Augmenting small farmers’ income through rural non-farm sector: Role of information and institutions

Low level of income of farmers is a critical concern in India in the backdrop of which the current Union Government promised to double farmers’ income by 2022. As the land size of the small and marginal farmers, who constitute 80 percent of farmer population in India is limited, reducing farmers’ distress and doubling of farmers’ income through 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 the farm households. Further, the sector can help in mitigating risks for the farmers and check migration to urban areas. The non-farm sector, however, has not received its due importance in the country and in this back drop, the current paper discusses the nature and extent of non-farm activities in India using India Human Development Survey unit record data. An exercise carried out to understand the determinants of income from non-farm activities using a Tobit regression model, shows that the households who could avail larger size loans (for any purpose including agriculture) or insurance from financial institutions and have access to information and networks are the ones who could get higher non-farm income. As the credit for non-farm activities per say is rather limited, it can be inferred that higher level of credit for even farm activities can help non-farm sector as well possibly through production linkages.