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Rural Livelihood Diversification and
its Measurement Issues: Focus India
Rajiv Mehta
Wye City Group on
Rural Statistics and Agricultural Household Income
Second Annual Meeting,
11-12 June 2009,
FAO, Rome
Parallel Session 1. a
“Two views of diversification and non farm income”
Rural Livelihood Diversification and its
Measurement Issues: Focus India
Structure of presentation
A. Postulations on rural economy
B. Rural Economic Diversification: multiple dimensions
C. Analytical inferences: focus India
D. Suggestions to further the Wye City Group agenda
The scope of increasing real income of farmers
and bringing sustained improvement in their well
being, solely through farming operations is
seriously constrained.
There is concern on the incidence of deep rooting
of poverty amongst the households depending on
single income from farm activities
(Wye Group, 2007)
Rural - Urban Structural Differentiation
• Rural Distinctiveness in factors of production
– Intense and intrinsic relationship with natural endowments,
– Oriented to production of primary goods
– Net suppliers of primary produce and generally, the net
consumers of secondary and tertiary goods and services.
• Rural sectors are rigid /less dynamic in restructurings
• Shrinking share of primary sector in GDP
• Commitment to ensure food security
– Sustainability and conservation commitment
• Constraints in economic activities and income generation
– Inter and intra regional differentiations in livelihood and
well-being.
Issues
Diversification of rural economy
• Creation of non-agricultural income opportunities,
• Expansion of Rural Non Farm Employment
Integral to rural development strategies and for
bringing meaningful structural change in rural
socio-economic conditions
Opportunities, Empowerment & Security
– three factors have complimentary and supplementary
role in neutralization of rural economic deprivation
– these three factors are also closely associated with the
process of rural economic diversification.
Rural Economic Diversification - Multiple dimensions
• Production of diverse goods and services in a production
boundary
• Pursuance of diverse economic activities for producing
larger range of goods and services
• Diverse production & activities results into income flows
from diverse sources
Rural livelihood diversification – an adjunct to rural
economic diversification
– measurements,
– indicators,
– data profile,
– development correlates
Rural livelihood diversification
• Rural employment diversification
– Individuals or households to engage in the alternative choices in the labour market
and undertake different forms of employment (rural / urban); both farm as well as
nonfarm
• Rural income diversification
– Individuals or households to have income sourced from the diversified sources.
• both are broadly complementary but not synonymous
• employment diversification is measured in terms of labour force participation in
diverse industries and occupation.
• wages and remunerations from different employment would add up to income.
• income diversification is more comprehensive, since it would also account for
transfer payments (rents, interests, dividends etc.) to individuals.
• Measurement as domain aggregate
• Aggregate of individuals or of household
Measurement of Rural Economic Diversification
Diversification Measures Data required Data Source
I. Crop Diversification
a. In terms of Area Season-wise, crop-wise area Agricultural
b. In terms of Value of output crop-wise value of output Statistics
apportioned season-wise National Account
(National – sub-national) Statistics
II. Farm Sector Crop-wise, subsector-wise (Crops, National Account
Diversification Horticulture, Livestock, Fisheries, Statistics
forestry) value of output
(National – sub-national)
III Livelihood Diversification
a. Employment Diversification Population work participation rates NSSO labour force
in different activities (aggregate, surveys
household classified)
(National – sub-national)
b. Income Diversification
(National – sub-national) Data limitation
Income accrual from different
economic activities ( aggregate,
household classified) and transfer
payments
(National – sub-national)
Different rural diversification indices (India – sub national)
State Category Diversification Measures Other
(Sub National) Crop Diversification Farm Sector Livelihood Explanatory
Index * Diversification Diversification Indicators
Area based Value (2004-05) Employment ( % incidence of
(2000-01) based # Diversification rural poverty)
(2004-05) $ (2004-05) !
