Agriculture, Manufacturing and the sector in between

Roughly 60% of our population is involved with agriculture and if we entertain a vision of less than 10% involved in agriculture, what are the 50% without work going to do?

Many are arguing that manufacturing has to be the future engine of growth, especially when it comes to creating new jobs, and that this is inevitable and cannot be stopped. With this very idea in mind there was a great push in the 80’s and 90’s to create manufacturing jobs in rural and semi-rural areas. However lack of infrastructure like roads, and power along with limited water resources made these units unviable. Later the cost of transporting materials from urban centers to rural areas and back again caused many industries to shut down. This is without taking into account the lack of skilled labour. So though this idea sounds grand it has not worked yet in India.

A recent article says “ India’s structural transformation has been slow and atypical, mainly on account of a low share of manufacturing in the economy and of its disappointing growth and employment performance.”

Another oft repeated argument is about the percentage of the population involved in agriculture in developed countries being well below 10%. Since roughly 60% of our population is involved with agriculture and if we entertain a vision of less than 10% involved in agriculture, what are the 50% without work going to do? For the level of mechanization adopted by developed countries to work in India, the landholding pattern would have to change. There are papers to show that small holders are using resources more efficiently than large farms and therefore their productivity per unit area is higher. When the US % of population figure in agriculture is quoted rarely is the level of subsidy provided to these framers mentioned. Many times the US Government pays farmers not to produce. If Indian agriculture can have the level of subsidies available to US farmers there would be no farmer suicides.

Simply saying “create more jobs in manufacturing” is not a complete answer to a complex problem. In my mind the environmental damage caused by the manufacturing sector is bad enough to warrant a moratorium on this kind of growth.

Creating jobs in manufacturing boil down to this:
a) if the raw materials for manufacturing come from within the rural areas, manufacturing can be a boon
b) products that are useful for local consumption can keep cash flowing within the rural economy
c) if energy, water and other resources are available locally, manufacturing can protect itself from external price shifts
d) if the manufacturing units are designed to be environmentally benign then local population will not suffer

In the 1980s, four out of 10 rural jobs were in the non-farm sector, now it is six out of 10. The rural non-farm sector has emerged as the largest source of new jobs in the Indian economy. 

The Economic and Political Weekly (EPW) paper quoted above says that there is an emerging 3rd sector of employment wedged between agriculture and manufacturing “, the rural non-farm sector has become much more dynamic than the farming sector, both in terms of GDP growth and employment generation. Between 1983 and 2004, rural non-farm GDP has grown at a rate of 7.1%, more than a percentage point faster than non-farm GDP, and 4.5 percentage points faster than agricultural GDP. This faster growth of the non-farm sector started in the decade from 1983 to 1993. In the period 1993-2004, non-agricultural employment growth in rural areas accelerated from 3.5% to 4.8%. In the 1980s, four out of 10 rural jobs were in the non-farm sector, now it is six out of 10. Given the large size of the rural labour force, these numbers mean that the rural non-farm sector has emerged as the largest source of new jobs in the Indian economy.

A better summary of the EPW paper can be read in the Business Line article. click here.

(Photo: © Chilasa)

Joseph Thomas, is Director of Impact, Innovation & Technology at Chilasa Venture Philantrophy. Thomas has 30 years experience in rural technology, agricultural, renewable energy, and social innovation within NGO, business and research sectors in India, South and South East Asia. He is a project consultant to Centre for Social Innovation, Indian Institute of Technology Madras (IITM), a Member of Project Advisory Committee of Universities and Councils Network on Innovation for Inclusive Development in Southeast Asia, Ateneo School of Government, Manila, and member of the Core Advisory Group on Sustainable Agriculture of the United Nations Global Compact.

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