Rural Non-Farm Employment and Rural Transformation in India, Working Paper Series No. 57

D N Reddy, A A Reddy, N Nagaraj, M C S Bantilan, 'Rural Non-Farm Employment and Rural Transformation in India, Working Paper Series No. 57', ICRISAT, 2018

This study attempts to assess the changing structure of rural production and employment in the lasttwo decades and its implications on rural labor market. The rural labor market has undergone profoundstructural transformation with labor moving from agriculture towards non-agricultural activities.Currently, non-farm sector is no longer a residual sector, but an emerging driver of rural developmentand transformation, contributing 65% to the rural Net Domestic Product in 2010. There has beenan absolute decline in labor force in recent times with a decline in agriculture employment for bothmale and female laborers and this decline in female workforce is much higher than male workforce inagriculture. The key drivers of changes include inter alia ? higher growth in non-farm sector speciallyinfrastructure and construction, coupled with improved transportation and communication, differentialwage rates, improved literacy and Government programs. Such change in employment structure alsoled to occupational shifts among different social groups with increased dependence of SC on rural nonfarmemployment mainly construction work, and reduced dependence on agriculture. Tis significantmovement of rural labor from farm to non-farm activities and migration from rural areas to cities,especially by male workers to relatively higher wage work, has led to tightening of the labor market.Thus labor scarcity has emerged as one of the major constraints to increasing agricultural productionin India. This has several implications on agriculture in terms of rise in farm wage along with otherrising input costs pushing the cost of production. Labor market also witnessed some structuraltransformation such as the disappearance of bonded and attached labor and changing contractualarrangement of rural labor. Casual labor is predominant but increasingly shifting from daily wage tocontractual work with increasing bargaining power of labor. Based on empirical results of the study anumber of policy interventions are suggested such as development of labor saving technologies andmachines to mitigate labor scarcity, inclusive farm mechanization program, especially for women andyouth, strengthening rural-urban connectivity, social protection to migrant labor and capacity buildingprograms for skill augmentation