special article

Rural Non-Farm Economy: A Note on the Impact of

Crop-Diversification and Land-Conversion in India
Saumya Chakrabarti, Anirban Kundu

Crop-diversification under the integrated institutional

set-up of corporate contract farming processing,
packaging and retailing may displace the petty
manufacturing and services that have matured over the
years in different parts of rural India as a constituent of
an endogenous process driven by agricultural growth
and changing land-relations. As local availability of basic
food items and other agro-raw materials form the basis
of rural employment diversification by farmer as well as
landless households, diversification towards high value
commercial crops leading to squeezing of these supplies
may destroy the very foundation of the rural non-farm
economy that is engaged in petty production.

The authors express their sincere gratitude to Kalyan Sanyal and

Sarmishtha Sen. The usual disclaimer applies.
Saumya Chakrabarti (saumyavb72@yahoo.co.in) is with the Department
of Economics and Politics, Visva-Bharati, Santiniketan. Anirban Kundu
(anirban_kundu2006@rediffmail.com) is an independent researcher.
Economic & Political Weekly EPW march 21, 2009 vol xliv no 12

ccording to the proponents of traditional development

theory economic development hinges on the growth of
modern capitalistic industry through accumulation of
capital. Accumulation proceeds via generation, realisation and
reinvestment of surplus created by using fixed capital with labour
transferred from the labour-surplus traditional sector. However, this path of development can be sustained only if adequate
supply of food to the modern sector is guaranteed. Such a process
is supposed to transform the traditional sector into a modern
oneand thereby ensuring self-sustained growth of the less
developed economy.

1Introduction
This has been the dominant development strategy during the
1950s and 1960s. However, since the early 1970s it has been increasingly argued that this Lewisian strategy is ineffective so far
as broad-based employment generation is concerned. Several
studies showed that hardly 2% to 3% of total increased workforce
got employed in large-scale manufacturing sectors during the
1960s and 1970s in countries like India, Pakistan and Bangladesh
(Amjad 1988).
Consequently, the focus shifted towards the informal sector in
general and rural non-farm (RNF) sector in particular as potential
candidates capable of creating widespread income and employment. Thus, the informal sector is no more considered as a residual segment. It has been argued that instead of getting withered
away through structural transformation the broadly defined informal sector is rather acting as a dispersed development engine.
In fact, there has been a paradigm shift (Mellor 1976; Saith 1991;
Ranis and Stewart 1993; Bangasser 2000; Lanjouw and Lanjouw
2001; Sanyal 2007).
Even if several developing countries are experiencing growth
in agriculture, modern industry and services, there is gross inability so far as absorption of surplus labour is concerned. This has
prompted a process of rural-rural migration from agriculture to
non-farm activities. In many of the cases this migration is a prosperity-induced phenomenon (Mellor 1976; Saith 1992) rather
than a distress-induced one (Vaidyanatham 1994). In different
ways the overall expansion of developing economies has contri
buted to the growth of the RNF sector. Thus, expansion of labour
intensive RNF activities could be considered as a mark of progress
rather than that of retrogression (Radhakrishna 2002).1
Recently, the need for improvement of this sector has been recognised in India as well. Consequently, its dynamics and the pattern of its dependence on other sectors of the economy especially

