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Journal of Management
(IJM), ISSN 0976
6502(Print), ISSN 0976(IJM)
- 6510(Online),
Volume 5, Issue 11, November (2014), pp. 48-50 IAEME

ISSN 0976-6502 (Print)

ISSN 0976-6510 (Online)
Volume 5, Issue 11, November (2014), pp. 48-50
Journal Impact Factor (2014): 7.2230 (Calculated by GISI)





*Ph.D., Research Scholar (Part-Time), Pachaiyappas College, Chennai-30

**Associate Professor of Economics, Pachaiyappas College, Chennai-30

This research paper discusses about the role and functions of the Non-farm sector in the
development of Indian economy. Rural non-farm sector (RNFS) has gained momentum especially
after liberalization. It is major objective of the limitation agriculture sector in providing gainful
employment to the surplus workforce. Besides, due to the seasonal fluctuation and environmental
degradation, the agricultural workforce itself is not able to obtain the sufficient livelihoods from
agriculture. This creates the problem of unemployment and underemployment. Due to this situation,
rural non-farm sector is considered to be the panacea for the problem of poverty, unemployment and
rural out migration.
Keywords: Economy, India, RNFS, Employment, Agriculture and Environmental etc.,
The rural economy in India is predominantly based on agriculture and other activities related
to agriculture sector. The key to Indias development lies in the development of its rural areas. In
India, there are as many as six lakh villages where about 70 per cent of the total population lives. The
agricultural sector occupies a pivotal place in the national economy both in terms of its contribution
to the gross domestic product and employment generation. However, segmenting rural employment
growth into the farm and non-farm sector would demonstrate that non-farm employment growth has
been significantly higher than farm sector employment growth.
In the view of the Economic Census (2005) identifies 17 non-farm activities includes mining
and quarrying, manufacturing, electricity, gas, water supply, construction, maintenance and repair,
wholesale and retail trade, hotels and restaurants, transport and storage, financial intermediation,
health and social work etc., Economic census 2005 reveals that number of non-agricultural
establishment in rural India has increased annually at the rate of 4.56 per cent during 1998-2005 as
against 1.65 per cent during 1990-98 wholesale retail trade has the highest share in RNF

International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 - 6510(Online),
Volume 5, Issue 11, November (2014), pp. 48-50 IAEME

establishments and the shares of transport, storage and communications, financial real estate etc,
have increased appreciably during 1990-2010. Agricultural sector alone cannot provide the ultimate
solution for rural poverty, unemployment and underemployment. As long-term strategy for structural
changes in employment and earnings may be necessary. In the rural households, out of necessity,
workers are being pushed into the non-farm sector and pulled by the dynamic rural non-farm
Non farm employment has received much attention from the policy makers and researchers
because it could reduce pressure on farm activities by creating supplementary income and could
moderate households economic risks in the rural economy. In the developing countries share of nonfarm income is high and it varies from 20 per cent to 50 per cent. India, like other developing
countries also exhibited a high proportion of non-farm employment. Due to launching of
liberalization policies, (1991) high rate of growth is exhibited after two decades of economic
reforms. Since 1990s several employment generation programmes were adopted in order to generate
employment to the rural poor. Priority was given to the non-farm sector over the past six decades,
tremendous efforts have been focused and promotion of rural non-farm sector globally.
The process of urbanization also effects the growth of RNFS. Urbanisation expands the
market for rural enterprises, and encourages non agricultural activities in secondary and tertiary
sectors in the neighbouring rural areas to meet the non local demand. Rural enterprises may
therefore benefit from economies of scale resulting in decreased cost and increase in efficiency.
The major role the RNFS plays is in reducing the inequality in income distribution across
different sections of the society like a landless agricultural laborers who work in agricultural season,
which is highly seasonal in nature and the people remains slack for rest of the year but a land holder
have enough product to fulfill his requirement of food and non food items for the rest of the year.
So, by providing employment during slack seasons RNF Sectors smoothens the rural households
income flows and hence the consumption. Hence participation in the RNF Sector allows poor people
to smooth out or offset fluctuations is agricultural income that might occur on a seasonal basic or as
a result of unexpected events and in this way it reduces vulnerability of the poor sections to cope
with future unforeseen contingencies.
In India, the land man ratio is decreasing, employment elasticity in agriculture has not only
declined but has reached almost zero. In this situation, the rural non farm sector is generally
perceived as the answer for tackling the twin problems of employment and poverty in rural India.
Employment growth in the farm sector has not been in consonance with employment growth in
general. A planned strategy of rural non-farm development may prevent many rural people from
migration to urban industries and commercial centers. When the economic base of the rural economy
extends beyond agriculture rural-urban salutary effects in many other aspects associated with the life
and aspirations of the people. Rural industrialization has significant spin-off for agricultural
development as well. Rural income distribution is much less unequal in areas where a wide network
of non-farm avenues of employment exists; the lower strata of rural societies participate much more
intensely in non-farm activities.


International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 - 6510(Online),
Volume 5, Issue 11, November (2014), pp. 48-50 IAEME

In view of the above, the rural non-farm sector is increasingly playing an important role in
the development of rural areas in India. Where, agriculture in the region declines its importance in
terms of its contribution to the economy, the rural non-farm sector will provide employment and
income to many rural folks. It is noted that RNFS are not the substitutes for employment in
agriculture but rather as a supplementary measures for development of non-farm sector policy and
interventions for creating employment opportunities on this regard the role of the government is
crucial especially in the provision of necessary infrastructure and other support services in the
country. It is also vital to improve the marketing links between the village entrepreneurs and the
larger business firms located in the towns. Other important considerations that need to be focused on
may include human resource development and women participation with a view in making the
activities self-sustaining in the changing competitive environment.
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