(The Gist of Kurukshetra) Non farm sector in India  [JULY-2019]

(The Gist of Kurukshetra) Non farm sector in India


Non farm sector in India


  •  In India almost 70 percent population lives in the countryside, thus ascertaining that the soul of India lives in villages.
  • Again, India has been traditionally an agrarian country. Thus, rural India has always been the centre of both national as well as international focus.

  • Besides agriculture, traditional handlooms and handicrafts of India like weaving, pottery, etc. have also been nurtured in rural India, making it the cradle of modern Indian civilization.

What is Rural Non-Farm Sector?

  • The Rural Non-Farm Sector (RNFS) encompasses all non-agricultural activities: mining and quarrying, household and non-household manufacturing, processing, repair, construction, trade and commerce, transport and other services in villages and rural towns undertaken by enterprises varying in size from household own account enterprises to factories.

Need for Rural Non-Farm Sector

  • Over the years, the economic contribution of agriculture to India's GDP is steadily declining with the country's broad-based economic growth.
  • As per the Tenth Agricultural Census, the average size of agriculture landholding declined to 1.08 hectare in 2015-16 from 1.15 hectare in 2010-11. This explains the rise of employment in NonFarm Sector. It is observed that 64 per cent of rural employment is in the agriculture sector, while the share of agriculture in rural output is 39 per cent.

Different Rural Non-farm Sectors

  • Mining and Quarrying: According to Periodic Labour Force Survey (PLFS) by Ministry of Statistics and Programme Implementation (MoSPI), the percentage of rural males and females employed in this activity is 0.5 per cent and 0.2 per cent, respectively during 2017-18.
  • Household and Non-Household Manufacturing: As per PLFS, during 2017- 18, about 52.2 per cent of rural households had major source of income from se/f-employment. The share of rural households with major source of income from casual labour during 2017-18 was 25 per cent and that of regular wage/salary earning was 12.7 per cent.
  • Construction and Manufacturing: The proportions of male and female workers in rural areas engaged in 'construction' sector were 14.5 per cent and 5.3 per cent, respectively. The proportions of male and female workers in rural areas engaged in  'manufacturing' sector were 7.7 per cent and 8.1 per cent as per PLFS.
  • Trade, Hotel and Restaurant: As per PLFS 2017-18, the number of rural males and rural females engaged in these activities are 9.2 per cent and 4.0 per cent, respectively.
  • Transport, Storage and Communications: 5.2 per cent of rural males and 0.3 per cent of rural females are engaged in these sectors as per PLFS 2017-18.

How can RNFS be developed?

  • In order to develop Rural Non-Farm Economy, heavy investments are needed for inclusive, sustainable and diversified rural development along as access to markets, education and health) for the overall economic development of backward rural areas.
  • This will also provide an additional avenue of livelihood for SHGs.
  • Around 624 routes are currently served by AGEY across the country as on January 2019.

Strength in Rural Non-Farm Sectors

  •  In India, the institutions underlying the development of non-farm sector have been strengthened over the years.
  •  The introduction of JAM Trinity - Jan Dhan, Aadhar and Mobile has increased the share of total disbursement of money in the non- farm sectors.
  •  This is in addition to the existing financial institutions like Khadi and Village Industries Commission (KVIC), State Khadi Boards, Small Industries Development Bank of India (SIDBI) etc which have helped in the development of agro-industries, domestic marketing channels for rural non farm production as well as government support in export promotion.

Challenges in Rural Non-Farm Sectors

  1. Infrastructure: The most significant bottleneck in generating higher levels of non-farm activities in India is the quantity, quality and reliability of infrastructure. Corrective steps are being taken in this regard like development of roads, increase in road connectivity, improvement of power supply, etc. as discussed in the previous sections, resulting in a more holistic development. More efforts in this regard will lead to more flourished non-farm sectors.
  2. Regulatory restrictions on small sectors: Regulation of the small-scale sector constitutes an important aspect of non- farm development policy in India. In the initial stages, capital investment restrictions were imposed to protect the small-scale sector, especially in rural areas from predation by large industry. Reservation of products for the sector was initiated to create a domestic market and quantitative restrictions imposed to protect them from competition from imports. At the end of the 1990s, however these very policies have become detrimental to the dynamism of the small- scale sector, especially in the rural areas. Capital investment limits have discouraged economies of scale, and concession offered to small industry have created adverse incentives against re-investment. Reservation of products for the small-scale sector has gradually reduced in significance. The decision of the government to put a the reserved items in the open general license category from April 2005 meant free import of such items at the prevailing tariff rate With the latter slated to come down over time to around 20 per cent as per the WTO norms this will effectively signal the end of protection for the small-scale industry.
  3. Education and Awareness: High levels of illiteracy in rural India have hampered the growth of the rural non-farm sector Education has both intrinsic and Instrumental value Apart from having a positive correlation with wages, a minimum basic standard of education is necessary to apply for credit, to be aware of one's rights and responsibilities and to deal with instances of corruption and malpractice. Often, a lack of education is intrinsic to poverty, which seems to have been the case in India until recently. This is also supported by the fact that wage rates are not defined and depends on the contratcors' wishes. Women are more vulnerable than their male counterparts because generally they are less educated and less paid.


  •  Around 70 per cent of Indian population still lives in rural areas with the major source of income continuing to be agriculture. However, with increased urbanization and decrease in the agricultural land. Non Farm Sector in rural India is gradually gathering momentum. This is supported by the implementation of different schemes of the Union Government like Skill India, Make in India, Digital India, etc. More livelihood and poverty alleviation programmes will bring in more participation in the non farm activities, reducing the dependence on agriculture.
  •  Agriculture needs to be incentivized in its own way along with the development of non-farm activities to improve the economic situation of rural India. This can be more facilitated by providing more financial/credit facilities, research and development and increase woman s participation to make non-farm activities self-sustainable in the days to come.

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Courtesy: Kurukshetra