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Non-farm diversification and rural poverty decline: a perspective from Indian sample survey and village study data


  • Himanshu, Himanshu
  • Lanjouw, Peter
  • Mukhopadhyay, Abhiroop
  • Murgai, Rinku


This paper studies the evolution of the rural non-farm sector in India and its contribution to the decline of poverty. It scrutinizes evidence from a series of nationally representative sample surveys and confronts findings from these sources against the experience of poverty decline in a western Uttar Pradesh village, Palanpur, which has been the subject of close study over a period of six decades. Sample survey data indicate that the non-farm sector in rural India has grown steadily during the past 30 years, with some acceleration during the late 1990s to the mid-2000s followed by a leveling off after 2004-05. The suggestion is of a process that has contributed modestly to declining rural poverty both directly, through employment generation, and indirectly through an impact on agricultural wages. The paper illustrates that in Palanpur, it is only relatively recently that rural poverty decline has become strongly linked to diversification of the village economy. There is little evidence that, prior to the 1990s, the poor in the village were able to participate actively in this process of intersectoral transfer out of agriculture. Data collected in 2008/9 indicate that continued expansion of the non-farm sector has now started to engage the poor directly and in a very significant manner. As the non-farm sector has expanded, the previously disadvantaged and most vulnerable segments of village society have gained access to non-farm employment opportunities and have recorded significant upward mobility. The paper goes on to highlight the close association between urban poverty reduction and rural non-farm growth (and accompanying rural poverty reduction). In particular the paper singles out small towns in India as both particularly closely linked to rural non-farm development and recording particularly high rates of urban poverty. It is suggested that galvanizing small towns may thus serve both urban and rural poverty reduction objectives.

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  • Himanshu, Himanshu & Lanjouw, Peter & Mukhopadhyay, Abhiroop & Murgai, Rinku, 2011. "Non-farm diversification and rural poverty decline: a perspective from Indian sample survey and village study data," LSE Research Online Documents on Economics 38371, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:38371

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    References listed on IDEAS

    1. Mukhopadhyay, Abhiroop, 2011. "Stepping out of Palanpur: employment outside Palanpur," LSE Research Online Documents on Economics 38373, London School of Economics and Political Science, LSE Library.
    2. Lanjouw, Peter & Stern, Nicholas, 1998. "Economic Development in Palanpur over Five Decades," OUP Catalogue, Oxford University Press, number 9780198288329.
    3. Lanjouw, Jean O. & Lanjouw, Peter, 2001. "The rural non-farm sector: issues and evidence from developing countries," Agricultural Economics, Blackwell, vol. 26(1), pages 1-23, October.
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    Cited by:

    1. Mukhopadhyay, Abhiroop, 2011. "Stepping out of Palanpur: employment outside Palanpur," LSE Research Online Documents on Economics 38373, London School of Economics and Political Science, LSE Library.
    2. Bhushan, S., 2016. "TFP Growth of Wheat and Paddy in Post-Green Revolution Era in India: Parametric and Non-Parametric Analysis," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 29(1).
    3. Peter Lanjouw & Rinku Murgai & Nicholas Stern, 2013. "Nonfarm diversification, poverty, economic mobility, and income inequality: a case study in village India," Agricultural Economics, International Association of Agricultural Economists, vol. 44(4-5), pages 461-473, July.
    4. Dethier, Jean-Jacques & Effenberger, Alexandra, 2012. "Agriculture and development: A brief review of the literature," Economic Systems, Elsevier, vol. 36(2), pages 175-205.
    5. Reddy, A Amarender, 2013. "Rural transformation since 1970s in Dokur Village of Andhra Pradesh, India," MPRA Paper 30784, University Library of Munich, Germany, revised 30 Nov 2013.
    6. Rahaman, Sk. Mahidur & Halder, Surajit & Pal, Subhadip & Ghosh, Abhishek, "undated". "Role of rural off-farm employment in earning income and livelihood in the coastal region of West Bengal, India," 2015 Conference, August 9-14, 2015, Milan, Italy 212697, International Association of Agricultural Economists.
    7. Sinduja Srinivasan, 2014. "Impact of Public Works on Household Occupational Choice Evidence from NREGS in India," Working Papers WR-1053, RAND Corporation.
    8. repec:wbk:wbpubs:28971 is not listed on IDEAS

    More about this item


    employment; diversification; rural non-farm sector; delcine of poverty; India; village;

    JEL classification:

    • N55 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - Asia including Middle East
    • N95 - Economic History - - Regional and Urban History - - - Asia including Middle East


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