RICE-WHEAT STATES
Punjab 0.730 0.721 0.534 0.665 6
Haryana 0.800 0.810 0.546 0.663 9
Uttar Pradesh 0.801 0.878 0.590 0.509 32
RICE DOMINANT STATES
Bihar 0.708 0.912 0.726 0.400 33
Orissa 0.725 0.876 0.696 0.524 40
West Bengal 0.742 0.909 0.728 0.577 24
OTHER STATES
Andhra Pradesh 0.893 0.903 0.707 0.469 8
Gujarat 0.906 0.925 0.653 0.424 14
Karnataka 0.943 0.935 0.716 0.330 12
Madhya Pradesh 0.906 0.916 0.592 0.321 30
Maharashtra 0.940 0.943 0.716 0.358 22
Rajasthan 0.909 0.912 0.609 0.500 14
Tamil Nadu 0.889 0.897 0.706 0.546 17
Simpson Index of Diversity: ( 1 - Pi2) where, Pi is the proportionate area of i th factor
Percent distribution of usually employed persons by
broad industry division
Data Source: NSS 61st Round Report no. 515
INDIA - Rural
Broad Industry Division Male Female
th
50 Rd 55th Rd st
61 Rd th
50 Rd 55th Rd 61st Rd
(1993- (1999- (2004- (1993- (1999- (2004-
94) 00) 05) 94) 00) 05)
Agriculture 74.1 71.4 66.5 86.2 85.4 83.3
Mining and Quarrying 0.6 0.6 0.7 0.4 0.3 0.3
Manufacturing 7.0 7.3 7.9 7.0 7.6 8.4
Electricity, Water, etc. 0.3 0.2 0.2
Construction 3.2 4.5 6.8 0.9 1.1 1.5
Trade, Hotel & Restaurant 5.5 5.8 8.3 2.1 2.0 2.5
Transport, Storage & 2.2 3.2 3.8 0.1 0.1 0.2
Communication
Other Services 7.0 6.1 5.9 3.4 3.7 3.9
All 100 100 100 100 100 100
Livelihood Diversification Index
0.437 0.475 0.535 0.250 0.263 0.297
India - Rural
Percentage distribution of rural households by size
class of land owned
Data Source: NSS 61st Round Report no. 515
INDIA - Rural
Size class of Household Household Type in economic activity class
land owned distribution Self employed Rural labour Other
(Hectares) in non non- Household
agriculture agriculture
Land Less 6.6 6.7 11.9 20.5
Less than 1HA 71.0 85.5 83.8 68.5
1-2 HA 11.7 4.7 2.8 6.1
2-4 HA 7.2 2.2 1.1 3.4
More than 4HA 3.5 0.1 0.5 1.6
All Classes 100.0 100.0 100.0 100.0
Relationships between incidence of rural poverty and
rural livelihood diversification
Key inferences
• Despite low employment elasticity, rural employment continues to be
predominantly agrarian
– There is slow but steady decline in rural work participation in agriculture.
– The work participation in non agriculture is also becoming diversified
– The pace of diversification in respect of females is much slower compared to
the male counterparts
• Manufacturing and services are not having that pronounced a role in
stimulating rural labour force engagement
• Varying sub national pattern in RNFE
• Significance of “push factor” in the preponderant land marginalization
• Inverse relation in rural poverty and rural livelihood diversification
• Poverty and illiteracy are positively correlated
• Negative correlation between illiteracy and rural livelihood diversification
• Coexistence of advanced agriculture with rural livelihood diversification
Concluding observations
• The Wye city Handbook 2007
– stepping stone for further profiling the statistical
indicators on livelihood stability and security of rural
and particularly farm households.
– Measurements of rural livelihood diversification and
its impact on and relationship to empowerment,
opportunity and security of rural population is
proposed for furthering the agenda of Wye Group
• Data needs for deeper synthesis of rural
economic composition
Concluding observations
• Suggested areas for furthering the work of Wye Group
– status and composition of rural non-farm employment - national / sub-
national;
– measures for promotion of rural diversification and responses;
– interventions for capacity building of farm households through HRD,
knowledge dissemination, awareness etc.;
– institutional support mechanism to encourage and facilitate non-farm
employment such as marketing, credit etc.;
– provision of infrastructure, specially for promoting diversified employment;
– measuring involvement of local government bodies, NGOs, cooperatives
and
– policy and programme intervention to facilitate and stimulate rural non-
farm employment.
Dr. Rajiv Mehta
Additional Director General,
Survey Design and Research Division,
National Sample Survey Organisation,
Ministry of Statistics and Programme Implementation
Govt. of India
“Mahalanobis Bhawan”
164, G. L. T. Road, Kolkata, India
Tel: (o): 91-33-25771326
email : rajivmehta2@gmail.com
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