Why in the News? 

The "State of Rural Youth Employment 2024" report reveals most rural youth see agriculture as unattractive and prefer non-farm jobs, including small businesses.

More on the news 

• The report is prepared by the Development Intelligence Unit (DUI), a joint initiative of Transform Rural India (TRI), Sambodhi Research, and the Global Development Incubator (GDI). 
• The report highlights that 70% of rural youth cite low productivity and poor profits as reasons for moving away from farming.

About Rural Non-Farm Economy (RNFE) 

• RNFE include value chain activities, such as agro-processing, transport, distribution, marketing, and retail, as well as tourism, manufacturing, construction and mining self-employment activities (handicrafts, bakeries, mechanics, kiosks, and so on)
  • It is defined both spatially, by activity that takes place in rural areas, and functionally, by a set of activities that do not constitute primary agricultural production.
• Although, agriculture has traditionally dominated the rural economy, but two-thirds of rural income now comes from non-agricultural activities i.e., RNFE. 
  • Moreover, more than half of the value added in manufacturing sector in India is contributed by rural areas. 

Key Determinants of RNFE in India

• Government Policies: Dr. Ashok Dalwai Committee recommended shifting surplus farm labor to non-farm jobs to double farmers' income. Key initiatives include promoting startups in agriculture and allied sectors, Namo Drone Didi schemes, etc.
• Education and Skills: Non-farm income increases with higher levels of education. 
• Family Size: Larger families earn less from farm activities but gain more from non-farm income.
• Impact of Climate Change: Climate change heightens the vulnerability of agricultural jobs, emphasizing the need for RNFE. 
• Public Spending and Diversification: Infrastructure investment, factory growth, and manufacturing expansion boosts RNFE. 
• Infrastructure Development: Development expenditure, especially on infrastructure, promotes construction employment, benefitting both men and women.

Challenges in Rural Non-Farm Economy (RNFE) in India

• Limited Access to Credit: Most RNFE enterprises rely on personal savings or moneylenders for funding, unlike farm activities that benefit from institutional credit. 
• Low Worker Productivity: Worker productivity in RNFE is significantly lower compared to urban areas. Only 13% of non-farm enterprises are modern, while the majority are traditional with minimal value addition. 
• Informal and Volatile Employment: RNFE jobs often provide: Low and unstable incomes, Poor working conditions, Lack of social security, leading to exploitation. E.g. Construction, the largest RNFE employer, is highly dependent on economic cycles, causing income instability. 
• Declining Income Levels: Rural non-agricultural households earn less (₹11,438 per month) than agricultural ones (₹13,661 per month). 

Way ahead to promote sustainable RNFE

• Expand Credit Access: Strengthen institutional credit, microfinance, and cooperative banks to provide affordable loans to RNFE enterprises through government schemes and financial inclusion initiatives.
• Diversify Employment Opportunities: Promote sectors beyond construction, such as renewable energy, tourism, and digital services, to reduce volatility in incomes.
• Encourage Value Addition: Promote high-value activities like agro-processing, handicrafts, and exports to boost RNFE incomes.
• Regulate Informal Employment: Establish frameworks to improve working conditions, ensure fair wages, and provide social security for RNFE workers.
• Cluster-Based Development: Promote rural industrial clusters for non-farm enterprises to encourage collaboration, innovation, and economies of scale.