Employment Pattern and Poverty Reduction across the Socio-Economic Groups in Rural India


As a predominant occupation, agriculture remained major source of livelihood and employment for more than half of the labour force in India. However, the country is witnessing a structural change in the national GDP. But there is not much change in the employment structure in India. According to the latest Census report, share of rural workforce in the total workforce reduced from 77 per cent in 2001 to 72 per cent in 2011, indicating a continuous pressure on agriculture and allied sector for livelihood and employment. Of the total rural workforce, farm sector accommodated 62 per cent of male and about 79 per cent of female workers. Among the non-farm activities, construction, trade, hotel & restaurant, and manufacturing sectors provided 27 per cent employment for rural male workers and 15 per cent employment for rural female workers. The remaining workers are depending on transport, storage & communication, mining & quarrying and other activities. It clearly indicates that a large proportion of rural workforce depends on farm sector for their employment. On the other hand, reduced share of agriculture in the national gross domestic product (GDP) with nearly stagnant but high share of workforce engaged in agriculture has widened income disparity between agriculture and non-agricultural sectors. This income disparity is considered to be one of the major reasons for the existence of poverty in rural India.

In order to increase farm income, reduce income disparity and alleviate poverty, various development programmes like National Food Security Mission (NFSM), Rashtriya Krishi Vikas Yojana (RKVY), etc., were implemented by the Government of India (GOI). Many studies analyzed the role of non-farm sector in rural areas in providing alternative or supplementing source of income and employment. These studies have also highlighted the role of non-farm activities in developing countries like India to transfer the workforce out of agriculture in the long run and to bring substantial employment and income benefits to rural workers. Some studies also indicated that incidence of poverty is substantially higher for those households who depend on agricultural income alone as compared to the households involved in non-farm activities.

Employment pattern by socio-economic groups

The employment pattern across different socio-economic groups for the last 16 years depicted that around 11 per cent of the rural population moved from agriculture to non-agricultural sector for their major source of income (Table 1). However, the fact remains that more than 50 per cent of the rural labour force still depends on agriculture for their livelihood. Within the agricultural sector, those who are self-employed in agriculture shifted considerably i.e. 6.9 per cent to other areas as compared to agricultural laboures (3.7%) during 1994 to 2010. This shift is mainly towards other laboures (7.3%) followed by self-employed in non-agriculture sector (3.3%). This trend indicates casualization rather than regular employment of labour in rural areas.

Landless laboures largely depends on agricultural wages (33.6%) and other casual wages (35.7%) for their major source of income. Though small and marginal farmers are primarily self-employed in agriculture, there is a shift towards casual work. However, as the size of holding decreases, share of self-employed workers in non-agriculture sector increased, indicating the need for alternate employment opportunity for the weaker section of the society. Work force participation rates both for rural male and female increased generally, but the participation is significant for rural females. As regards gender aspect of employment, participation of male work force is more towards non-agricultural sector, whereas work force participation of females is more in agriculture, indicating feminization of agriculture.

Poverty reduction across the socio-economic groups

Incidence of poverty in India reduced from 50.3 per cent to 25.4 per cent during 1993-94 to 2011-12 and there is a sharp decline in poverty in all the socio-economic groups in the recent period (Table 2). During 1994-2005, poverty rate reduced by 7 to 8 per cent across all the households, except other households. The poverty reduction varied significantly from 11 per cent to 23 per cent in the last decade and the reduction was the highest for agricultural labour (23.3%) followed by self-employed workers in non-agriculture (17.7%), and other workers (15.8%). Higher real agricultural wages in general and social welfare programmes like the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) might have contributed to higher income and to move out of poverty particularly for agricultural laboures. The lowest poverty reduction was in case of self-employed workers in agriculture i.e., farmers, emphasizing the need to rise profitability either through commercialization and diversification of agriculture, or by creating supplementary income generating activities. This is more so for small and marginal farmers who are becoming wage earners in rural non-farm sector.


Agriculture being predominant occupation, provided employment and livelihood to more than half of rural population in the country. However, agriculture alone is not able to provide sufficient income to small & marginal farmers and landless laboures to come out of poverty. Search for alternative employment for additional income made them to shift towards non-farm sector. This shift makes them more of casual laboures rather than skilled or permanent employees. In this context, rural non-agricultural sector for self-employment has not only emerged as a promising sector to provide alternative employment to rural workers, but also contributed significantly (17.7%) to reduction of poverty among the rural laboures. Hence, greater emphasis is needed to create non-farm employment in the rural areas and development of agro-industry may help to a larger extent in this regard. However, rural non-farm sector can make a contribution to poverty alleviation only if the workers shift from low-productivity to higher-productivity jobs rater than low paid casual workers.