Dr. Amit Kumar Dwivedi, Mr.

Punit Kumar Dwivedi

RURALENTREPRENEU~DEVELOPMENT:ASTUDY
ON INDIAN HANDMADE PAPER INDUSTRY
Dr. Amit Kumar Dwivedi
Academic Associate (Finance & Accounting Area)
Indian Institute of Management (11M-A) Vastrapur, Ahmedabad (Gujarat) India
Mr. Punit Kumar Dwivedi
Ass!. Professor (Finance)
Bankatlal Badruka College of Information Technology
Hyderabad, (Andhra Pradesh), India

ABSTRACT
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The gloomiest facet of recession is large scale employee sacking by multinational

companies throughout the world. As loss of employment opportunities and mass scale
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firing often leads an economy into a vicious circle of unemployment, poverty and severe
recession. Thus to rescue economy from this vicious circle, it becomes indispensable for
an economy to identify prospective employment opportunities and, to stabilize and
strengthen its traditional root sector.

Although MUlti-National companies are pi/lars of both developed and developing

countries in current era; but global impact of sub - prime crises have substantially shaken
these pillars, so when pillars become weak it becomes essential for a country to bolster its
roots. Traditional small scale manufacturing sector although trivial in supporting economy,
, however is the root of manufacturing sector of the country, and being labor intensive and
less investment demanding can be identified as a savior of current economic crises.

This paper is a contribution to study the big potential of traditional small scale handmade
paper industry in India over more than a decade, hence to make world economies, to
realize the prowess of small when large corporate sector is showing plunge.
Introduction urban areas ofthe country. (Indian Economic
Popular for its art and craft small scale
Survey 2005-06).
industrial sector is an integral part of Indian
IThe Handmade Papermaking industry
economy since medieval times. Today also (HMPI) is one among the recognized
small scale enterprises hold a vital position traditional small scale industrial sector of the
_~ . ~an economic scenario contributing country. In 1953 this industrial sector was
--~- around 39 percent of the country's having 35 -40 units for production but today
manufacturing output and 34 per cent of its after half century Handmade paper industry
exports in 2004-05. It provides employment is having more than 3000 production units,
to around 29.5 million people in the rural and providing employment to nearly 37000

66
Electronic copy available at: http://ssrn.com/abstract=2502735
 Osmania Journal of International Business Studies
January - June 2009
people in rural and unorganized sector of the Thus this paper emphasife on big wonders
country (KVIC India). of the small in the country.

The magnificent growth of Indian Small Literature Review

Scale Industrial sector and with it Growth of
Small-scale industries occupy a place of

Indian HMPI since 1990-91 is shown in

strategic importance in Indian economy in

Table- I of appendix. The handmade paper

view of its considerable contribution to

units are scattered throughout the country

employment, production and exports

with concentration most in the Kalapi (Jhansi,

(Subrahmanya M.H. Bala, 2004). According

Uttar Pradesh), Sanganer (Rajasthan), Pune

to Indian planners, the principle of self

(Maharastra), Kurukshetra (Haryana),

employment was considered as important

Mahaboobnagar (AndhraPradesh) and

to a successful democracy as that of self

some clusters are in West Bengal.(KVIC,

government. In modern era of global

India) Today over the years, the handmade

competition, small scale industries try to

paper industry has its own reputation for craft

become investment driven in addition to

paper as well as its converted products.

being labor intensive (Thangavel N,

Some HMPI products are recognized and

Elangovan R. 2008). Above all in a thickly

are generally demanded in the market like

populated country like India the small scale

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carry bags, albums, stationery items, gift

industry has been approached positively with

items, packaging items, drawing papers,

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the purpose of generating employment (Dutt, '

greeting cards, invitation cards, business

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2005). In India, the manufacture of

cards, miscellaneous fancy and decorative

handmade paper is a fairly well-established

items etc.
industry at the village or small-scale-industry

With their prominent benefit of being level. It is an interesting technology simply

environmental friendly, handmade paper and o~

because it uses only waste materials,

Handmade paper value added products including rags, tailor shop cloth cuttings and

enjoy exclusive demand among the elite agro-wastes, in the process of making

customer segment of both national and extremely high quality paper, paper products

international markets, thus providing, a and card. For this reason, the industry has

strong impetus to investors in the country to been described as "eco-friendly" and one of

ripe the fruits of this exclusive market of the outstanding examples of sustainable

Traditional Handmade paper and its value development. In addition, the technology is

added products. Further HMPI sector being fairly simple to operate and requires no

less C'apital demanding {Project cost starting special training or certi'fication. The

from 3,26,000 (KVIC, India)} and more labor technology is also available in ready-made

intensive clearly signifies its scope as a form and can be ordered on a tumkey basis.