69

speciAl article

agriculture has become an important issue of research. Substan- 1972-73 to 1999-2000 the total number of workers (usual status,
tial empirical work has been done on the question of farm-non- primary and secondary status) and the share of employment in
farm linkages in India. It is proposed that farm sector growth in this non-farm sector had increased from 352.4 lakh to 726.4 lakh
duces expansion of non-farm sector through demand (consump- and 14.3% to 23.8%, respectively (Table 3). It is generally argued
tion) and supply side (forward and backward) linkages. Expan that the cause of such expansion of the RNF sector in Indiais the
sion of non-farm economy, in its turn, helps agriculture to grow particular pattern of growth of agriculture. Consequently, farmfurther through demand boost as well as through supply side non-farm linkages have become an important issue of discussion.
support (Mellor 1976; Ranis and Stewart 1993). Thus, a growth
multiplier process operates involving both farm and non-farm 3Review of Literature on Farm-Non-farm Linkage
sectors.2 However, such a mechanism is argued to be dependent As our basic issue of discussion is the impact of crop-diversificalargely on the condition of egalitarian growth in agriculture tion and agricultural land-conversion on the dynamics of the RNF
(Harriss 1991). Agricultural growth based on equitable asset dis- sector, the literature on farm-non-farm linkages may provide us
tribution is supposed to raise demand for locally produced labour- with the appropriate building blocks for the subsequent analysis.
Hence, we take up a journey through
intensive goods and services through
Table 1: Growth Rates of Agricultural Output and Employment
the relevant literature. Vaidyanathan
forward as well as backward linkages.
(in %)
(1986) in his study showed that where
Nevertheless, at present Indian agri-
1985-86 to 1994-95 1995-86 to 2002-03
3.4
1.8
agriculture is unable to provide sufficulture is experiencing significant re Output growth rate
1983-93
1993-99
cient employment the RNF sector picks
source reallocations. Two such funda-
Employment growth rate
2.6
0
up a part of the slack. Thus, an inverse
mental changes are crop-diversification Source: D Kapurs comment on Pre- and Post-Reform India by S Bhalla
relationship between farm and nonand agricultural land-conversion for and T Das, in India Policy Forum 2005-06,Vol 2, Sage, India, 2006.
farm employment was proposed (see
industrialisation. The government of
also Bhaumik 2002). However, contrary
India is also shifting its policy focus from Table 2: Employment Share of Different Sectors (in %)
Sector
1983
1993-94
1999-2000
to this residual sector hypothesis there
basic cereals production to production
Primary
69
65.5
60.4
is a vast literature that proposes a posiof so-called high value non-food com- Secondary
13.8
14.8
16.8
tive relationship between farm growth
mercial crops, especially vegetables, Tertiary
17.2
19.7
22.7
and expansion of RNF activities.
fruits and flowers. It is argued that such Source: Indian Economy by R Dutt and K Sundaram, S Chand Publication.
Hazell and Haggblade (1990) considcrop-diversification would boost em
ployment and income generation. Moreover, it is supposed to ering state and district level data for India calculated that on an
ensure sustainable cultivation (Joshi et al 2004). On the other average a Rs 100 increase in agricultural earnings is associated
hand, huge tracts of agricultural land are being converted for with a Rs 64 increase in RNF income (see also, IFPRI 1985; Hazell
construction of industrial zones leading to loss of basic agricul- et al 1991). It was found by Haggblade et al (1989) that marginal
tural production. Such changes may, however, have profound consumption of locally produced non-foods is large (about 35%)
impacts not only on the basic food crop (cereals) economy but in Asia (India and Malaysia). Mellor (1976) hypothesised that the
also on the RNF sector. We, in this paper, try to discuss the probable green revolution generated increased demand for locally
impacts of crop-diversification and agricultural land-conversion produced labour-intensive RNF goods and services. But the assertion that even the big farmer class could be the driving force for
on the vast RNF economy engaged in petty production.
The paper is constructed as follows. Section 2 presents some non-farm growth has been questioned by several researchers
stylised facts on the employment situation in India. Section 3 (Dunham 1991).
provides the review of literature on farm-non-farm linkages.
Table 3: Number (in Lakh) and Percentage of RNF Workers (to total workers) (us - ps+ss basis)
InSection 4, we note a few empirical observations on farm- 1972-73
1977-78
1983
1987-78
1993-94
1999-2000
non-farm relations pertaining to some states of India. In 352.4
364.9
459.2
559.6
631.8
726.4
Sections5 and 6 we try to explore the probable impacts of crop- 14.3
16.5
18.4
21.7
21.6
23.8
diversification and agricultural land-conversion on the RNF Source: Employment Diversification in Rural India: A State Level Analysis by S K Bhaumik in
Indian Journal of Labour Economics, Vol 45(4), 2002 (p 721).
sector. Section 7 concludes.
Using examples from India, Pakistan and Taiwan, Johnston
2Some Stylised Facts on the Employment Situation
and Kilby (1975) highlight the importance of production linkage.
Before going into the core of the issues let us present certain They point to small farmers demand for fertilisers and others
information on the overall employment situation in India. In similar inputs as well as that for equipment along with repair
Table 1, the growth rates of agricultural output and employment services provided by local artisans. According to Hazell and Roell
are shown. It is pretty clear that the situation is alarming. It calls (1983) small- and middle-sized peasant farmers have much higher
for a serious search for effective alternatives. So far as the propensity to consume labour-intensive rurally produced goods
secondary and tertiary sectors are concerned there is also not compared to that of their larger counterparts. In such cases nonmuch hope for employment generation (refer Table 2).
farm employment multipliers are also substantial (Krishna 1976).
This is obvious given the nature of technology used in these Data from Punjab raises similar doubts about the significance of
sectors. In this situation, the RNF sector is said to provide some large farmer-based agriculture. In this respect we can site the
respite. Such optimism is also supported by the fact that from study by Bhalla and Chadha (1983) on Punjab, where they found

