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Non-Farming Production Activities and Their Impact on Economy

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Non-farming producing activities are related to those economic activities that do not directly relate to agricultural activities. Generally, marginal farmers and landless laborers are getting benefits from these activities, which provide them a good source of income and employment. Non-farming activities include handicrafts, small-scale manufacturing (both domestic and non-domestic), construction, mining, quarrying, repair, transportation, community service, and so on. 

Types of work in the field of Non-farming activities can be divided into three categories:

  • Regular work,
  • Self-employment, and
  • Casual employment

According to a study, about 27 million workers in the organized sector were underemployed in 2003. This proportion, on the other hand, has been steadily declining since 1998. According to studies, 92 percent of Indian employees labor in the unorganized sector, whereas the organized sector employs just around 8% of the population. As a result, the unorganized sector’s presence in India is mostly due to the informal tendency of agricultural and non-farming activities.

According to census data, about 42 million individuals in rural India work in non-farming occupations. This census constitutes nearly about 47 percent of the total non-farm employment of rural areas. Out of these, 17.30 million persons (which compose about 42 percent) have their own employment enterprises. The remaining 24.59 million (nearly 58.70 percent) worked as hired employees. Female employees account for about 10 million of the total population (around 21.96 percent). However, when compared to self-employed non-farm employees, the percentage of female workers for hired non-farming operations has been shown to be higher (24.32 percent) (18.59 percent).

Non-farming activities are increasing through the following efforts:

  • One strategy to encourage more individuals to engage in non-farming activities is to provide financial support to help them raise the necessary funds through low-interest loans.
  • The market for buying and selling products and services is expanding.
  • Good roads and communication help to set up more engagement in the non-farming activities.

Some of The Non-farm Production Activities:

1. Dairy:

Dairy farming is one of the Non-agricultural activities in which milk is produced over a lengthy period of time and then processed on a farm or in a dairy factory. Commercial dairy farming employs animals such as cows, buffalos, to create a variety of dairy products such as cheese, butter, ice cream, buttermilk, and curd. More than about 8.47 million people on yearly basis out of which 71% are women are related to such activities. Basically, they are working mainly in the fields of production and processing of dairy products. Between 1960 and 2002, the country’s milk production surged by more than fourfold. 

2. Leather Industries:

In India, the leather sector plays a crucial role in the economy. India’s leather industry consistently earns substantial export revenues and is one of the country’s top ten foreign exchange-earners. Footwear exports account for a significant portion of India’s total leather and leather product exports, accounting for about 47.59 percent. The leather business in India is a job-creating industry, employing over 4.42 million people. In India, there are five key segments of the leather industry: 

  1. Footwear,
  2. Finished leather,
  3. Leather goods and accessories
  4. Leather clothing, and
  5. Saddlery and harness.

According to current data, the rising demand for leather fashion all around the world has a good potential for expansion of all of these segments.

3. Tourism:

In most countries of the world, including India, tourism is one of the key engines of economic growth. Tourism’s contribution must be assessed because it does not come under a single heading in the National Accounts Statistics. The overall number of tourism jobs in the country increased in absolute terms from 38.6 million in 20. In 2007-08, tourism was predicted to contribute 5.92 percent to the country’s GDP and 9.24 percent to total jobs (direct and indirect), respectively. According to the United Nations World Tourism Organization, tourism directly employs 6% to 7% of the global workforce and indirectly employs millions more through the multiplier effect. Tourism contributes significantly to India’s foreign exchange revenues, accounting for 13% of the country’s total service exports in 2009-10.

4. Consultancy:

Consultancy is primarily a knowledge-based profession with a development role that spans a wide range of industries. Not only do consultancy services contribute significantly to the development of the economy, but they also increase the visibility of Indian technical expertise abroad and boost the external sector in a variety of ways, including foreign exchange revenues, promotion of technology and merchandise export (especially capital goods and raw materials), and personnel training, all while contributing significantly to the host country’s national development. In 2007, the Indian consulting industry’s revenues were anticipated to be US$ 4.41 billion. Despite the fact that consulting contributed only 0.44 percent to GDP in 2007, the industry’s development rates have been exceptionally promising in recent years, with a CAGR of over 73.68 percent between 2002 and 2007. In 2008, the Asia Pacific (APAC) consulting business earned $33.5 billion in sales, with India accounting for US$1.81 billion, or 5.4 percent of the total APAC market.

6. Small-Scale Businesses:

In comparison to a standard-sized business or corporation, a small-scale business is defined as an enterprise or corporation with a modest initial investment, a limited number of workers, and a low sales volume. It is primarily alone trader kind of business that is generally privately held. From the shortlist of goods, one can select small-scale company ideas. These small-scale industry concepts are suitable for everyone, regardless of their educational background. All you need is a strong desire to succeed in business. The firm must adhere to the Indian government’s regulations. Small-scale businesses are critical to India’s economy, and they offer a wide range of job possibilities for skilled employees. After all, small-scale enterprises are important to the financial and social well-being of the economy. Due to strong demand and possibilities, these industries thrive in a growing country like India. Over half of all items delivered in India are produced by small and medium-sized businesses (45-55 percent). The creation of numerous small-scale industries has come from vendor demand for multinational corporations.

7. Services Sector-Based Industries:

The services sector not only accounts for the majority of India’s GDP, but it also attracts significant foreign investment, contributes significantly to export, and employs a big number of people. Trade, hotel and restaurant services, transportation, storage and communication, financial, insurance, real estate, business services, community, social, and personal services, and construction services are all part of India’s services industry.

The following are some of the recent data of the services sector:

  • India’s exports climbed by 48.34 percent to US$ 32.5 billion in June 2021, marking the sixth month of growth.
  • Between April 2000 and March 2021, India’s services sector attracted a total of US$ 87.06 billion in foreign direct investment (FDI). According to data given by the Department for Promotion of Industry and Internal Trade, the services category ranked first in FDI inflow (DPIIT).

8. Other sources of income, such as information technology:

Many sectors of the Indian economy are being revolutionized by information technology. It has the capacity to assist people in realizing their creative potential and expanding their knowledge. Farmers can efficiently handle weather forecasts, crop treatment, fertilizers, pesticides, storage conditions, and other concerns if they have access to professional guidance. The quality and quantity of crops may be substantially enhanced if farmers are made aware of the newest equipment, technology, and resources. 

Governments are using relevant data and software tools to predict areas of food shortages and vulnerability, allowing them to take action to prevent or reduce disasters. It also helps agriculture by spreading information about new technology and its applications, as well as pricing, weather and soil conditions for growing different crops, and so on. Although IT is not a cause for change in and of itself, it serves as a tool for releasing society’s creative potential and knowledge. It also has the potential to create jobs in rural regions. In many regions of India, people are experimenting with IT and its uses for rural development.

Impact on India economy

  • Several parts of the non-farming industry have dynamic relationships. Rural communities benefit from such connections because they promote healthy growth.
  • In comparison to farming, the non-farm industry gives employment opportunities throughout the year. As a result, it aids in the eradication of poverty in rural areas.

When it comes to earnings, research has indicated that regular workers in the rural non–farm sector earn 2.4 times more than those in agriculture. Some independent research also implies that in recent years, there has been a shift in the trend away from self-employed agricultural backgrounds and toward higher-paying non-farming industries.

  • Agriculture’s economic contribution to India’s GDP has been progressively dropping over time.
  • This helps to explain why employment in the non-farm sector is increasing. Agriculture employs 64 percent of rural workers, whereas agriculture accounts for 39 percent of rural production.
  • As a result, lowering the rural population’s reliance on agriculture as a source of income will help to enhance the rural population’s overall income.


The productivity of farming activities has been steadily declining in recent years. As a result, non-farm activities in rural areas were working more broadly and successfully than they have been in the past years. It would not only contribute to the overall GNI (Gross National Income), but it would also provide financial assistance to rural residents whose primary source of income is agriculture. The findings reveal that farms that work on non-farm activities earn higher revenue than those farms that deal with the production of agricultural goods. 

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Last Updated : 10 Sep, 2023
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