potential employer ~and income generator, The making of handmade paper is a fairly

especially in rural and unorganized sector 'old process in India going back several

of the country. This paper is a contribution to centuries. Paper-making was largely

recognize the growth trajectory of Indian dominated by Muslim Kagzis.( PART I II:

handmade paper ind~stry, considering it as COMMUNITY.;.BASED SUSTAINABLE

a paradigm for many other traditional small LIVELIHOODS) Although there have been
\
scale ind which could successfully many studies exploring the potential of small
country at tough times of recession. scale industries in the country, this paper is

67
Electronic copy available at: http://ssrn.com/abstract=2502735
 Dr. Amit Kumar Dwivedi, Mr. Punit Kumar Dwivedi
an effort to look exclusively at one of its
inconsequential part which have a
consequential importance especially in rural
,I and unorganized sector of the country. Thus
identifying the progress and prospects of
Traditional small.scale HMPI sector of the
country, and hence recognizing power of
small at bad economic times.
Objectives of the Study
I • To study the growth of Indian HMPI
sector in terms of handmade paper
and handmade paper value added
products in India since 1990
• To study the growth of Indian
Handmade· paper and Indian
handmade paper value added
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product Industrial units since 1990
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• To study the growth of employment in
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Indian HMPI sector since 1990
Research Methodology:
In this paper, a time series model is
exploited to fit data. The technique consists
of filtering out autocorrelation by an
autoregressive integrated moving average
(ARIMA) model, following the techniques of
Box et at. (1994).Autoregressive integrated
Xl = VdV~r; is a starionarysenes, and
V" =(1~B)4 represents the number of regular differences and V~ =(1-B1t
represents the number of seasonal differences requtted to induce stationarity in Yt .
Analysis & Discussion
Model I (Production in Rs Lakhs) of
Graph- , in appendix, clearly explicates the
~~~__ growth pattern of HMPI in India since 1990,
~gh till 1999 growth observed was at
decreasing rate, but after 1999 production
68
moving average (ARIMA) modeling is
specific subset of univariate modeling, in
which a time series is expressed in terms of
past values of itself (the autoregressive
component) plus current and lagged values
of a 'white noise' error term (the moving
average component). The main advantage
of ARIMA forecasting is that it requires data
on the time series in question only. First, this
feature is advantageous if one is forecasting
a large number of time series. Second, this
avoids a problem that occurs sometimes with
multivariate Models. (AIDAN MEYLER*,
GEOFF KENNY AND TERRY QUINN).
The integrated component of an ARIMA
model represents the number of times a time
Series must be differenced to induce
stationarity. A general notation for ARIMA
Models is ARIMA (p,d,q)(P,D,Q), where p
denotes the number of autoregressive
Terms, q denotes the number of moving
average terms and d denotes the number of
times a series must be differenced to induce
stationarity. P denotes the number of
seasonal autoregressive components, Q
denotes the number of seasonal moving
average terms and D denotes the number
. of seasonal differences required to induce
stationarity.
.
of HMPI sector in country is observing an
increase at increasing rate. This clearly
indicates that more investment and high
innovation in Indian HMPI will not only aid its
production, but will also increase the demand
of HMPI and HMPI value added products in
national and international markets.

 Osmania Journal of International Business Studies

January - June 2009
This implicates that although less units' model can be captured from Table II,
investment demanding, the production III, IV, V, and VI of the appendix)
prospects of the sector are promising.
(Further details of HMPI production model Model III (Employment in Thousand) of
can be captured from Table II, III, IV, V, and Graph- I in appendix shows great
