Augmenting Small Farmers’ Income Through Rural Non-farm Sector in India: Role of Information and Institutions

Abstract

The low level of income of farmer s is a critical concern in India against the backdrop of which the current Union Government proposes to double farmers’ income by 2022. As the land size of small and marginal farmers, who constitute 80 per cent of the farmer population in India, is limited, reducing farmers’ distress and doubling of farmers’ income through the farm sector alone is almost impossible. In this regard, the non-farm sector can not only absorb the excess labour from agriculture but also generate additional income for farm households. Further, the sector can help mitigate risks for farmers and check migration to urban areas. However, the non-farm sector’s importance has not been duly recognized in the country, and against this backdrop, this chapter discusses the nature and extent of non-farm activities in India using the unit record data of the India Human Development Survey. An exercise carried out to understand the determinants of income from non-farm activities using Tobit regression shows that households that can avail themselves of larger loans (for any purpose, including agriculture) or insurance from financial institutions and have access to information and networks are the ones that are able to earn higher non-farm income. As the credit for non-farm activities per se is rather limited, it can be inferred that higher levels of credit even for farm activities can help the non-farm sector as well, possibly through production linkages.