THE RURAL NON-FARM SECTOR IN INDIA: APPROACHES, LINKAGES AND GROWTH DRIVERS

Abstract

Even after the extensive research on Rural Non-Farm Sector (RNFS), still there exists ambiguities regarding its definition, impact, and linkages with rural poverty and quality of employment provided by the sector. Thus, keeping in view of these issues the present study examines the difference in share of employment of the RNF activities on the basis different approaches; assess the impact of RNF sector on rural poor; evaluates the status of RNF employment through Quality of Employment Framework; and analyzes the factors affecting the growth of RNF sector at aggregate as well as disaggregate levels. The study uses four rounds i.e.50th round (1993-94), 55th round (1999-00), 61st round (2004-05) and 68th Round (2011-12), but for the detailed explanation, it is based on the unit level data of 7th (61st round, 2004-05), 9th (68th round, 2011-12) quinquennial NSS surveys. The study is majorly based on UPSS (PS+SS) which captures the short term employment also. The OLS, Logistic Regression and Multinomial Regression are used to identify the determinants of rural poverty and RNF employment and quality of employment framework is used through identification and aggregation of indicators to examine the quality of RNF employment. The summary of main findings of the study is presented as follows: The study has its own significance as it explores the nature, pattern, approaches and linkages of RNF sector. The most important aspect taken up in the study is to suggest a synthesized approach/definition of RNF sector on the basis of NSS dataset. Moreover, no study has estimated Quality of Employment through framework of indicators separately for RNF sector which is an important aspect to study while estimating the share employment. Furthermore, a number of studies documented the nature and pattern of RNF employment either for major states (mainly 12 or 15 states), for different regions within a state but the studies on regional analysis of RNF employment in comparison to farm sector are scant. Therefore, the present study is expected to add a new dimension to the analysis of RNF employment across different regions of India from the latest NSS data available (from 1993 to 2011-12). Keeping into account all the ambiguities of the sector and rural-urban linkages, we estimate the RNF employment using a new synthesized approach which uses the theoretical background defined by Saith (1992) but with some alterations. While estimation, two major heads are taken into consideration i.e. Area and Activities which further are elaborated on the basis of narrow and broad aspects. The synthesized approach suggests the methodology to account for location of the activity while estimating the share of RNF employment. According ii to the approach, Wide Area Confined Activities (WACA) is the recommended estimation approach, which considers the location of activity as rural irrespective of location of the worker. The actual estimation based on this approach varies from the estimation not considering the location of activity. The WAWA captures the less number of people as compared to the CACA approach. Thus, CACA (which can be taken as proxy to usual estimation) leads to the overestimation of RNF employment. According to the suggested methodology, location of the activity plays important role in estimating the share of RNF sector. The estimation without considering the location of activity may lead to overestimation of the share of RNF employment. Since the share of the sector has been increasing over a period of time, overestimation can lead to the serious policy issues. The accurate estimation allows us to formulate the policies accordingly and not to overestimate the share of a sector. RNF sector and poverty linkages show that non-farm activities appear to be strongly associated with declining incidence of poverty but in-depth analysis reveals that the poor face significant pressure to explore opportunities in the RNF economy. The lack of their human (such as, education and skill), financial and physical (such as land ownership) assets often confines them to low productive, low remunerative and low-growth labour market segments, of which there are few pathways out of poverty, simply a means of bare survival. The main indicators, which lower the quality of employment, are absence of collective bargaining, economic freedom and vocational training which constitute more than 75 percent of the employed population in RNF sector. Aggregation of the indicators also signals towards the severity of the deprivation in terms of quality indicators in RNF sector. Total 1/3rd of population is working in lower quality employment in RNF sector due to deprivation in any of the three indicators. The analysis of determinants of RNF employment shows that both pull as well as push factors affect the adoption of RNF employment. On one side, urbanization, high literacy, nonfarm wages, and electrification enhance RNFE, while population density and incidence of poverty put the pressure on the rural workforce to join RNF sector. The micro level analysis reveals that being a female, belonging to lower caste, having low skill level and being young (age group 15-29) confine them to the casual employment only and lower their chances of being employed in self-employment in non-farm or other occupations. Thus, first and foremost policy issue is to understand the severity of overestimation and measures should be taken towards the correct estimation of the share of employment in the sector. Second, the quality indicators highlighted in the study such as vocational training, iii economic freedom and collective bargain should be improved. There should be some specific policies to enhance the skill level by opening the training centers, giving the social security to the casual workers as it is done in the upcoming budget (pension scheme for unorganized workers). Increasing informalisation within formal sector has led to lower the quality even for regular workers which should be taken care of. The promotion of RNF employment should also be undertaken within the broader context of rural development. The most important for rural poverty reduction is to improve the quality of RNF employment rather just focusing on the quantity. It should also be noted that RNF employment is not a substitute for employment in agriculture; it is rather a supplementary option. Agricultural development is still important and should be pursued as a necessary precondition.