70

march 21, 2009 vol xliv no 12 EPW Economic & Political Weekly

special article

that middle peasantry (5-12.5 acre) and not the big or very
big farmers is the dominant source of demand for non-farm
goods and services. A survey on Arni, Tamil Nadu (Harriss
1991) has revealed that agricultural expansion has not
encouraged local production of labour-intensive consumer
goods; rather it has disproportionately expanded trade in
big city products. Based on this survey Harriss concludes
that not only agricultural output and income growth but
also its pattern has serious implications for the growth of
labour-intensive RNF sector.3 In particular he asserts that it
is the egalitarian growth process in agriculture that is
essential for the development of decentralised labour-intensive
non-farm sector.
Similarly, the importance of redistributive land reforms in promoting localised RNF activities has been emphasised by several
researchers (Saith 1991 and 1992; Ray 1994). In fact, small farmbased agriculture is supposed to help the growth of the RNF
sector through both the demand and supply side linkages. Agricultural expansion generates demand for local inputs especially
rudimentary tools and farm services and for locally produced
cheap consumer goods. On the other hand, such an expansion
ensures the vital local supply of food and other raw materials.4
In this context, the observations of the West Bengal Human
Development Report 2004 need special attention. It is argued that
as the growth of agricultural output and income in West Bengal
during the 1980s and 1990s has been achieved on the foundations of land reforms, it has created a wider market for mass

40% of the total rural workers in the state are engaged in

such non-agricultural activities. A very large part of these
activities are, in fact, undertaken in household enterprises.
The National Sample Survey Organisation (NSSO 2001) survey on
the informal sector in India shows that the proportion (per 1,000)
of enterprises located within household premises is very
high (571) for West Bengal and it is well above the national
average (448). This is particularly plausible given the food
security of the households ensured through formal access to the
produce itself.

4Empirical Observations on Farm-Non-farm Linkage

In support of our argument that the labour-intensive RNF sector

is much more integrated with a small farm-based agriculture
concentrating on primary commodities or basic cereals pro
duction, we go for a simple empirical exercise. Using data
fromNSSO (2005) on productive assets for farm and non-farm
business possessed by the farmer households we have constructed Table 4 for three representative states and for all
Indiaaverage.
We have selected purposively three states, West Bengal,
Tamil Nadu and Punjab. Agriculture in these three states had
performed well in the 1980s and early 1990s. However, Punjabs
progress was based on the growth of traditional foodgrain production (particularly wheat), while Tamil Nadus agriculture
was one of the most diversified. Contrarily, in West Bengal
ag riculture was small farm based though concentrating mainly
on rice cultivation. From Table 4 it
Table 4: Average (Per Hectare) No of Productive Assets for Farm and Non-Farm Business Possessed
can be inferred that marginal (up to 1
(Per 1,000 Farmer Households by Size Class of Land Possessed) (season: kharif)
hectare) and small (1.01 to 2 hectares)

Size Class (in hectares)

Up to 2 2.01-4 4.01-10 Up to 2 2.01-4 4.01-10 Up to 2 2.01-4 4.01-10 Up to 2 2.01-4 4.01-10
Item
s

