The Financial Express

Flourishing rural economic units

| Updated: October 25, 2017 01:45:26

Flourishing rural economic units
Findings of a country-wide survey conducted by the Bangladesh Bureau of Statistics (BBS) showed that the country's rural economy is noticeably characterised by numerous small and medium economic units. Interestingly, and curiously too, operation of these units are not agro-centric-a revelation that many may find a little incongruous given the general assumption that agriculture is the lifeblood of Bangladesh's rural economy. At the dissemination seminar on the Final Report of the BBS Economic Census 2013, it became clear that the key to the expansion of rural economic activities is the stimulus from non-farm economic units which have been flourishing over the years.
Economic units, as defined in the report, are those that contribute to the country's gross domestic product ranging from manual labour such as rickshaw-pulling to manufacturing. Agriculture, forestry, fishing, household activities and services for consumption of the household members were kept outside the survey accounting. According to the Final Report, 71.48 per cent of economic establishments are situated in rural areas, 8.87 percentage points up from that a decade earlier when the share of economic units was 62.61 per cent in rural areas. The number of total economic units has now become more than double in a decade, at 7.9 million -- 111 per cent up from 3.8 million in 2003. Of these, 5.59 million units are situated in rural areas. The figure was 2.32 million in 2003. The remaining units are situated in urban areas. According to the report, 87.78 per cent, or 6.76 million units, have less than Tk 500,000 as fixed assets.
One interesting observation that emerges from the aforementioned picture, attested as well by economists present at the event is that increase in non-agricultural economic activities by way of the much desired diversification through concentration on non-farm income-generating activities is not only positive as a dependable source of rural earning but also instrumental in contributing to reduction of inequality between rural and urban economy. Noted Economist Wahiduddin Mahmud said at the seminar that rural people are now engaged in multiple economic activities instead of only agricultural farm jobs. As a result, contribution of rural area-based SMEs to national economy is getting stronger and gradually this sector will lead the country's economy in future. This goes to further reinforce the reality that small entrepreneurs, outside the agricultural sector, do have the strength to secure their earnings in the changed dynamism of the country's rural economy. Referring to this changed dynamism, Economist and researcher Hossain Zillur Rahman said that Bangladesh economy became resilient to global recession because of the millions of small economic units across the country. The government should include these units in the definition of SMEs so that these also can get finance and other institutional support. He further added with emphasis that raising the economy to a high income level from the current lower middle income level will depend largely on how well this sector is nurtured.
According to the BBS Final Report, of the total economic units, 4.51 million have permanent establishments, 0.48 million temporary establishments and the remaining 2.82 million are economic households operating within their premises. Individual or family runs 86.42 per cent of the units.
At the divisional level, large variation in economic activities still exists.
The highest number of economic units - 3.25 million - are situated in Dhaka. Chittagong has 1.69 million units, Rajshahi 1.49 million, Rangpur 1.30 million, Khulna 1.27 million, Sylhet 0.51million and Barisal 0.47 million.
Now, flourishing of the non-farm activities in rural areas is an issue the policy planners and economists should examine and analyse critically. It need not be mentioned that with the narrowing down of the urban-rural gap, a substantial economic diversification has been taking place in rural areas over the decades. This has been augmented, in large part, by the introduction of technology and access to a myriad range of activities hitherto unknown in rural Bangladesh. Overseas remittance has also a vital role in this regard. While remittance raises the level of non-farm income of many rural households, it also adds to divert the traditional focus from agriculture to non-agricultural engagements. 
There are several reasons why promotion of rural non-farm activity can be of great importance to the policy-makers. Evidence shows that non-farm income is an important factor in rural households and indeed in food security, since it allows greater access to food. In the face of credit constraints, non-farm activity affects the performance of agriculture by providing farmers with cash to invest in productivity-enhancing inputs. Besides, the nature and performance of agriculture can have important effects on the dynamism of the non-farm activities to the extent that the latter is directly or indirectly linked to agriculture. Therefore, importance of the non-farm sector is immense for improving the socio-economic status of rural households.

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