Share |

Overview of the Non Farm Sector in India

Non Farm Sectorincludes all economic activities like household and non-household manufacturing, handicrafts, processing, repairs, construction, mining and quarrying, transport, trade, communication, community and personal services etc. in rural areas. These activities in rural areas are very important in providing additional income to households. As per government statistics (1998) more than 81.9 percent of rural enterprises were non-agricultural in nature which includes wide range of activities. Nearly 40 million persons are working in this sector of which 74 percent are males.
            In 1980’s rural nonfarm employment was one of the reason and main driver for the reduction of poverty. It has become more important to know about this sector now in the context of the economic reforms in the country since the yearly increase in the percentage share of RNFE in total employment was 0.35 per cent per annum during the reform period (93-94 to 99-00). During this period overall employment growth was only one percent.  Ninety per cent of the additional employment during the reform period was due to RNFE. But the growth rate of workers in RNFE has declined during the reform period. RNFE growth rate in India is also slow when compared to East Asian countries.


RNFE in total employment*

No. of workers in millions*

Growth rate in RNFE per annum*

















*NSS data
We can analyze from the data in the table that growth in RNFE is more of a male phenomenon. In the reform period there were 2.8 percentage points for males and 0.7 percentage points for females. Also not all the sectors show same growth rate in RNFE. Construction, transport, storage and communications has shown more growth and created additional employment. There is no data to show additional employment in the fast growing sectors have led to well being of the poor. The numbers show that in the rural areas, the three poorest segments are agricultural laborers, construction workers and manufacturing workers. Poverty among cultivators is much lower. One of the major challenges which still remain is to improve the quality of employment and incomes in the rural non-farm sector.
Importance of NFS:
Rural areas have become a place to supply manpower to urban areas due to lack of employment opportunities and attractive livelihood options. Farm based income is not enough for their daily living as we can witness this in agricultural crisis the country is facing. Employment growth in this sector has not been up to the mark and agriculture is not being able to generate employment when compared to other sectors. At this juncture Non farm sector becomes a viable and alternate option to address the concerns of people. It can improve the income of the people in rural areas there by reducing migration to urban areas and making rural areas more vibrant. This encouragement of NFS is more important because rural industries absorb more labor with less capital which has direct implications on poverty reduction in rural areas. Also there is empirical evidence to prove that rural industrialization contributes to agricultural development also in many ways.
            The inherent strengths of NFS are that due to the reform process higher investments can be put up in rural areas. There is institutional credit available for this purpose through various channels. Policies and institutions are aiming for rapid growth of rural nonfarm sector. 73rd amendment also has an important role in enhancing the opportunities in NFS. However there are certain areas which need improvement like infrastructure, removing of regulatory restrictions, creating forward and backward linkages and improving the quality of manpower in this sector.
            From the data available in NSSO surveys we can see that rural employment has undergone significant changes in the last few decades. The share of agricultural labor force has been declining steadily from 1970’s and share of NFS has been increasing. Now non farm sector employs about one-third of rural work force amounting to about 11 crores rural people. This shows the growing importance of NFS in rural areas. A glimpse of it can be seen it from bar chart given below on sourcing of new jobs. The share of non farm sector employment has been rising in all states although unevenly. We can observe that there is structural transformation from farm based to nonfarm based activities.

