The Hindu Business Line : Urbanisation of rural India

A growth rate of 3-4 per cent in rural enterprise employment is achieved even if agriculture sector performs poorly. Therefore, enterprises do not depend on surplus farm income.

A. Srinivas

Bangalore The final results of the fifth Economic Census, released recently, point to changing trends in enterprise activity and employment in India. Enterprises in rural India are far less labour-intensive than those in urban India, with each enterprise employing 1.9 workers in the former as against three workers in the latter.

As of 2005, about 26 million rural enterprises employed 51 million people, whereas about 16 million urban enterprises employed 49 million.

However, this trend seems to be changing, with rural employment in enterprises (engaged in activity other than agriculture) growing at an annual rate of 3.3 per cent between 1998 and 2005, as against 1.7 per cent in the case of urban enterprises. A change in composition in favour of the former could arrest the shift of populations to cities.

A growth rate of 3-4 per cent in rural enterprise employment is achieved even if agriculture sector performs poorly. Therefore, enterprises do not depend on surplus farm income. They might have come up to cope with falling agriculture incomes. Nevertheless, healthy farm sector growth helps; a 2-3 per cent growth in agriculture output is likely to lead to a growth rate of rural employment of 5 per cent or more.

Five states

The five States, which registered the highest growth in employment (including high rates of rural employment) between 1998 and 2005, were Jammu and Kashmir, Sikkim, Kerala, Haryana and Tripura. Of these, the compound annual growth rate (CAGR) of farm output was negative in Kerala (minus 4 per cent) and Sikkim (minus 1.8 per cent).

In J&K, Haryana and Tripura, however, CAGR of agriculture output was 4.4 per cent, 3.1 per cent and 3.1 per cent, respectively. These three States registered high rates of growth of rural enterprise employment: 7.65 per cent, 8.8 per cent and 5.84 per cent, respectively. West Bengal, by showing just a 1.7 per cent increase in rural enterprise employment despite a 2.66 per cent CAGR of farm output, stands out as an exception.

Given that Kerala, Tamil Nadu and Sikkim registered rural employment growth despite negative CAGR of farm output between 1998 and 2005, it appears that factors other than agriculture performance drive enterprise activity in rural areas.

Kerala, J&K and Tamil Nadu have a well-developed tourism and manufacturing sectors.

But the tenuous link between the farm sector and rural enterprise is evident even in Punjab and Haryana, where agriculture accounts for about 50 per cent and a third, respectively, of net state domestic product. Most rural enterprises in these States are of non-agricultural nature. In fact, Punjab is the only major State where the number of urban enterprises exceeds that of rural enterprises.

Enterprise growth

While enterprise growth in rural areas seems to occur independently of farm output, a combination of the two appears to be more effective in poverty reduction. Haryana, Punjab (rural employment growth of 5.2 per cent), J&K and Kerala have poverty levels below 10 per cent.

Tamil Nadu, Maharashtra, West Bengal, Andhra Pradesh and Uttar Pradesh have the largest number of enterprises.

Except for Tamil Nadu and Uttar Pradesh, the others did not fare well in terms of generating employment. Andhra Pradesh and Maharashtra registered a CAGR of agriculture of 1.85 per cent and zero, respectively.

Their employment growth rates are lower than the all-India average.

Poverty reduction in the period 1998-05 was more pronounced than in the early 90s. The Economic Census 2005 tells us that about two-thirds of this employment was generated in rural areas, despite the indifferent performance of the farm sector. Are we seeing the ‘urbanisation’ of rural India?

More Stories on : Rural Development | Economy | Employment

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page