West Bengal
Tamil Nadu
Punjab
All India
farmers are much more tied up with
[For farm business]
non-farm sector across India as well
(primary implements)
Sickle, chaff-cutter, axe,
as in all the three representative
spade, chopper, plough
5,064 2,707 1,426 3,700 2,363 1,175 5,543 3,402 1,906 5,776 3,038 1,564
states. These farmers largely depend
Pump
101 120
91 242 279 192 360 400 220
128 141
91
on such equipment for farm and non(Capital intensive implements)
farm businesses, which are generally
Power tiller, tractor
23
20
26
5 13
11
84 243 162
16
35
26
[For non-farm business]
produced in the local labour intensive
Machinery and equipments
158
12
0
90
1
14
99
81
1
140
22
10
non-farm sector. Pr imary implements
Source: Calculated from NSS 59th round, Report No 497 (59/33/5), pp A28, A31, A35, A37.
like sickle, plough, axe, etc, are
consumption goods and for different locally produced inputs mostly owned by the marginal and small farmers compared to
including farm-related services such as petty processing and medium (2.01 to 4 hectares) and large (4.01 to 10 hectares)
transportation, petty trading of crops, etc. On the other hand, it ones. On the other hand, capital-intensive implements like
has also ensured the vital micro (household or village level) food power tiller, tractor, pump are used proportionately more by
security. Thus, the newly evolved class of small and marginal upper class farmers.
farmers and the bargadars concentrating mainly on basic crops
Similarly, the machinery and equipment meant for
production have been the source of food and raw materials for non-farm business are mainly used by the small and marginal
the local non-farm sector. Consequently, a mutually beneficial farmers. This is true for India as well as for the three states.
(reinforcing) endogenous growth process develops. Summaris- Another interesting result is that this inclination is maxiing, we can say that the small farm economy specialising in non- mum in West Bengal followed by Punjab and Tamil Nadu.
mechanised production of basic crops generated on the one hand This observation again supports the view that extensive employsubstantial agricultural employment and hence large market ment diversification as experienced in rural West Bengal is
for cheap mass consumption goods, and on the other, demand largely due to its particular pattern of land and agricultural
for locally produced and supplied inputs of production and income distribution.
farm services.
A similar kind of inference could also be drawn if average
Consequently, a large section of the rural population gets monthly (net) income from non-farm business per farmer
engaged in local non-farm activities. According to this report, household for the three states is compared. This is done in
Economic & Political Weekly EPW march 21, 2009 vol xliv no 12

71

Average monthly (net) income from non-farm business per farmer household
during the agricultural year (July'02-June'03)
speciAl article
of raw material for sophisticated processing meant primarily for
exports (Singh 2004; Sidhu 2005). On the other hand, HVC cultivation could be a better option for large farmers (Sen and Raju
800800
Punjab
2006) either having access to modern storage processing
transportation facilities or having the ability to get attached with
600600
West Bengal
the big agri-business firms through corporate contract farming.
Thus, this HVC cultivating segment of agriculture could easily get
400
400
Tamil Nadu
integrated with the so-called modernisation process. Nevertheless, it might delink a large part of agriculture from the rural
200200
labour-intensive non-farm sector with far-reaching implications.5
The whole chain of crop-diversification processing, packag00
ing, retailing could be organised through firm-farm contract.
0.005
0.205
0.705
1.505
3.005
7.005
0.005 0.205
0.705
1.505
3.005
Size class (mid
value) of land
possessed
(hectares)7.005
However, it is seen that generally the large processing companies
Source: Derived from NSS Report No 497 (59/33/5), pp A187, A189, A191.
favour big farmers for undertaking contract farming, perhaps
size class (mid value) of land possessed (hectares)
Figure 1. For the lowest size class of landholding though due to high transaction cost involved in case of the smaller counPunjab shows higher extent of rural employment diversification, terparts (Singh 2004; Dev and Rao 2005; Kumar 2006). Confor all other size classes West Bengal portrays a consistently versely, the large farmers happen to use finer (modern) products
robust trend. However, all three states show similar fluctu- produced in formal industry for production and consumption
ations in non-farm income, which could perhaps be a mark purposes. Contract farming itself ensures use of modern inputs
of distress-led and prosperity-induced diversification across dif- and modern farm services creating diversion of purchasing power
ferent size classes.
in favour of big city products and thereby initiating substantial
On the other hand, comparison of Punjab and West Bengal leakage of potential demand away from the labour intensive nonwith Tamil Nadu gives us clear indication that crop diversifica- farm sector. Crop-diversification may induce agricultural output
tion (as practised in Tamil Nadu) does not generate sufficient de- and income growth, it can also act as a boost to formal non-agrimand for rudimentary farm implements. We can hypothesise cultural sectors, but it does not necessarily guarantee increased
that land reforms in West Bengal and green revolution in Punjab demand for local non-farm products.6
As has been noted earlier, there is a very close relation between
concentrating mainly on basic crop production may have created
significant demand for minor farm and non-farm implements, small farm-based agriculture and the labour-intensive RNF secespecially from the small and marginal farmers. On the other hand, tor. On the other hand, under general conditions, the small and
in Tamil Nadu agriculture concentrating on crop diversification marginal farmers happen to be the producers of traditional or
basic cereals. There is mutual interdependence between this
could generate only moderate demand for such implements.
basic agriculture and the RNF sector through demand as well as
5Crop-Diversification and the RNF Economy
supply side channels (Radhakrishna 2002). Small and marginal
We now turn to our analysis of the probable impacts on RNF farmers either consume or use in production the local non-farm
economy due to diversification of agriculture. We have noted products and simultaneously provide the RNF sector with basic
above that the pattern of agricultural growth is supposed to have food items and other agro-products used as raw materials. Consignificant influence on the course of development of the RNF sequently, with crop-diversification if agriculture shifts away
sector. Hence, it seems quite likely that crop-diversification as from basic food crop production, it may adversely affect the nonwell should have serious implications for non-farm progress. farm sector as many demand and supply side channels may get
Based on the above analysis of farm-non-farm linkage literature constricted/blocked.
we here try to put forward few propositions regarding the
probable effects of crop-diversification on the dynamics of RNF Insertion of Big Capital
economy. We hypothesise, contrary to the usual belief that the When these small and marginal farmers get involved in the pro
particular type of agricultural growth based on diversification cess of crop-diversification, as a survival strategy, they have to
towards high value crop (HVC) could rather affect the labour- face great hurdles/uncertainties (Sen and Raju 2006) due to lack
of access to modern inputs, technology and knowledge and most
intensive RNF activities adversely.
The HVC farming could serve well the current course of indus- importantly, due to lack of access to the market, and modern
trialisation by providing (processed) food to the relatively well- storage-processing-transportation-packaging facilities. This creates
off population engaged in modern industry and through supply the scope for intervention by big capital. Only huge investments
Figure 1: Average Monthly (Net) Income from Non-farm Business Per Farmer
Household (July 2002-June 2003)
Net receipt (Rs)

