International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),

Volume 5, Issue 11, November (2014), pp. 48-50 © IAEME

48

ROLE OF NON-FARM SECTOR IN THE

TRANSFORMATION OF INDIA’S RURAL ECONOMY

*V. SUJATHA, **Dr. M. SIVARAJAN

*Ph.D., Research Scholar (Part-Time), Pachaiyappa’s College, Chennai-30

**Associate Professor of Economics, Pachaiyappa’s College, Chennai-30

ABSTRACT

This research paper discusses about the role and functions of the Non-farm sector in the

development of Indian economy. Rural non-farm sector (RNFS) has gained momentum especially

after liberalization. It is major objective of the limitation agriculture sector in providing gainful

employment to the surplus workforce. Besides, due to the seasonal fluctuation and environmental

degradation, the agricultural workforce itself is not able to obtain the sufficient livelihoods from

agriculture. This creates the problem of unemployment and underemployment. Due to this situation,

rural non-farm sector is considered to be the panacea for the problem of poverty, unemployment and

rural out migration.

Keywords: Economy, India, RNFS, Employment, Agriculture and Environmental etc.,

INTRODUCTION

The rural economy in India is predominantly based on agriculture and other activities related

to agriculture sector. The key to India’s development lies in the development of its rural areas. In

India, there are as many as six lakh villages where about 70 per cent of the total population lives. The

agricultural sector occupies a pivotal place in the national economy both in terms of its contribution

to the gross domestic product and employment generation. However, segmenting rural employment

growth into the farm and non-farm sector would demonstrate that non-farm employment growth has

been significantly higher than farm sector employment growth.

In the view of the Economic Census (2005) identifies 17 non-farm activities includes mining

and quarrying, manufacturing, electricity, gas, water supply, construction, maintenance and repair,

wholesale and retail trade, hotels and restaurants, transport and storage, financial intermediation,

health and social work etc., Economic census 2005 reveals that number of non-agricultural

establishment in rural India has increased annually at the rate of 4.56 per cent during 1998-2005 as

against 1.65 per cent during 1990-98 wholesale – retail trade has the highest share in RNF

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International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),

Volume 5, Issue 11, November (2014), pp. 48-50 © IAEME

49

establishments and the shares of transport, storage and communications, financial real estate etc,

have increased appreciably during 1990-2010. Agricultural sector alone cannot provide the ultimate

solution for rural poverty, unemployment and underemployment. As long-term strategy for structural

changes in employment and earnings may be necessary. In the rural households, out of necessity,

workers are being pushed into the non-farm sector and pulled by the dynamic rural non-farm

opportunities.

Non – farm employment has received much attention from the policy makers and researchers

because it could reduce pressure on farm activities by creating supplementary income and could

moderate household’s economic risks in the rural economy. In the developing countries share of non-

farm income is high and it varies from 20 per cent to 50 per cent. India, like other developing

countries also exhibited a high proportion of non-farm employment. Due to launching of

liberalization policies, (1991) high rate of growth is exhibited after two decades of economic

reforms. Since 1990’s several employment generation programmes were adopted in order to generate

employment to the rural poor. Priority was given to the non-farm sector over the past six decades,

tremendous efforts have been focused and promotion of rural non-farm sector globally.

GROWTH OF URBANISATION

The process of urbanization also effects the growth of RNFS. Urbanisation expands the

market for rural enterprises, and encourages non – agricultural activities in secondary and tertiary

sectors in the neighbouring rural areas to meet the non – local demand. Rural enterprises may

therefore benefit from economies of scale resulting in decreased cost and increase in efficiency.

FUNCTION OF RNFS

The major role the RNFS plays is in reducing the inequality in income distribution across

different sections of the society like a landless agricultural laborers who work in agricultural season,

which is highly seasonal in nature and the people remains slack for rest of the year but a land holder

have enough product to fulfill his requirement of food and non – food items for the rest of the year.

So, by providing employment during slack seasons RNF Sectors smoothens the rural households

income flows and hence the consumption. Hence participation in the RNF Sector allows poor people

to smooth out or offset fluctuations is agricultural income that might occur on a seasonal basic or as

a result of unexpected events and in this way it reduces vulnerability of the poor sections to cope

with future unforeseen contingencies.

GROWTH OF NON-FARM EMPLOYMENT IN INDIA

In India, the land man ratio is decreasing, employment elasticity in agriculture has not only

declined but has reached almost zero. In this situation, the rural non – farm sector is generally

perceived as the answer for tackling the twin problems of employment and poverty in rural India.

Employment growth in the farm sector has not been in consonance with employment growth in

general. A planned strategy of rural non-farm development may prevent many rural people from

migration to urban industries and commercial centers. When the economic base of the rural economy

extends beyond agriculture rural-urban salutary effects in many other aspects associated with the life

and aspirations of the people. Rural industrialization has significant spin-off for agricultural

development as well. Rural income distribution is much less unequal in areas where a wide network

of non-farm avenues of employment exists; the lower strata of rural societies participate much more

intensely in non-farm activities.

International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),

Volume 5, Issue 11, November (2014), pp. 48-50 © IAEME

50

CONCLUSION

In view of the above, the rural non-farm sector is increasingly playing an important role in

the development of rural areas in India. Where, agriculture in the region declines its importance in

terms of its contribution to the economy, the rural non-farm sector will provide employment and

income to many rural folks. It is noted that RNFS are not the substitutes for employment in

agriculture but rather as a supplementary measures for development of non-farm sector policy and

interventions for creating employment opportunities on this regard the role of the government is

crucial especially in the provision of necessary infrastructure and other support services in the

country. It is also vital to improve the marketing links between the village entrepreneurs and the

larger business firms located in the towns. Other important considerations that need to be focused on

may include human resource development and women participation with a view in making the

activities self-sustaining in the changing competitive environment.

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