The most prominent hindrance in creating more rural nonfarm activity in India is the quantity, quality and reliability of infrastructure.
Finances from budgetary and non budgetary sources are still not enough to take up any new structural change in the rural economy.
Regulatory restrictions on small scale industries have discouraged economies of scale. The protection offered to them before 1991 reforms are now detrimental to their dynamism.
Higher levels of illiteracy in rural India have hampered building a dependable human capital for RNFS because illiterate villagers cannot apply for something as basic as an institutional loan from a bank. Lack of education is often intrinsic to poverty.
Rural-urban migration is the reason for the lack of workforce for small scale rural industries.
Female participation in labour force is very unpredictable; women must constantly be encouraged to be in the mainstream labour market.
Forward and backward linkages affect performance of nonfarm activities in rural areas. Forward linkages of the RNF sector serve as inputs to other sectors. Backward linkages demand the output from other sectors.