Rural Livelihood Diversification and its Measurement Issues: Focus India   Rajiv Mehta   Wye City Group on Rural Statistics and Agricultural Household Income Second Annual Meeting, 11-12 June 2009, FAO, Rome Parallel Session 1. a “Two views of diversification and non farm income”

Rural Livelihood Diversification and its Measurement Issues: Focus India Structure of presentation Postulations on rural economy Rural Economic Diversification: multiple dimensions Analytical inferences: focus India Suggestions to further the Wye City Group agenda

The scope of increasing real income of farmers and bringing sustained improvement in their well being, solely through farming operations is seriously constrained. There is concern on the incidence of deep rooting of poverty amongst the households depending on single income from farm activities (Wye Group, 2007)

Rural - Urban Structural Differentiation Rural Distinctiveness in factors of production Intense and intrinsic relationship with natural endowments, Oriented to production of primary goods Net suppliers of primary produce and generally, the net consumers of secondary and tertiary goods and services. Rural sectors are rigid /less dynamic in restructurings Shrinking share of primary sector in GDP Commitment to ensure food security Sustainability and conservation commitment Constraints in economic activities and income generation Inter and intra regional differentiations in livelihood and well-being.

Issues Diversification of rural economy Creation of non-agricultural income opportunities, Expansion of Rural Non Farm Employment Integral to rural development strategies and for bringing meaningful structural change in rural socio-economic conditions Opportunities, Empowerment & Security three factors have complimentary and supplementary role in neutralization of rural economic deprivation these three factors are also closely associated with the process of rural economic diversification.

Rural Economic Diversification - Multiple dimensions Production of diverse goods and services in a production boundary Pursuance of diverse economic activities for producing larger range of goods and services Diverse production & activities results into income flows from diverse sources Rural livelihood diversification – an adjunct to rural economic diversification measurements, indicators, data profile, development correlates

Rural livelihood diversification Rural employment diversification Individuals or households to engage in the alternative choices in the labour market and undertake different forms of employment (rural / urban); both farm as well as nonfarm Rural income diversification Individuals or households to have income sourced from the diversified sources. both are broadly complementary but not synonymous employment diversification is measured in terms of labour force participation in diverse industries and occupation. wages and remunerations from different employment would add up to income. income diversification is more comprehensive, since it would also account for transfer payments (rents, interests, dividends etc.) to individuals. Measurement as domain aggregate Aggregate of individuals or of household

Measurement of Rural Economic Diversification

Different rural diversification indices (India – sub national) Simpson Index of Diversity: ( 1 -  Pi2) where, Pi is the proportionate area of ith factor

Percent distribution of usually employed persons by broad industry division Data Source: NSS 61st Round Report no. 515 INDIA - Rural

India - Rural

Percentage distribution of rural households by size class of land owned Data Source: NSS 61st Round Report no. 515 INDIA - Rural

Relationships between incidence of rural poverty and rural livelihood diversification

Key inferences Despite low employment elasticity, rural employment continues to be predominantly agrarian There is slow but steady decline in rural work participation in agriculture. The work participation in non agriculture is also becoming diversified The pace of diversification in respect of females is much slower compared to the male counterparts Manufacturing and services are not having that pronounced a role in stimulating rural labour force engagement Varying sub national pattern in RNFE Significance of “push factor” in the preponderant land marginalization Inverse relation in rural poverty and rural livelihood diversification Poverty and illiteracy are positively correlated Negative correlation between illiteracy and rural livelihood diversification Coexistence of advanced agriculture with rural livelihood diversification

Concluding observations The Wye city Handbook 2007 stepping stone for further profiling the statistical indicators on livelihood stability and security of rural and particularly farm households. Measurements of rural livelihood diversification and its impact on and relationship to empowerment, opportunity and security of rural population is proposed for furthering the agenda of Wye Group Data needs for deeper synthesis of rural economic composition

Concluding observations Suggested areas for furthering the work of Wye Group status and composition of rural non-farm employment - national / sub-national; measures for promotion of rural diversification and responses; interventions for capacity building of farm households through HRD, knowledge dissemination, awareness etc.; institutional support mechanism to encourage and facilitate non-farm employment such as marketing, credit etc.; provision of infrastructure, specially for promoting diversified employment; measuring involvement of local government bodies, NGOs, cooperatives and policy and programme intervention to facilitate and stimulate rural non-farm employment.

Thanks Dr. Rajiv Mehta Additional Director General, Survey Design and Research Division, National Sample Survey Organisation, Ministry of Statistics and Programme Implementation Govt. of India “Mahalanobis Bhawan” 164, G. L. T. Road, Kolkata, India Tel: (o): 91-33-25771326 email : rajivmehta2@gmail.com