Prospects of Non-Farm Employment and Welfare in Rural Areas

Employment elasticity with respect to agriculture value added in South Asia has weakened in recent years. While crop diversification has grown and value added per hectare also grew, employment growth was sluggish. However, the linkages between farm and non-farm employment remain strong. Drawing upon the 50th and 61st rounds of the National Sample Surveys (NSS) for India in 1993 and 2004, we first review the changes in participation rates in farm and non-farm activities by gender, age, education and caste affiliations. This is followed by an econometric analysis of contribution of farm and non-farm employment towards welfare in terms of per capita expenditure. The focus is on household characteristics (size, composition, education, land holding), and community characteristics (access to roads, power and financial services). Using a measure of normalised rainfall, we assess how rainfall shocks influence welfare in farm and non-farm activities. The fact that welfare of selfemployed in non-farm activities became more sensitive to rainfall shocks in 2004, relative to 1993, suggests stronger linkages between farm and non-farm activities. Also, the welfare of self-employed in agriculture became more sensitive to rainfall shocks in 2004, presumably due to expansion of agriculture into arid and semi-arid areas. Finally, and not so surprising is the greater sensitiveness of welfare of agricultural labour households to rainfall shocks. So while education and better infrastructure will help enhance welfare in farm and non-farm activities, the policy concern for resilience against rainfall shocks is reinforced.