Why agriculture sector’s share in rural employment is declining

Over the last three-and-a-half decades, there has been a structural shift in the occupational choice among rural workers, particularly rural agricultural workers, with changes in their occupational choices ranging from agriculture to non-agricultural sectors. According to the 38th Round (1983) of the National Sample Survey (NSS) report, around 77 per cent of rural households depend on the agricultural sector to sustain their livelihoods.

Over the years, rural households’ dependency on agriculture has declined to 50 per cent as per the latest round of the Periodic Labour Force Survey (PLFS) for 2018-19. In addition, the agriculture sector’s contribution to national GDP has declined from 34 per cent in 1983-84 to 16 per cent in 2018-19. Similarly, agriculture sector’s contribution to GSDP (Gross State Domestic Product) has broadly followed the same pattern over the same period.

Apart from contributing to the GSDP, the agricultural sector also plays an essential role in generating employment opportunities for the rural workforce. According to the 38th round of NSS and PLFS (2018-19) reports, the agricultural sector’s contribution to employment declined from 81 per cent in 1983 to 58 per cent in 2018.

This contrasts with rural non-agricultural employment, which increased from 19 per cent to 42 per cent during the same period. In other words, agricultural employment declined by 23 percentage points, while employment in the rural non-agricultural sector increased by the same percentage points from 1983 to 2018.

Gender-wise employment

A glance at the gender-wise rural employment shows that the percentage of male workers engaged in agricultural activities declined from 78 per cent in 1983 to 53 per cent in 2018, while the rate of female agricultural employment fell from 88 per cent to 71 per cent in the same period. Thus, both male and female employment in the rural agricultural sector followed the same trend in selected States (see Table).

On the other hand, workforce participation in rural non-agricultural sectors for male workers increased from 22 per cent in 1983 to 47 per cent in 2018, thus registering an increase of 25 percentage points. Along similar lines, female employment in the rural non-agricultural sector gradually increased from 12 per cent to 29 per cent over the same period.

What are the primary reasons behind the decline in employment share in the rural agricultural sector? In our opinion, major internal factors such as insufficient public investment for agrarian development, inadequate access to institutional credit, inadequate irrigation facilities, government's poor agriculture-related marketing policies, half-baked land reform policy, and low return from agriculture are responsible for the fall in agricultural employment.

Besides, external factors such as excessive economic liberalisation in the Indian economy and low import tariffs in agricultural products have also played a critical role in the declining share of employment in the rural agriculture sector.

Exogenous shocks

Apart from the external and internal factors, exogenous shocks such as frequent droughts, floods and cyclones are also responsible for the falling employment share in the agricultural sector. These natural calamities cause extensive damage to crops, which in turn disincentivises rural workforce to take-up farming.

Indian agricultural sector remains highly vulnerable to frequent flood disasters. According to a report by the Central Water Commission, on an average India lost around ₹2,785 crore annually due to crop damage related to flooding during the period 1980-2017. Frequent floods not only affect agricultural employment but also increase poverty, inequality, and farmer distress.

This finding is validated by a 2020 article published in Environment, Development and Sustainability , by Parida, Saini, and Roy Chowdhury, which confirms that damages due to floods result in a decline in the economic growth of States. The lower economic growth, in turn, affects both agricultural employment and income of rural households.

In addition, damage due to floods also affects gender-wise employment in the rural agricultural sector. In rural India, the agriculture is one of the major employment providers for the female workforce. Any catastrophic events like floods result in a reduction in income and employment opportunities for the rural female workforce.

In 2020, the paper ‘Natural Disasters and Rural Labor Markets: A Gender Analysis’, by Roy Chowdhury of the University of Utah, empirically confirms that damages due to floods reduce employment opportunities in rural agricultural sectors. The study further shows that the reduction in job opportunities is more for female workers than for male workers. The possible reason is that female workers cannot easily shift from agricultural to non-agricultural occupations due to socio-economic and cultural barriers.

Way ahead

To mitigate the impact of floods on gender-wise employment in the rural agricultural sector, both the Central and State governments should devise a suitable flood management policy and implement a revamped agricultural policy. For example, the government should invest more in flood control, irrigation, and disaster risk reduction measures.

Moreover, increasing public investment for building agricultural infrastructure, revamping agricultural marketing policy, providing compulsory crop insurance, making agricultural input subsidies readily available, and increasing MSPs for major crops are crucial.

These measures will encourage rural female workers to engage in agricultural activities and minimise labour shift from agricultural to the rural non-agricultural sector. Moreover, the recent stimulus package announced by the Centre for agriculture and allied sectors under Aatmanirbhar Bharat schemes can also generate employment opportunities in this sector.

Joyita Roy Chowdhury is Assistant Professor in Economics, FLAME University; Prarthna Agarwal Goel is Assistant Professor in Economics, GGS Indraprastha University; and Parul Bhardwaj, Independent Researcher, New Delhi. Views are personal.

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