Table 5: Monthly Per Capita Consumer Expenditure Over Two Groups of Food Items for Farmer Households across Different MPCE Classes (All-India in Rs)
Items/MPCE class (Rs)

0-225

225-255

255-300

300-340

340-380

380-420

420-470

75.05
(61.61)

88.18
(57.59)

96.86
(55.13)

103.76 108.93
(52.18) (49.38)

114.45
(47.01)

119.1
(44.65)

126.1 130.97
137.8
(42.92) (39.94) (36.33)

145.23 158.53
(32.69) (27.87)

Vegetables, fruits (fresh), fruits (dry), beverages, 17.88

24.76
refreshments and processed food
(15.55) (16.84)

29.19
(16.61)

34.19
(17.19)

44.19
(18.15)

49.22
(18.45)

54.49 63.41
(18.54) (19.34)

87.79 52.07
(19.76) (18.68)

Cereals, cereal substitutes,

gram, pulses and their products

39.19
(17.76)

470-525

525-615

615-775

74.14
(19.55)

775-950

950+

Numbers in the parentheses represent the corresponding shares (%).

Source: NSS 59th Round Report No 495 (59/33/4), pp A84.

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march 21, 2009 vol xliv no 12 EPW Economic & Political Weekly

special article

in collection, transportation, storage, processing, packaging and

finally retailing could effectively realise the potentials of cropdiversification (Rao et al 2006; Sen and Raju 2006).7 Hence, the
intrusion of big capital in this elaborate chain of activities
becomes imminent either through spot contracts or through the
integrated institution of contract farming. The diversified HVC is
siphoned off for big city consumption or for exports and on the
other hand, modern inputs and modern farm services are introduced into the agricultural sector. The same channel could even
be used to sell big city products in rural areas. Three clear consequences of this whole process could be: (i) lack of access to
local (basic) food supply making the non-farm sector vulnerable
(Sen and Raju 2006); (ii) shifting of demand for agricultural
inputs and farm services from local non-farm sector to the
modern industry (Basant 1994); and (iii) big city cheap
products displacing non-farm consumer goods (Harriss 1991).
Thus, the non-farm sector faces challenge from the introduction of modern industrial commodities. The insertion of capital
displaces the non-farm population, only a part of which could be
internalised into the agricultural modernisation process. In this
context, we can refer to the study of Basant (1994) on Gujarat. It
is noted that growth of land productivity (or per capita output) based mainly on cropping pattern changes may not generate
adequate impulses for the development of rural non-agricultural
activities. It may be partly because the processing of output is
likely to be concentrated in urban areas and the techniques of
production may be capital-intensive. Thus, the pattern of agricultural growth in Gujarat is such that it could not boost significantly the RNF activities of rural located-rural linked type.
Rather, urban linked (though rurally located) firms played a
significant role and whatever RNF activities developed was
capital-intensive in nature (ibid).
Agricultural diversification may also jeopardise macro, micro
and especially, local and household food security.8 It could really
be a problem for the petty producers both in agriculture producing HVC and shifting away from basic cereals and in non-farm,
getting displaced due to agricultural resource reallocation. Food
insecurity at local as well as at household levels makes these
farmer households dependent on external sources. However, as
the non-farm households lose their work they are doubly affected.
They neither have the access to local food supply nor do they have
sufficient entitlement to exchange with.9
It is evident from Table 5 (p 72) that crop-diversification is
bound to affect the food security of low-income earning farmer
households who spend a large part of their income on basic food
items such as cereals, pulses, etc.
This argument is supported by Table 6 as well. We have constructed the average monthly per capita consumption expenditure for farmer households across different size class of land possessed for the three representative states (as before) and for allIndia. It shows that except Tamil Nadu, for all other cases the
households with relatively smaller amount of land spend significantly higher proportion of their income on cereals and pulses
compared to the bigger counterparts. Moreover, for West Bengal,
Punjab and all-India averages the ratios of share of expenditure
on cereals, grams, pulses and their products to that on vegetables
Economic & Political Weekly EPW march 21, 2009 vol xliv no 12

