Best Small Business Ideas for Rural Areas, Villages, Small Towns in India

March 20, 2023

11 min read

Best Small Business Ideas For Rural Areas Villages Small Towns In India

Aatmanirbhar Bharat, the idea propagated and supported by Government is all about becoming technically and financially self-reliant. It encourages the new-age entrepreneurs to take a risk and become assertive in their approach to break the glass ceiling. The government’s initiative is not exclusive to big-city entrepreneurs but has universal appeal and is also meant for small-town/village-level entrepreneurs.

With more than 70% of the population residing in villages and small towns, the opportunities to start new businesses is more in these areas. As most of the businesses in the rural hinterland are directly or indirectly dependent on agriculture or a related sector, there is a number of opportunities available to explore and flourish with time. Some of the business ideas that can be explored in the small towns are discussed below for entrepreneurs to take a call.

Some of the business ideas for new-age entrepreneurs in small towns/villages are:

Retail store

With the majority of the population residing in rural India, there is a shortage of well-planned retail outlets in these marked areas. The outlets can be of different types that cater to a different sections of the population. One such option that is very easy and practical is opening a Kirana store.

The Covid crisis has proved the resilience of the Kirana shop owners and the adaptability to learn and change according to the new scenario. It is a very feasible option and is never out of demand provided the Kirana store is opened at the right place, has good customer service and is well stocked (supply chain). The other shops that can be opened in the rural hinterland are:

Sweet shops
Tailor shop
Electronics shop
Saloon shop
Cosmetics shop
Two-wheeler/four wheeler mechanic
Fruit shop/juice shop
TV/Radio/Mobile mechanic
Electrical/plumber shop

Before opening the above-mentioned shops, it is necessary to have a certain level of expertise. It is necessary to have some skills and knowledge to open a shop. However, one benefit of opening a retail outlet is, that it requires less amount of time to start the business and it is ready, making demand for such essentials in every place.

Flour mill

Another idea that can be worth exploring is the establishment of a flour mill. In rural areas there is no paucity of raw material(cereal) for the flour mills, moreover, people don’t purchase the packed flour from the markets as visible in urban areas. It is a very feasible and profitable business if you grind other grains along with wheat like corn, oats, barley, sorghum, and spices like turmeric, chilli, etc.

The flour mill can also supply the products to nearby cities and towns at profits. It is a good business and requires limited money but a good electrical connection to start and run the business.

Small-scale manufacturing units

Rural areas and small-town are ideal locations to start small-scale manufacturing units to cater to the demand in the local area as well as supplying products to nearby towns and cities. These manufacturing units can be for various products like:

Agarbatti
Candle/ matchbox
Paper cup/paper plate
Packaging products
Disposable bags, etc.

These products have a large market in urban areas, whereas the raw material is in abundance in rural areas to become a profitable business with quick returns.

Clothing store

Traveling to big cities for buying clothes on special occasions or for daily needs is very common in villages. Starting a clothing store with good brands, fabrics, and variety is a sure-shot way to success provided the owner has good contacts from the garment suppliers and the supply chain is intact.

If you can provide the latest fashions, designs, and styles of clothes, there will be a good demand for the products in the villages and small towns. You can also arrange tailoring services and provide handmade products for the clients at the store.

Poultry/live-stock farming

The poultry farming business is growing at a rapid pace with active support from government agencies. Moreover, it is not capital-intensive and does not require much land. However, a person must have some experience to run the business. There is a huge demand for poultry products in rural and urban areas helps in reducing the return on investment. Initially, you can start with a limited number of birds and also the quality and variety of birds, and with time can increase the business. Along with the local demand, you can advertise and sell the meat/eggs in cities.

Fertilizer/pesticide store

As the rural economy is largely based on agriculture, it makes perfect economic sense to start a fertilizer/pesticide business. It is necessary to apply for a license before starting the business. Moreover, you can also keep seeds along with fertilizer and pesticides.

Tutor services

The shortage of well-qualified teachers in rural areas is a big problem and can be a good business idea to start a tutoring center with eligible teachers employed at the center. It will not only provide employment to qualified local youths but will help people to find a good teaching institute closer to their home for children. The business doesn’t require much capital and space, and, is a good business opportunity to explore, provided you have the qualification and necessary skills to run a center. The tutoring service can start with limited manpower but will grow with time.

