Resource information
This paper assembles data at the
all-India level and for the village of Palanpur, Uttar
Pradesh, to document the growing importance, and influence,
of the non-farm sector in the rural economy between the
early 1980s and late 2000s. The suggestion from the combined
National Sample Survey and Palanpur data is of a slow
process of non-farm diversification, whose distributional
incidence, on the margin, is increasingly pro-poor. The
village-level analysis documents that the non-farm sector is
not only increasing incomes and reducing poverty, but
appears as well to be breaking down long-standing barriers
to mobility among the poorest segments of rural society.
Efforts by the government of India to accelerate the process
of diversification could thus yield significant returns in
terms of declining poverty and increased income mobility.
The evidence from Palanpur also shows, however, that at the
village-level a significant increase in income inequality
has accompanied diversification away from the farm. A
growing literature argues that such a rise in inequality
could affect the fabric of village society, the way in which
village institutions function and evolve, and the scope for
collective action at the village level. Failure to keep
such inequalities in check could thus undermine the pro-poor
impacts from the process of structural transformation
currently underway in rural India.
