Rural Non-Farm Employment in India: Access, Income and Poverty Impact

Attention has been paid to the significance of the non-farm sector in the rural Indian economy since the early 1970s. The importance of earnings from secondary non-farm occupations is not well documented. In this paper an attempt is made to assess the contribution of the nonfarm sector across population quintiles defined in terms of average per capita income. The correlates of employment in the non-farm sector and the direct impact of a growing non-farm sector on agricultural wage rates in rural India have also been examined. The study is based on rural data from 32,000 households belonging to 1765 villages across all parts of India collected by the National Council of Applied Economic Research in 1993-94. Analysis shows that non-farm incomes account for a significant proportion of household income in rural India with considerable variation across quintiles and across major Indian states. Education, wealth, caste, village level agricultural conditions, population densities and other regional effects influence in determining the access to non-farm occupations. Direct contribution of the nonfarm sector to poverty reduction is possibly quite muted as the poor lack the assets. It has also been found that the growth of certain non-farm sub-sectors is strongly associated with higher agricultural wage rates. The analysis presented in this study suggests that the policy makers seeking to maximise the impact of an expanding non-farm sector on rural poverty, should concentrate on two fronts. First, efforts should be focused on removing the barriers to the entry of the poor into the non-farm sector. This involves improving the educational level in rural areas. Second, the policy makers should note the strong evidence of an impact on agricultural wages of the expansion in rural construction employment West Bengal. Our estimates show that the aggregate delay pertaining to all the phases of exports turns out to be approximately four days for a single shipment. It also shows that the additional transaction costs in te ms of delays and speed money incurred by the Indian exporters during trading with Bangladesh is about 10 per cent of shipment value. The present study has shown that informal barriers/para-tariff in India-Bangladesh trade are already high and further trade liberalisation without improving the infrastructure would be counterproductive. The paper ends with feasible policy recommendations to make trade between India and Bangladesh more vibrant.