and fruits and to that on beverages, processed food, etc, fall drastically as the amount of land possessed rises. Hence, the widespread practice of crop-diversification with the motto of evergreen revolution under the guidance of the National Farmers
Commission or National Horticulture Commission may lead to a
significant erosion of micro food security, which, in turn, may
destabilise the indigenous rural non-farm sector.
All the probable outcomes discussed above have resemblance
with the Hymer-Resnick (1969) result where expansion of exportable cash crop sector of the colony displaces the rural traditional
non-farm activities. In our present context, Ranis and Stewarts
(1993) unfavourable post-colonial archetype could also be
referred to as a similar case. Ranis and Stewart, however, show
that Taiwans agricultural progress based on non-traditional
crop helped the development of rural industry, mostly processing
and other related activities. But they categorically mention that
such a linkage could be established because of the deliberate
policy favouring the RNF sector (Z-goods sector). On the contrary, the Philippine macro policy encouraged modern industry
(U-industry), which led to the displacement of Z-goods sector
even if, like Taiwan, the Philippines also concentrated on export of
non-traditional processed crops. The Indian case of diversification
under the macro framework of corporate contract farming seems
to be closer to the case of Philippines rather than that of Taiwan.
Table 6: Monthly Per Capita Consumer Expenditure Shares Over Different Food
Items for Farmer Households Across Size Class of Land Possessed
Size Class of Land
Per Capita
MPCE
Possessed
Consumption
Class

Expenditure

(in Rs)

Share of Expenditure
Share of
Share of
on Cereals, Cereal
Expenditure
Expenditure on
Substitutes, Grams, on Vegetables,
Beverages,
Pulses and Their
Fresh and
Refreshments and
Products
Dry Fruits
Processed Food
(%)
(%)
(%)

West Bengal
< 0.01

435.47

420 470

48.83

13.65

0.01-0.40

437.73

420 470

48.83

13.65

4.21

0.41-1

561.13

525 615

44.95

14.44

4.33

4.21

1.01-2

731.50

615 775

41.26

14.17

5.15

2.01-4

896.98

775 950

39.59

13.94

5.71

4.01-10
Tamil Nadu
< 0.01

987.54

950 +

35.41

15.76

6.47

456.36

420 470

41.95

14.13

9.50

0.01-0.40

507.50

470 525

41.76

13.91

9.55

0.41-1

583.18

525 615

39.07

14.68

11.07

1.01-2

724.31

615 775

39.38

14.26

11.27

2.01-4

838.86

775 950

38.10

13.93

10.87

4.01-10
Punjab
< 0.01

862.04

775 950

38.10

13.93

10.87

624.13

615 775

25.39

11.26

6.96

0.01-0.40

658.44

615 775

25.39

11.26

6.96

0.41-1

833.44

775 950

22.36

11.66

7.08

1.01-2

940

775 950

22.36

11.66

7.08

2.01-4

1010.34

950 +

19.34

11.97

7.28

4.01-10
All-India
< 0.01

1351.03

950 +

19.34

11.97

7.28

417.63

380 420

47.01

13.50

4.65

0.01-0.40

434.54

420 470

44.65

13.43

5.02

0.41-1

485.81

470 525

42.92

13.36

5.18

1.01 -2

572.36

525 615

39.94

13.68

5.66

2.01-4

670.00

615 775

36.33

13.38

6.17

4.01-10

841.09

775 950

32.69

13.31

6.45

Source: Computed from NSS 59th Round, Report No 495 (59/33/4), pp 10, A75, A78, A82, A84; and
Report No 497 (59/33/5), pp A187, A189, A191.

