Bamboo, Honey and Khadi, enabling 50,000 artisans to join the economic value chain. Further, to improve the technology of such industries, the Scheme for Promotion of Innovation, Rural Industry and Entrepreneurship (ASPIRE) has been consolidated for setting up of Livelihood Business Incubators (LBIs) and Technology Business Incubators (TBIs). The scheme contemplates to set up 80 Livelihood Business Incubators (LBIs) and 20 Technology Business Incubators (TBIs) in 2019-20 to develop 75,000 skilled entrepreneurs in agro-rural industry sectors.
For smaller artisans and craft clusters, the gap is in the lack of knowledge, skills, assets and resources to take advantage of social enterprise which is, in essence, a concept of business that takes social good as an equal priority to profit-making and seeks to bring about a ‘fairer economy.’ The key question is whether artisan work is merely a subsistence/survival strategy or can become an asset building strategy that can lead to new entrepreneurial endeavours. In case of the latter, are the proposed cluster development schemes adequate or do they need to be reinforced by targeted behaviour change programmes aimed at encouraging entrepreneurial or risk taking mindsets?
For many of the rural artisans, craftwork has been relegated to a supplementary occupation, with agriculture and farm based actions assuming the lion’s share of the household income. These conditions are further extenuated by the seasonality of work, absence of other employment benefits that can co-exist with piece rate work. Any cluster based approach or technological value addition being proposed needs to take cognisance of these realities and support a market oriented model of growth that incentivises craftworkers to re-invest their time and efforts in such non-farm oriented occupations.
Data from the Development Commissioner’s (Handicraft) website confirms that more than 80% of all craftworkers in the country are from socio-economically disadvantaged backgrounds (Scheduled Caste community: 20.8%, Schedule Tribe community: 7.5% and members of Other Backward Castes: 52.4%). Questions of access and outreach of otherwise well-intentioned cluster based approaches assume critical importance against these dimensions of socio-economic marginality.
Global brands and buyers in key international markets increasingly require suppliers in developing countries such as India to adhere to fair labour practices, workplace standards and environmentally sustainable production. With the growing domestic market today which is more conscious of ethically produced environmentally sustainable products, the importance of adherence to fair, ethical, social and environmental standards is becoming extremely important in enhancing businesses.
Cluster-based development should also take cognisance of these needs and build capacities in this regard. AIACA has initiated work on environmental standard setting in the crafts sector through its Craftmark Green project, with pilots and researches across 5 materials in leather, clay, metal, textiles and natural fibres.
3) Khadi And Coir
There is an allocation of ₹1252.65 crore towards the development of Khadi, Village and Coir industries. Khadi Vikas Yojana (KVY) has received the bulk of the grant amounting to ₹396.46 crore for two new aspects namely Rozgar Yukt Gaon and Design House, besides the existing schemes.
Khadi assumes an intrinsic political identity in the history of India, owing to its origin as an expression of protest and proclamation during the freedom struggle. It was widely recognized as a driver of economic growth for the rural poor during and post-Independence, promoted variously through special Acts and allocations thereafter, and has also reinvented itself as a symbol of ethical and eco-friendly fashion in recent times.
However, there also has been subsequent research to suggest that the performance of the Khadi sector, in relation to production capacity and employment generation potential, cost effectiveness and optimal utilization of resources and internal governance and structuring, has been far from satisfactory. Keeping these in mind, the increased allocation for Khadi Vikas Yojana is aimed at facilitating job creation through the Enterprise-Led Business Model through the new component of Rozgar Yukt Gaon.
The Design House component is also a welcome addition, aimed at integrating regional variations and contemporary design inputs into Khadi products. This could be a game changer in the way Khadi is re-positioned in the domestic and global market; there are already attempts being made in this direction by a few agencies and designers.
To summarise, the 2019 Budget opens up opportunities for increased entrepreneurship and also backs these commitments through investments. However, the need of the hour is also to facilitate the creation of an enabling market-oriented ecosystem for craftwork; which has been a challenge in the face of rising competition from cheaper machine made products and the decreasing social and economic value being ascribed to traditional artisanal work in the country. Whether these larger issues will be addressed through these budgetary provisions, remains to be seen.
The All India Artisans and Craftworkers Welfare Association is an apex body that has been working since 2004 on a range of issues to promote market-led growth for the crafts sector; and increased incomes and improved living standards of crafts producers. Over the past decade, AIACA has conducted policy research and advocacy on a range of issues including access to credit for crafts producers and environmental and health and safety standards for the sector; developed a crafts-certification system called the Craftmark; assisted sales and outreach of member producer groups and enterprises through commercial trade catalogues, trade fairs and order fulfillment; and assisted in developing and strengthening back-end production systems through a range of product design and business development services. AIACA has worked with 110,000 artisans across 23 states in India.