Income Diversification in Hill Farms: An Empirical Analysis

Diversification of rural economy is thought of as a strategy to minimize risk to cover crop failure where the immediate goal is not to make profits but to stabilize income for survival .This study has examined the income diversification in farm sector of Kangra district and has investigated the empirical relationship between the magnitude of diversification and various so- cio-economic factors. The study has been conducted on two developed blocks, form the developed category and two backward blocks, and form the backward category on the basis of ranking of infra-structural as well as ranking of agricultural related variables. Two stage stratified random sampling technique with stratification (on the basis of index of crop acreage diversifica- tion using Entropy Index) at second stage was employed for the selection of villages and households. A sample of 105 and 83 households were selected using simple random sampling technique from the villages, in approximate proportion of the number of households, of developed and backward categories respectively. The result have shown that the household income is highly diversified in backward category but the level of total household income is significantly lower as compared to developed cate- gory where low level of diversification is associated with high level of income thus, pointing towards the prevalence of distress diversification. The extent of income diversification is higher in less-diversified farms (EI<0.6393) than in more-diversified farms (EI>0.6393) of developed category. In contrast, diversification of income is higher in more-diversified farms of backward category. The regression results for the determinants of income diversification revealed that both the economic variables like the size of operational holding and tractor density as well as social factor such as family size and educational status of the head of family are significant determinants for explaining the process of income diversification in developed category, while family size and dichotomous bullock were significant variables in backward category. Alternatively, the proportion of off-farm income of the total household income was also taken as a measure of rural diversification. The statistical evidence with regards to the determinants of off-farm income diversification suggested that both the economic factors such as the number of fragments of holding, size of operational holding, tractor density, extent of tenancy and social factors like family size, age and educational status of the head of the family are significant for explaining the process off-farm income diversification in the developed as well as in the backward category.