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speciAl article

One may argue, as crop pattern changes RNF sector survives

on this HVC cultivation itself. Evidently, it would not be possible
since small farms would be tied up with the big agro-based multinational corporations (MNCs) through contract farming diversification, processing, retailing chain both for inputs and market.
Even the small and marginal farmers for sheer survival could
accept this arrangement as crop-diversification becomes unviable
without such contracting. This whole agreement between the
small and marginal farmers and big agri-business firms would
drive out petty non-agricultural activities by squeezing the
demand as well as the supply side channels. Though the huge
population engaged in different types of RNF activities gets
expropriated, only a minor fraction of it would be able to attach
itself with the so-called modernisation process involving formal
sector and HVC based agriculture.

6Land-Conversion and the RNF Sector

There are many studies which confirm that the access to land is a
crucial factor explaining access to rural non-agricultural activities/employment opportunities (West Bengal Human Development Report 2004; Ray 1994; Saith 1991). Thus rural households
owning small plots of land or sharing landownership (or culti
vation) rights could diversify to different other localised petty
activities over and above basic agriculture, using the benefits of
agricultural growth itself. Micro food security ensured through
access to land played an important role for rural employment
diversification. In fact, such diversification enabled the households to neutralise the seasonal fluctuations of agricultural production. On the other hand, job diversification by the farmer
households reduced the pressure on land as agriculture is managed more efficiently. Thus, small farm-based agriculture on the
one hand, and employment diversification by these farmer households, on the other, sustain a mutually reinforcing endogenous
growth process.
Nevertheless, the present debate hovering around the issue of
agricultural land conversion for industrialisation is not paying
sufficient attention to the probable impacts on this RNF sector.
Agricultural land-conversion may seriously affect the micro food
security shaking the very foundation of non-farm growth. The
expropriation of peasantry displaces the localised labour intensive non-farm activities because the demand as well as supply
side linkages between farm and non-farm sectors get snapped.
On the other hand, as the formal sectors expand, demand for
HVC rather than that of basic cereals increases. Expansion of
modern industry and services increases the demand for skilled
labour and thereby disproportionately raises the income of the
upper stratum of the population. This changes the demand pattern in favour of HVC shifting away from basic cereals. Consequently, the prices of HVCs rise creating incentive for the farmers
to shift away from basic crop production. This may create not
only micro food insecurity but also shortage of raw materials
choking off the non-farm sector. Thus, the contractionary effects
of agricultural land-conversion on the RNF sector get reinforced
as the so-called modern diversified agriculture becomes integrated with the advanced sectors severing its close links with
the labour intensive RNF economy.

74

Thus, land-conversion coupled with crop-diversification can

doubly damage the foundations of the RNF sector. While, land
alienation disturbs micro food security, compensating the loss of
food production due to conversion through crop-diversification
reduces demand for non-farm inputs and local non-farm services.
However, while, the issue of compensation in the context of land
acquisition is intensely debated, there is almost nothing for the
people engaged in localised non-farm sector.

