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Why Indian Farmers Find it Hard to Move Beyond Agricultural Jobs Despite Low Returns? IIT Madras Research Finds Out

Lack of education and skill, credit constraints, and poor access to social capital restrict farmers from taking up jobs beyond agriculture even if farming does not provide them with a reliable means of sustenance, reveals a study by the Indian Institute of Technology (IIT) Madras.

Researchers have identified the barriers to entry of rural communities into non-farming Occupations. The Researchers studied the problems associated with the Indian rural economy. In particular, they analysed the reasons that farmers do not adopt non-farming jobs even when agriculture does not provide them with a reliable means of sustenance.

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They also showed that farm income and land assets have a negative influence on diversification, and household size has a positive impact on the participation of the rural community in non-farming activities.

The Researchers called for Regional Rural Banks to allow micro-financing and composite finance services to remove the financial barriers to rural job diversification. The IIT Madras study shows that increasing the flow of information via access to telecommunication devices such as mobile phones can enhance awareness about the benefits of non-farming occupations among the rural community, thereby enabling participation.

The Research was undertaken by Dr. Sabuj Kumar Mandal, Associate Professor (Economics), Department of Humanities and Social Sciences, IIT Madras, and his student Anviksha Drall, PhD Research Scholar, IIT Madras. The understanding gleaned from their research has recently been published in the reputed peer-reviewed international journal World Development.

Speaking about the key findings of this study, Dr. Sabuj Kumar Mandal, Associate Professor (Economics), Department of Humanities and Social Sciences, IIT Madras, “The flow of income into agricultural families have been dwindling due to imperfect credit and insurance markets, prevalent in rural India. It has long been recognized that the diversification of rural livelihood into non-farm activities is a key strategy to ensure that rural families maintain a minimum level of income. Trade and hospitality, construction, transport, and education and health are the top four sectors that contribute to the non-agricultural rural jobs in the country.”

The farm sector, the backbone of the Indian economy, has suffered from a low growth rate in recent years. According to the 10th Agricultural Census, the average size of agricultural landholding declined to 1.08 hectares in 2015-16 from 1.15 hectares in 2010-11. This retrograde has been a result of weather vagaries, land fragmentation, price fluctuations, soil erosion, waterlogging, and rapid population growth.

Further elaborating on this study, Anviksha Drall, PhD Research Scholar, IIT Madras, said, “The benefit of diversifying into the non-farm sector is that the income from these areas can be diverted into the farm sector without risk of livelihood loss. This not only helps the rural community stay solvent or even profitable but also helps in increasing agricultural output in the country. Despite the promise, the average Indian farmer is hesitant to enter the non-farming sector and is trapped in a vicious cycle of poverty and debt.”

In order to identify the barriers to the rural community’s entry into the non-farming sector, Dr. Sabuj Kumar Mandal and Anviksha Drall performed modelling studies using household-level panel data on the Indian States belonging to semi-arid tropics and Eastern regions. They built a theoretical framework that modeled the decision of a household’s time allocation among three activities–farm work, non-farm work, and leisure.

“Our empirical findings indicate the specific policies that must be implemented to increase the participation of the rural household in non-farming activities,” added Dr. Sabuj Kumar Mandal.

These policies must be aimed at increasing access to education, credit, and social capital. The IIT Madras researchers recommend rigorous implementation of existing educational policies like Samagra Shiksha and training programs such as Deen Dayal Upadhyaya Grameen Kaushal Yojana.

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