VI of the appendix) employment potential of Indian HMPI since
1990. This shows vast employment scope
Graph: 1 in Indian Traditional Small Scale Industrial
Sector. ((Further details of HMPI
40
EmploymentlnThollSB lld . __
Employment model can be captured from
30 MOclel_3 . /
Table II, III, IV, V, and VI of the appendix)
:!o /'
Conclusion
10 ~ India has a vast rural and unorganized
0
~ ,ooo
orki n Units.Mode l_2 economic sector. This sector is life blood of
...
CII
.c
3,000
~ ....------­
.
the country, providing income, employment
and investment prospects to many in the

I
E ~ooo
:J
Z
country. Being less in lime light with large
, .000 Multi National Sector this traditional small
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scale industrial sector is Recession­

60 ~-';=:====================::::::
Resistant , as the products of this sector
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Produ ioninRsLakhs·

50,000 Model 1

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enjoy exclusive national and international

40 .000
30.000
demand.
:0.000
The Indian HMPI sector clearly signifies
10000
D~~~~~~~~~~~~
the overall potential of traditional small scale
industrial sector of the country. This sector
- Ollserlled
not only have capability to stop the wealth
Abbreviati ons Used

drain from rural to urban areas, to establish

ARIMA stands for Auto-Regressive

strong industrial base of rural employment

integrated Moving Average

and rural growth, to reduce rural-urban

HI'vlPI stands for Handmade paper

disparity in the country but also ability to

Industry

bolster the roots of the economy hence

Model II (Working units) of Graph- I in rescuing it from the economic hardships that
appendix, signifies the growth trajectory of are more volatile in organized sector of the
HMPI working units since 1990, although as country.
per ARIMA outcome the growth patterns of
References
working units were mixed before beginning
of year 2000 , however after year 2000 the 1. Ansley, C.F., R. Kohn. (1985): A
growth of HMPI units in India has been structu red state space approach to
accelerating. This clearly indicates with computing the
strong investment impetus such units can be a. Likelihood of an ARIMA process and
easily set up to boost the economic its derivatives, Journal of Statistical
framework of Indian rural and unorganized Computation and Simulation. 21:
sector. (Further details of HMPI working 135-169.

69
1
 Dr. Amit Kumar Dwivedi, Mr. Punit Kumar Dwivedi

2. Box G.E.P., Jenkins G.M., Reinsel G.C.
(1994): Time series analysis:
Forecasting
a. and control Englewood Cliffs, NJ:
Prentice-Hall.
3. Biggs Stephen and Messerschmitt
Don, (2005): 'Social Responsibility on
Growing
a. Handmade paper industry in Nepal',
(University of EastANGLlA, Norwich,
UK), Journal- World Development,
33, Issue-11, 1821-43
4.. Dutt, R. (2005). Indian Economy. S
Chand and Company Ltd, New Delhi
694-695
. 5. Khistova. P., Kordsachia 0., Patt R.,
Karar I. and KhiderT (2006),
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6. Meyler A, Kenny G, Quinn T (1998):
Forecasting Irish Inflation UsingARIMA
a. Models 3/RT198
7. Subrahamanyam M H Bala (2004):
Small Industry and Globalisation
Implications,
a. Performance and Prospects
Economic and Political Weekly, May
1,2004,1826-1833
8. Thangavel N, Elangovan (2008):
Employment in Indian Small Scale
Industry: Some
a. Issues, Medwell Journals, the Social
Sciences 3(7): 484-487
9. (UNDP) & United Nations Industrial
Development Organization (UNDIO),

30th
a. 'Environmentally Friendly Pulping and
a. 1997: 'Strengthening the Hand Made
Members Copy, Not for Commercial Sale

Bleaching', Journal- Industrial Crops

www.IndianJournals.com

Paper Industry in India' a Project

and Products, 23, 02, March-131-139
Report by United Nations
Development Programme
Appendix
Table - I Large potential of small scale industries and HMPI in India
!
Performance of Small Scale Industrial j Performance of Handmade paper and

I
sector India
Produc
valued added industries in India iI
Units tion Employment Production Employment I
(No. In (Rs (No. In Working (In Rs . (In .
I Year Lakhs) Crore) Lakhs) Units Lakhs) . Thousand) i
. 1990-91 67.9 . 78802 158.3 325 852.61 6