7Conclusions
A very important proposition that emerges from the preceding
analysis is that sectoral policies such as crop-diversification or
agricultural land-conversion for industrialisation should not be
formulated in isolation. Such policies should particularly take
into account the corresponding impacts on the rural labour-
intensive non-farm sector which is accepted as a dynamic segment
of the economy having enormous employment generation potentials. The policies of crop-diversification to raise farm income
and land-conversion for rapid industrial progress should form
only parts of a more comprehensive broader project encompassing all the major sectors of the economy.
Crop diversification could be a socially beneficial policy when
it is complemented by extensive infrastructural facilities, financial and technological support, etc, especially for the localised
micro (labour-intensive) enterprises engaged in processing,
storing, grading and packaging. Furthermore, specific support to
organise the marketing network is very crucial for a policy of
crop-diversification targeted towards small farmers. Only such a
comprehensive policy package can boost non-farm production
and service activities involving indigenous resources and utilising
local labour. An appropriate institutional set-up should be organised so that a labour-intensive growth multiplier process is triggered off involving both the diversified agriculture and neighbouring non-farm sector. At present, processing is mainly done
by small-scale non-farm units (99.4%) where 86.8% of total
processing sector employment is generated (Dev and Rao 2005).
Only an appropriate institutional arrangement (eg, network of
cooperatives engaged in production as well as distribution) along
with government support for technological upgradation, infrastructure, farm-services, etc, are essential. However, land-
conversion may have a serious impact and needs detailed
planning to counterbalance the adverse effects.
Notes
1 It has been found (Bhaumik 2002) in the Indian context that the RNF sector
can play effective role in reducing rural poverty.
2 In fact, growth of farm and non-farm sectors are not separate phenomena,
rather parts of an integrated endogenous process (Sanyal 2007).
3 De Janvry and Sadoulet (1993) in the context of Latin America observe that because of highly skewed distribution of land and farm income the benefits of agricultural growth could not be appropriated by the RNF sector in the absence of
significant consumption linkages. In this context, we should refer to the Indian
data on distribution of landholding which could provide some explanation for the
existence of a large RNF sector. From the Agricultural Statistics at a Glance 2003
(Government of India) it could be found that the share of small and marginal operational holdings with size up to two hectares increased from 70% tomore than
80% during the period 1970-71 to 1995-96. However, the corresponding share for
the large holdings of four hectares and above declined from 14% to almost 7%
during the same period. This typical pattern of landholding may have contributed
to the existence of the vast non-farm sector in India.
4 Ranis and Stewart (1993) also indicate at such linkages in the case of Taiwan as
compared to the Philippines.
march 21, 2009 vol xliv no 12 EPW Economic & Political Weekly

special article
5 In fact, in various studies it is found that the regions practising intensive HVC cultivation in
India have concentrated in urban and semi-urban
areas (Rao et al 2006). This corroborates our
claim that there is a close link between diversification of agriculture and urban formal sector.
6 Thus the impact of diversification as pursued by
the big farmers is undoubtedly contractionary for
the non-farm sector engaged in petty production.
We can refer in this regard to a study on Africa
where small and very big farm growth is found to
generate identical local growth multipliers indicating the inability of big farms to boost the local
non-farm activities (Haggblade et al 1989).
7 Production, especially processing of HVC, seems
to be more capital-intensive even across Africa. In
fact, Haggbade et al (1989) report that activities
like oil extraction, sugar production, tea drying
and packaging, etc, are often performed in rural
areas by large-scale enterprises. A similar pheno
menon may occur in India as well with introduction of big capital in the chain of diversification
contract farming processing retailing. Such a
situation could be found in Punjab where nonfarm activities are actually labour saving (see in
this context Saith 1991 and Singh 2004).
8 Lanjouw and Shariff (2004) note that marginal
expenditure on local products is about 80% in
allA sian and African countries surveyed. Of
this45% is spent on local food in Asia and 65%
inA f rica.
9 In fact, crop-diversification may even lead to land
alienation adversely affecting micro food security
and hence, reducing the scope for participation in
local non-farm activities (West Bengal Human
Development Report 2004). If, however, the small
farm-based agriculture gets integrated into the
extended circuit of capital through contract
farming and thus backward and especially the
forward linkages of agriculture with local labourintensive non-farm sector are severed, this petty
production based non-farm sector may face
extinction. The complementarity between agri
culture and rural non-agriculture is replaced with
a tacit conflict, where development of modern
agriculture displaces rural non-agricultural
population.

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THE POSTNATIONAL CONDITION

March 7, 2009
The Postnational Condition

Malathi de Alwis, Satish Deshpande,

Pradeep Jeganathan, Mary John, Nivedita Menon,
M S S Pandian, Aditya Nigam, S Akbar Zaidi
South Asia? West Asia? Pakistan: Location, Identity
S Akbar Zaidi
The Practice of Social Theory and the Politics of Location
Satish Deshpande
Reframing Globalisation: Perspectives from the
Womens Movement
Mary E John
Postnational Location as Political Practice
Malathi de Alwis
The Postnational, Inhabitation and the Work of Melancholia
Pradeep Jeganathan
Empire, Nation and Minority Cultures: The Postnational Moment
Aditya Nigam
Nation Impossible
M S S Pandian
Thinking through the Postnation
Nivedita Menon

Economic & Political Weekly EPW march 21, 2009 vol xliv no 12

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