Poverty Decline, Agricultural Wages, and Non-Farm Employment in Rural India 1983–2004
The authors analyze five rounds of National Sample Survey data covering 1983, 1987/8, 1993/4, 1999/0, and 2004/5 to explore the relationship between rural diversification and poverty. Poverty in rural India declined at a modest rate during this period. The authors provide region-level estimates that illustrate considerable geographic heterogeneity in this progress. Poverty estimates correlate well with region-level data on changes in agricultural wage rates. Agricultural labor remains the preserve of the uneducated and also to a large extent of the scheduled castes and scheduled tribes. Although agricultural labor grew as a share of total economic activity over the first four rounds, it had fallen back to the levels observed at the beginning of the survey period by 2004. This all-India trajectory masks widely varying trends across states. During this period, the rural non-farm sector grew modestly, mainly between the last two survey rounds. Regular non-farm employment remains largely associated with education levels and social status that are rare among the poor. However, casual labor and self-employment in the non-farm sector reveal greater involvement by disadvantaged groups in 2004 than in the preceding rounds. The implication for poverty is not immediately clear - the poor may be pushed into low-return casual non-farm activities due to lack of opportunities in the agricultural sector rather than being pulled by high returns offered by the non-farm sector. Econometric estimates reveal that expansion of the non-farm sector is associated with falling poverty via two routes: a direct impact on poverty that is likely due to a pro-poor marginal incidence of non-farm employment expansion; and an indirect impact attributable to the positive effect of non-farm employment growth on agricultural wages. The analysis also confirms the important contribution to rural poverty reduction from agricultural productivity, availability of land, and consumption levels in proximate urban areas.
Summary: | The authors analyze five rounds of
National Sample Survey data covering 1983, 1987/8, 1993/4,
1999/0, and 2004/5 to explore the relationship between rural
diversification and poverty. Poverty in rural India declined
at a modest rate during this period. The authors provide
region-level estimates that illustrate considerable
geographic heterogeneity in this progress. Poverty estimates
correlate well with region-level data on changes in
agricultural wage rates. Agricultural labor remains the
preserve of the uneducated and also to a large extent of the
scheduled castes and scheduled tribes. Although agricultural
labor grew as a share of total economic activity over the
first four rounds, it had fallen back to the levels observed
at the beginning of the survey period by 2004. This
all-India trajectory masks widely varying trends across
states. During this period, the rural non-farm sector grew
modestly, mainly between the last two survey rounds. Regular
non-farm employment remains largely associated with
education levels and social status that are rare among the
poor. However, casual labor and self-employment in the
non-farm sector reveal greater involvement by disadvantaged
groups in 2004 than in the preceding rounds. The implication
for poverty is not immediately clear - the poor may be
pushed into low-return casual non-farm activities due to
lack of opportunities in the agricultural sector rather than
being pulled by high returns offered by the non-farm sector.
Econometric estimates reveal that expansion of the non-farm
sector is associated with falling poverty via two routes: a
direct impact on poverty that is likely due to a pro-poor
marginal incidence of non-farm employment expansion; and an
indirect impact attributable to the positive effect of
non-farm employment growth on agricultural wages. The
analysis also confirms the important contribution to rural
poverty reduction from agricultural productivity,
availability of land, and consumption levels in proximate
urban areas. |
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