Which farmers are diversifying away from agriculture?

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Declining farm incomes and uncertain weather conditions have led many people to leave their farmland in recent decades. But which farm households take off-farm work more seriously?

A new study by Anviksha Drall and Sabuj K Mandal of IIT Madras shows that farm households where family members have easy access to credit, have good social capital through participation in cooperatives and are more educated technically are more likely to have people working outside. firm.

The study is based on 2010-14 data for 1,300 households in 30 villages in 8 states. These are regions with uncertain rainfall, barren soils, and high population growth where farmers want to diversify, but succeed to varying degrees.

Getting loans is important for households because it makes it easier for them to start new businesses. But many small farmers find it difficult to obtain loans because they have few assets to present as collateral. More credit for a household solves liquidity problems and increases the share of non-farm income in total income – in other words, it helps diversification.

Social capital also has an impact on household diversification. The study reveals that the higher the share of household members registered in associations, the higher the share of non-agricultural income in total income. Active participation in cooperatives helps reduce financial constraints and improves the entrepreneurial skills of household members, giving them better bargaining power in the market and more information about non-farm employment opportunities.

Running your own business or doing non-farm jobs requires skills. The study reveals that households whose members are technically qualified have much higher off-farm incomes than others.

To help marginal farmers access credit and diversify, the authors suggest encouraging regional rural banks to expand and open new branches.

Read also: “Investigating the Existence of Barriers to Entry into Rural Non-Farm Sector Employment in India: A Theoretical Modeling and Empirical Analysis”

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