Policy Recommendations:
·         Policy makers need to realize the wide range of activities and its diversity with rural non farm sector and establish sub sector specific activities.
·         Policies should focus towards improving the education and skills of the workers.
·         Initiatives should be taken to increase employment of the unskilled workers.
·         Incomes of the women have to be improved by creating opportunities in the higher productivity sectors.
·         Increasing initiatives for building of roads would expand nonfarm activities to a greater extent.
·         It would be more appropriate to introduce an integrated farm and non-farm sectors development planning approach together with developing a common nature of basic necessities and infrastructure facilities promoting development of both the sectors simultaneously.
·         Public investment in agriculture and rural non-agriculture has to be improved significantly to improve the quality of RNFE. Infrastructure development and other incentives are needed for attracting private investment.
·         The objective focus of initiating rural development programmes should by and large be confined in favor of the expansion of self-employment opportunities rather than wage-paid-casual employment.
          NFS is playing a very significant role in the development of rural areas after agriculture has been on a decline due to several reasons. It has become a important source of supplementary income in rural areas and goes along with the broad objective of rural development. So policies and interventions for creating employment opportunities have to be designed for promoting NFL in a big way along with strengthening the existing institutions. It becomes a imperative for the government in this regards to create infrastructure and necessary skills for the rural areas to reduce poverty and also for enhancing economy of the nation.
Silk Subsector Analysis:
Silk, known as the queen of Textile, is the shimmering fiber of unparallel grandeur. It has got some distinct qualities such as natural sheen, inherent affinity for dyes and vibrant colors, high absorbance, light weight, resilience and gorgeous look. There are four types of silk which are produced in the world for commercial purpose such as Mulberry, Tasar, Eri and Muga. India is the only country in the world, which is blessed with all the four types of silk. India is the second largest producer of silk and also the largest consumer of silk in the world. It has a strong tradition and culture bound domestic market of silk. In India, mulberry silk is produced mainly in the states of Karnataka, Andhra Pradesh, Tamil Nadu, Jammu & Kashmir and West Bengal, while the non-mulberry silks are produced in Jharkhand, Chhattisgarh, Orissa and north-eastern states.
Chemically speaking, silk is made of proteins secreted in the fluid state by a caterpillar, popularly known as 'silkworm'. These silkworms feed on the selected food plants and spin cocoons as a 'protective shell' to perpetuate the life. Silkworm has four stages in its life cycle viz., egg, caterpillar, pupa and moth. Man interferes this life cycle at the cocoon stage to obtain the silk, a continuous filament of commercial importance, used in weaving of the dream fabric. Silk is a high value but low volume product accounting for only 0.2 % of world's total textile production. Silk production is regarded as an important tool for economic development of a country as it is a labor intensive and high income generating industry that churns out value added products of economic importance. The developing countries rely on it for employment generation, especially in rural sector and also as a means to earn the foreign exchange.
Sericulture is an agro-based industry. It involves rearing of silkworms for the production of raw silk, which is the yarn obtained out of cocoons spun by certain species of insects. The major activities of sericulture comprises of food-plant cultivation to feed the silkworms which spin silk cocoons and reeling the cocoons for unwinding the silk filament for value added benefits such as processing and weaving.
Status and growth opportunities:
More than 60 lakh persons are employed in various sericulture activities which is considered labor intensive and generates employment greatly in rural areas. Unlike other sectors nearly 57% of the value of silk fabric goes back to the villages thereby improving the conditions of the rural areas. Other advantage is that it has low gestation period and high returns rate. The other important aspect is that more than 60 % of the labor force in this sector is women coming from weaker sections of the society. Sericulture can also be practiced with very less land holding. With low capital investments it is suitable for both small and large landholdings. So it is recognized as one the main avenues for socioeconomic development and employment generation.
            India being the second largest producer of silk after china is projected to have record levels of growth in the coming years. GOI has given greater importance to silk in its National Fiber Policy since it plays a major role in imports and exports. Indian silk exports are only 4-5 percent of the world market as it has very strong domestic demand but export of silk products in the last decade has risen sharply and now India exports 15 percent of its total produce of silk goods. The export market is expected to still raise in the coming years.
Focus Product Scheme:Silk products are covered under this scheme so that some benefits are applied to these silk products similar to those of other exports.
Rastirya Krishi Vikas Yojana:sericulture and post cocoon activities up to production of yarn and marketing are covered under this scheme which provides necessary support for improving mechanization, soil health, infrastructure, seed extension system and other non farm activities.
Silk Bank Scheme:For strengthening silk exchange with necessary infrastructure, expansion of market yards and testing facilities. This scheme is being promoted by department of sericulture, cooperatives and NGO’s.
Catalytic Development Programme:A centrally sponsored scheme for improving employment generation, quality and productivity improvement and technology up gradation which is being implemented by central silk board under five year plans.
Cluster development for integrated development of sericulture:This would ensure the integration of all the schemes of GOI and state governments and would ensure awareness for stakeholders.
Case Study:
ICT for the renewal of a Traditional Industry - A Case Study of Kancheepuram Silk Saree
Silk industry in kancheepuram had to face tremendous competition from synthetic fiber industry in many aspects. It was on the brink of extinction because of obsolete designs and lack of technology. The process of weaving was a long and tiresome process. The whole process of designing used to take around 5 hrs and was very complex and tedious. So productivity suffered and cost of the saree was going up. So a idea was born out of necessity to keep the traditional kancheepuram sarees alive since it was a traditional art of weaving and had many people dependent on it.