1991-92 70.6 80615 166 344 1210.39 7
1992-93 73.5 84413 174.8 350 . 1532.12 7.5
1993-94 76.5 98796 182.6 1246 2213.92 . 10
1994-95 79.6 122154 191.4 1911 3027.45 12
1995-96 82.8 147712 197.9 2293 3511.25 15
1996-97 86.2 167805 205.9 2794 4312.97 15
1997-98 89.7 187217 213.2 2794 4886.12 '17
1998-99 93.4 210454 220.6 2975 5456 18
1999-00 97.2 233760 229.1 2883 . 7000.32 20
2000-01 101.1 261297 238.7 2519 12100.89 . 25
2001-02 105.2 282270· 249.3 2641 22325.06 ' 28
2002-03 109.5 311993 260.2 2811 36695.01 32.5
2003-04 114 357733 271.4 2956 44731 34
2004-05 118.6 418263 282.6 3129 48595.9 35.25
2005-06 123.4 476201 294.91 3260 53455.5 37
Source: SIDBI, KVIC (Annual Report 2006)

70
I
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Osmania Journal of International Business Studies

January - June 2009
ARIMA model Results HMPllndia (Time of analysis 1990-2005) Model Description
Table-II

I . . - TModelType
odell~ Production (in Rs Lakhs) Model- 1 ARIMA(O,O,O)
! Working Units Model 2 ARIMA(O,O,O)
-=-- r...-.---------------­
I_EmPloyment (In Thousand) ModeL3 ARIMA(O,O,O)
-

Model Summary Model Fit

Table-III
Mean SE Minimum Maximum .,,''-''''''''',:
- I !
Fit Statistic 5 10 25 50 75 90 95
Stationary
.832 ,122 .755 .972 .755 .755 ,755 .770 .972 ,972 .972
R·squared
R-squared ,832 ,122 ,755 .972 ,755 .755 ,755 .770 .972 ,972 .972
RMSE 3318.986 5289.609 1,837 9419.109 1.837 1,837 1.837 536,013 9419.109 9419.109 9419.109
MAPE 91,662 111,836 9,328 218,987 9.328 9,328 9,328 46.673 218.987 218,987 218.987
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MaxAPE 534.019 694.370 43,964 1328,622 43.964 43.964 43,964 229.470 1328,622 1328.622 1328,822
MAE 2788,604 4446.624 1,349 7916,649 1.349 1,349 1.349 447,814 7916.649 7916,649 7916.649
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MaxAE 4956.369 7833.618 3.271 13987,740 3.271 3.271 3.271 878,097 13987.740 13987.740 13987,740
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Normalized
BIC
11.042 8,695 1.562 18.648 1.562 1,562 1.562 i 12,915 18.648 18,648 ! 18.648

Residual ACF Summary

Table-IV
; Mean SE Maxi Percentile
Lag 5 10 25 50 75 90 95
1 Lag 1 .740 1.087 .640 :790 .640 .640 .640 I .790 .790 .790 .790
I Lag2 .388 .105 .268 .463 .268 .268 .268 .434 i .463 .463 .463
1 Lag3 .008 .094 i -.094 .091 -.094 .027 .091 .091 ~091

Lag 4 -.286 .044 -.313 -.235 -.313 -.311 1-. 235 -.235 -.235
5 -.406 .099. -.495 -.299 -.495 -.424 -.299 -.299 -.299
-.487 .106 . -.589 -.377 -.589 -.494 -.377 -.377 -.3n
-.419 .124 -.493 -.276 -.493 -.488 -.276 -.276 -.276
-.342 .073 -.426 -.295 -.426 -.305 -.295 -.295 -.295
Lag 9 -.215 .096 -.312 -.121 -.312 -.212 -.121 -.121 -.121
Lag 1 -.051 .090 -.148 .028 -.148 -.032 .028 .028 .028
, .031 . .036 .095 .036 .082 .095 .095 .095
Lag 1 .171 i .026 .144 .196 .144 .144 .173 .196 .196 .196
Lag 1 .162 .037 ' .130 .202 .130 .130 .130 .155 .202 .202 .202
Lag 1 , .053 i .065 .168 .065 .065 .065 .092 .168 .168 .168
Lag 1 i .042 .025 .105 .025 .025 .025 .041 .105 .105 .105
1

71
r Dr. Amit Kumar Dwivedi, Mr. Punit Kumar Dwivedi

Model Statistics
Table V

Number
of
Model Predictors Model Fit statistics

Stationary
I I
R­
squared
R- I
squared RMSE MAPE MAE
Ii MaxAPE

MaxAE
Production i
(in Rs
Lakhs)­
1 '77fJ i
1.770 9419.109 218.987 7916.B49 1328.622 13987.740
ModeL1
Working I
Units­ 1 .755 I .755 536.013 . 46.673 447.814 229.470 878.097
ModeL2
Employment I
(In
Thousand)­
1 .972 t~.972 1.837
i
9.328 1.349 43.964 3.271
Model 3 i
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ARIMA Model Parameters

Table VI

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Estimate 8E it 8ig.
Production Production No Constant
{in Rs (in Rs Transformation
- 1020373.018 i -6.828 .000
6967386.210
Lakhs)­ Lakhs}
ModeL1 YEAR, not No Numerator Lag
3495.935 510.823 6.844 .000
periodic Transformation 0
Working Working No Constant
-378700.750 58066.266 -6.522 .000
Units­ Units Transformation
Model_2 YEAR, not No Numerator Lag
190.690 29.069 6.560 .000
periodic Transformation 0
Employment Employment No Constant
(In (In Transformation -4398.781 198.967
- .000
22.108
Thousand)­ Thousand}
ModeL3 YEAR, not No Numerator Lag
2.212 .100 22.208 .000
periodic Transformation 0

72