Milk/dairy center

Due to the abundance of milk in rural areas, running a milking center is a sound business idea. It can collect milk from individual houses and supply it to dairy farms. The fund requirement to start the center is less, however, the person must be qualified to run the center. Collection and supply of milk are possible only by tying up with a dairy farm. To start a local dairy project, one needs funds that can be availed from different financial institutions including banks, and NBFCs like Lendingkart.

Organic vegetables/fruits

Organic fruits and vegetable market is growing rapidly and living near villages and small town presents a sound business opportunity to start growing and marketing the produce. However, it is not easy to start a business and requires farmland or a contract with farmers to grow the produce. Moreover, these are perishable goods and require refrigeration for storage. It is advisable to start the business closer to vendors for less transportation and logistic charges.

Business Plans

Small business loan

A small business loan is a customized loan to meet the financial requirements of a small/medium size enterprise. It is collateral in nature and is offered by all financial institutions to eligible borrowers.

Benefits of small business loan:

Some of the benefits of the small business loan are:

There is the flexibility to select from different loan schemes. Government schemes such as CGTMSE even doesn’t need collateral or a third-party guarantee.
There is flexibility in the repayment tenure and depending upon convenience, one can select the EMI option.
The rate of interest in government-backed schemes is low.
It is easy to avail of the loans and the loan amount disbursement is quick.

Eligibility criteria of a small business loan

The eligibility criteria to get a small business loan is:

Age: Minimum – 21 yrs, Maximum – 70 yrs
Nationality: Indian nationals
No case of default with any financial institutions
Bank statements for the last 12 months
Income tax returns for the last two years

Documents required to avail of a small business loan:

Duly filled loan application form with KYC documents
Complete business plan
Identity proof: PAN card, Aadhar card, Voter ID, Driving license
Residence proof: Utility bills, PAN card, Ration card
Business registration documents
Income tax returns for the last two years
All kinds of licenses and required permits

Procedure to apply for a small business loan

The procedure to apply for a business loan is very simple and is defined below:

1: Check the eligibility criteria before applying for a small business loan.

2: Fill in the application form and submit it with all the required documents mentioned above.

3: Once the documents are verified after you submit them, the loan is sanctioned and funds transferred to the borrower’s account.

Small Business Ideas for Rural Areas, Villages, Small Towns FAQs:

1. Is it possible to get a business loan in villages or small towns?

Yes, you can apply for getting a business loan from any bank in these areas. The rules and regulations are similar to the ones applied in the urban centre.

2. What are the things to keep in mind before starting a business in villages or small towns?

Before starting a business, it is advisable to do a feasibility study. Try to understand the competition and the demand for the place to plan accordingly. Also, funds and location are equally important to start the business.

3. What businesses are more profitable in rural areas?

Businesses that are agriculture-related are more likely to succeed as the raw material is in abundant supply, while you can send the supply to the nearby towns and cities for greater profitability.

4. Is starting a gift shop a profitable business?

Gift shop is a sound business in urban areas with more number of people undertake the activity during festivities, however, in rural areas it is not a successful idea but if you can add a bakery or a small snacks bar with the gift shop, it is likely to succeed.

5. Does starting the poultry business requires a license?

Yes, it is necessary to take a permit from relevant state and local authorities before starting a poultry business. Also, NOC from electricity and water department required.

6. Why do we need insurance for poultry business?

The birds that you breed in your poultry farms for meat or eggs are every prone to diseases. In case of an outbreak, it will lead to complete loss of bird population causing significant losses, hence it is advisable to take insurance cover for the poultry.

7. Does the income from fisheries/poultry income-tax free?

No, the income from fisheries/poultry business are not income tax-free. Although they come under the agriculture allied activities they are taxable.

8. Can one get a business loan for poultry farm?

Yes, starting a poultry farm is encouraged by the government and apart from the government scheme(MUNDRA), different banks also lend to the entrepreneurs. However, lending by banks is not collateral-free.

9. Does banks provide loans to start the flour mill?

Flour mill is a good business and depending upon the risk profile of the entrepreneur, the banks do provide the loan. The flour mill comes under MSME sector and loans are easy to get.

10. Is there any support provided by the government for organic farming?

Yes, in order to encourage organic farming in the country, the government provides the necessary assistance. In addition to NABARD, different other government schemes provide loans to farmers to grow organic crops.