But, the expected growth in rural non-agriculture due to economic reforms does not seem to have materialized. Thus the growth in Rural Non-Farm Employment in India has been much slower.
Legislation and regulations - India has frequently used the tool of reserving production of specified goods for small-scale or traditional enterprises as a method to preserve certain sectors in the face of competition from modern factories. Thus sometimes subsidies and undue protection provided by the government can sometimes lead to crippling of the industry. For example, textile policies instituted in the 1950s did increase employment in the handloom and small-scale power loom industries, but the export potential of India's textile industry may have been damaged in the process. (Little, et al. 1987).
Low productivity- High productivity activities in rural areas generally accrue to the relatively wealthy. Growth of these activities thus tends to increase rural inequality. Because the poor do not typically possess the skills, contacts and assets necessary to access such occupations, they usually do not benefit directly from such jobs.
Failure of existent infrastructure and capital projects due to non-maintenance-for example engineers kept for gobar gas plants tend to leave their jobs soon after installation due to inadequate remuneration. Once the capital is pumped there is no further funding to keep up the employment.
Ignorance about institutional support- Projects, instead of policies, has been the primary tools to encourage development of rural small-scale enterprise. The biggest problem with such support is the ignorance of people about such policies. With project assistance, however, small and geographically dispersed enterprises (or clusters of enterprises) can be very difficult to reach, particularly in a cost-effective manner " and the number of small enterprises is vast. Even the largest projects, such as the Grameen Bank in Bangladesh with more than 630,000 small-scale enterprise borrowers, are thought to reach only a small fraction of potential beneficiaries.