The Slow Emergence of Rural Non-farm Sector Employment in India: Shift or Diversification?

The rather slow transition in the rural employment from farm to non-farm sector in India is well documented. In the structural transformation thesis, rural non-farm sector (RNFS) is a key interlink between rural and urban sector, and is a catalyst for rural change. RNFS may also reduce risk under adverse agricultural conditions. In India, construction sector is the single most important source of non-farm employment in rural areas. Moreover, even within the agricultural household a substantial share of the work time is increasingly spent on non-farm activities, mostly on construction. The household and individual movement to RNFS is conceptualised as shift or diversification. Diversification in employment would appeal to risk mitigation, as opposed to shift which may be more akin to earnings maximisation. Analysis shows that households are moving out of agriculture and are increasingly becoming mixed or non-farm households. The emerging trend seems to be diversification of households, with shift of individuals within households to RNFS. Non-farm households are higher in the economic ladder but the gap between the agricultural household and non-farm household seem to be reducing. Casualisation is declining, but it is primarily due to the movement of workers to being self-employed in the agricultural households. There is no decline in casualisation within non-farm and mixed households. Possession of land is now increasing among non-farm households who uses this probably for speculative purposes. The relationship of the urban and the rural is contentious with the emerging agri-competing industrial sectors in the RNFS.