Small farmers get bulk of their income from non-agriculture activities

Written by Sandip Das | New Delhi | Updated: Sep 23 2009, 05:13am hrs
Contrary to common perception that agriculture is the dominant source of income for rural farm households, a new study by the National Centre for Agriculture Economics and Policy Research (NCAP), an affiliate body of Indian Council of Agricultural Research (ICAR) has found out that rural households with small land holdings receive a substantial share of their income from non-agricultural sources.

With falling farm sizes and lower yield, the rural marginal and small farmers are increasingly looking towards non-farm sector for earning his livelihood, which also reflects the crisis Indian agriculture faces in the coming years, the NCAP study said.

The study showed that small land holders tend to diversify more towards non-farm activities while farmers with large land holdings tend to remain in agriculture.

Apart from small land holdings, low agricultural productivity, surplus labour and higher dependency ratio are other important factors pushing farmers away from agriculture towards non-farm sector, the study titled how important is rural non-farm sector in enhancing farmers income conducted by Pratap S Birthal and PK Joshi of NCAP said. The study also validates a 2005 survey conducted by the government, wherein it was proved that almost 40% farmers are willing to quit agriculture, if alternative occupation is available to them.

The message is loud and clear that agriculture is no longer a preferred occupation for smaller farm households and there is need to create remunerative, sustainable and equity-oriented income generating opportunities outside the agricultural sector to enhance their incomes, the NCAP study observed.

Relying on data provided by the National Sample Survey Organization (NSSO) and secondary data analysis the study said farm households obtain 41.4% from agricultural activities while 24.4% of the income is derived from non-farm business and wages and salaries and livestock contributed 24.4% and 19.8% of the income respectively.

On a cautious note, the study said that though non-farm business activities is an important income source but these are highly unequally distributed and are one of the largest source of inequality in rural areas having a strong un-equalizing effect on income distribution.

Besides the distributional consequences of income sources vary across regions. Agriculture is the largest source of inequality in irrigated and rainfed zones and except in arid zone, it has an equalizing effect on income distribution, the study said

It also observed that non-farm sector is quite heterogeneous in composition and input intensities.

The study has suggested that the government should facilitate farm households entry into high payoff non-farm sector by reducing financial and skill barriers including access to credit, insurance and information.

For creating sustainable and remunerative income opportunities in non-farm sector, there is need to promote intensification and diversification of agriculture towards enterprises such as horticulture, animal husbandry and fisheries that generate large returns to land, labour and capital, the study recommended.

It has also suggested creation of better infrastructure and market institutions for enhancing productive capacity of rural economy which would strengthen farm-non-farm linkages by reducing transactions costs.