Effectiveness of non-farm diversification on rural household income – evidence and policy implications from India

Shreya Kapoor and Sanjeev Kapoor

International Journal of Development Issues, 2021, vol. 21, issue 1, 1-23

Abstract: Purpose - Doubling farming households’ income through occupational diversification to the non-farm sector has been advocated to be of paramount importance in an agrarian economy such as India. The purpose of this paper is to analyse the effects of non-farm activities on rural household incomes in four different Indian states by using a propensity score matching technique and developing an endogenous switching model. Design/methodology/approach - The research is based on secondary data taken from four quinquennial rounds of employment and unemployment surveys conducted by the National Sample Survey Organization. Findings - The matching results indicate a maximum monthly rise in per capita income of Rs. 60 in Gujarat and a minimum increase of Rs. 18 in Rajasthan among rural households employed in the non-farm sector as compared to the farm sector. The findings confirm that rural non-farm structural diversification cannot be viewed as a blueprint for increasing rural household incomes in different states. Further, it suggests the need to segmenting the different states on the basis of agricultural development for increasing rural incomes. Research limitations/implications - The study argues that Indian states with a strongly developed farm sector i.e. Gujarat and Punjab are not ideally suited to undergo structural changes in their economic pursuit. The estimates suggest that the transition of rural households from farm to non-farm-sector activities is a very weak strategy in agriculturally developed states of Gujarat and Punjab, whereas non-farm diversification becomes a pivotal strategy for increasing rural household incomes in less agriculturally developed states such as Rajasthan and Uttar Pradesh. A contrasting point that arises from these evidence is that although diversification to the non-farm sector leads to higher income, but the resultant figures are very scanty. Originality/value - The present study contributes to the existing literature by providing evidence and policy implications on rural non-farm diversification in India and its impact on the rural household income. The study can help the policymakers in framing policies aiming at increasing the income of the rural household through the structural transition of the rural economy.

Keywords: Rural livelihoods; Rural economy; Agriculture economy; Non-farm diversification; Occupational transformation; Rural non-farm income (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:ijdipp:ijdi-03-2021-0065

DOI: 10.1108/IJDI-03-2021-0065

Access Statistics for this article

International Journal of Development Issues is currently edited by Dr Dilip Dutta

More articles in International Journal of Development Issues from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().