The Indian economy has transformed from closed to an open economy, welcoming liberalization. However, the Indian Economy is still striving for stabilization in order to become a developed economy. The trinity of interest rate, inflation and monetary policy is beyond control and has become a vicious cycle. The policy reformers are now thinking to revisit and redefine the Indian Economy through economic prosperity of Rural India. Rural Economy is now at the priority and considered to be the remedy for bringing a sea change in the overall growth of Indian Economy. Rural Sector has become the backbone of Indian Economy in the present situation of service led growth which is temporary in nature. A new Economic Philosophy of Inclusive Growth has been initiated as route to success towards sustainability and rigidity of Indian Economy. The paper attempts to focus on growth of rural economy through development of Khadi and Village industries considered to be major engine for growth in a labour intensive country like India.