Benefits of Computerization Process
Initially there was more emphasis on the automation of design process. The speed of the design process has increased and also the variety of designs has also increased greatly. At the starting some small and medium firms in Kancheepuram have adopted this technology. After the acceptability of the sarees has gone up with the customers then nearly all the firms have adopted the technologies. A swat analysis was done on the kancheepuram saree industry which detailed the strengths, weakness, opportunities and threats to their industry. A technology Platform was created so that any new design or innovation for speeding up the process could be taken up.
So computerization saved the industry from near collapse. The process of design has undergone a lot of change. Today, the quality, style and design of the kancheepuram sarees are again on the forefront of market and achieved a reputed name. Now this cluster promotes not only its sarees but also its traditional art.
Issues and Concerns : (see Annexure I for supply chain linkages)
Farmers:There is lack of supply of quality seed cocoon for farmers. There is also insufficient focus on R & D in seed production leading to problems of both quality and quantity for the farmers.
Reelers:Dumping of raw silk from china which is much price effective. Difficulty in getting loans from formal financial institutions and compounding to all these there is high fluctuations in raw silk prices.
Twisters:Large scale imports of twisted yarn from china
Weavers:Silk fabrics are imported at much more cheaper price from china and there is inadequate production of silk in desired quantity and quality in India
Exporters:Poor image of ‘Made in India’ products.
Conclusion and Policy Recommendations:
Fiscal and Non-fiscal measures should aim to fill the gap between demand and supply in the country both in terms of quality and quantity. Intensive R & D activities have to be taken up with improving extension systems, modernization and clusterisation of various activities to build economies of scale. Some of the fiscal measures like duty exemption on silk machinery, reducing duty on silk exports, export incentives have to be promoted. Introduction of price support scheme for silk industry would go a long way in improving the competitiveness of this industry. Non- fiscal measures like putting thrust on scientific ways of improving productivity, up gradation of technology and skills, eco friendly approaches can be taken up. The mapping of existing and potential areas for developing sericulture in the country can be done through using ISRO’s remote sensing satellite images. Since India is a major player in silk industry having its own advantages of producing all types of silk available in the world with enough human resources, with proper policy direction and focus on relevant stages of silk production can make silk industry one of the best non livelihood options in the country along with enhancing the export markets.
Vijay Mahajan and Yerram Raju.B (2004). Institutional framework and enabling environment for Rural Non farm sector in Rural Transformation in India: The role of  Non Farm Sector Edited by Rohini Nayyar and Alakh N.Sharma, Institute of Human Development, New Delhi.
Bhalla, Sheila 1979, Real Wage Rates of Agricultural Labourers in Punjab, 1961-77-A Preliminary Analysis, Economic and Political Weekly, Vol - XIV No. 26, June 30, 1979 accessed   --  07/09/2013, 07.35 pm
Bowonder,B and Sailesh J V (1998),ICT for the renewal of a Traditional Industry: A Case Study of Kancheepuram Silk Saree, ASCI.  accessed 07/09/2013 12.32 pm  accessed 07/09/2013 11.56 am
Nath, Jatindra(2011), Supply chain linkages and constraints in natural silk sector in Assam: A study of Muga and Eri silk, International journal of Multidisciplinary studies, Vol.1, December 2011.
Anjani Kumar, Sant Kumar, Dhiraj Kumar Singh and Shivjee (2011),Rural Employment Diversification in India: Trends, Determinants and Implications on Poverty, Agricultural Economics Research Review, issue 2011

Government agencies

Annexure ISupply chain linkages for silk fabric production in India: