4 reasons why diversifying livelihood sources can boost rural income

Diversification of earning streams can help pull the farmers out of financial and mental stagnation and allows them to save or invest for the future. With simple training and careful mentoring, our farmers can be much more productive

Zarina Screwvala
Updated: Nov 1, 2022 12:55:21 PM UTC
File photo: A woman walks with her goats in Beed one of the worst drought-affected districts in Maharashtra. Image: Shutterstock


Jayram Govind Shid is a 43-year-old paddy farmer in the small village of Bhavshet Thakurwadi, Raigad. Because farming here is dependent on rainwater alone, only paddy is cultivated in the area. But the untimely monsoon last year destroyed Jayram’s crop, allowing him to harvest only 20-30 percent of it. While this would’ve spelt doom for most, Jayram sailed through thanks to his diversified income source. He is the only one in his family to have broken away from a single source of income to invest in poultry farming, goat rearing and even masonry, which can fetch approximately Rs 10,000 per month. His wife assists in poultry and goat farming which keeps adding to their assets as the farms grow bigger. The added income sources helped Jayram and his family sustain through the untimely rains.

Many of our farmers across India can draw inspiration from Jayram. Most agricultural households are not yet engaged in multiple livelihood activities. Neither have most rural households without agricultural land broken away from the single-income mindset. Hence, the approach to expand income potential should be through simultaneously driven activities under on-farm (diversify crop cultivation), off-the-farm (animal husbandry, poultry, dairy) and non-farm (skilled labour, self-help groups and so on) categories.

Here is why doing so will boost rural incomes.

1) Divides risk

Out of the overall income of the households engaged in agriculture, 39.8 percent comes from wages, followed by crop cultivation (37.2 percent), animal rearing (15.5 percent), and income from non-farm businesses (6.3 percent) [SAS survey, 2019]. Wages may lead the pack, but the wage economy in rural India is seasonal and uncertain. Farm opportunities come during cropping seasons, whereas other labour-intensive opportunities fluctuate with market trends, festive seasons, and so on. On the other hand, agriculture is growing precarious owing to the climate emergency. According to the 2018 Global Food Policy Report by (IFPRI), erratic rainfall and weather patterns threaten India's food security. Last year during the Rabi season, wheat crops were affected due to heat waves in Punjab and Haryana, compelling governments to ban wheat exports. Farmers of dryland crops such as soybean and bajra have already suffered losses due to the untimely rains through September.

Also read: Going digital: A bubbling revolution in rural India?

Opting for goat rearing, poultry, vegetable orchards or training in a skill such as welding, or electrical alongside farming would divide the risks involved in individual practices.

2) Cushion against economic volatility 

Inflation and pandemic-induced economic setbacks make urban markets volatile. It has a cascading effect on rural livelihoods that often depend on opportunities generated by urban centres—in infrastructure, manufacturing and so on. We all saw how the pandemic impacted migrant workers, forcing them to head home overnight. According to rating agency Crisil, inflation is going to be the biggest pushback to India's economic recovery post-pandemic, affecting rural communities that are already the last to benefit from the recovery despite being the first to face its heat. Diversification mitigates the risk posed by volatile economic conditions.

3) Opportunity to leverage urbanisation and emerging economy 

As one of the fastest growing economies of the world, India is hosting an emerging modern retail market, catering to an aspirational consumer base with disposable income. Rural enterprises must find a way to optimise this opportunity. Many ecommerce giants have a dedicated space for products sourced from rural communities to support local enterprises. Startups in the clothing industry are providing a platform to traditional cottage industries. Some local enterprises responded to the urgent need and created beautiful cotton masks during the pandemic. The plastic ban is another opportunity that could help market sustainable products born out of mindful and traditional materials such as bamboo, areca leaves, cotton and so on. Communities can leverage this to increase their footprint in the product value chain.

Also read: Community ownership: Essential step for rural empowerment

4) Alleviates mental poverty and creates additional income

My experience of working in the rural sector has acquainted me with a kind of poverty that isn’t addressed properly—mental poverty. It is the lack of hope to live better owing to generational poverty. For instance, despite fetching a meagre income, subsistence farming is widely practised in India because farmers are unable to break away from it or diversify to explore other practices. Farming demands long hours on the field, but it is seasonal. With simple training and careful mentoring, our farmers can be much more productive. We can build their confidence and pride, allowing them to make the most of what they have. During non-cropping months, their energy can be channelled towards off-farm or even non-farm practices such as animal husbandry, poultry, skill training and so on. Diversification pulls them out of financial and mental stagnation and allows them to save or invest for the future.

Also read: Empowering rural women may be the key to a poverty-free Bharat

Given the above factors, it is necessary to create an ecosystem where rural communities can contribute to and benefit from an emerging economy by creating better rural-urban market linkages, and extending financial literacy programs to self-help groups and local enterprises. Umed by Maharashtra State Rural Livelihoods Mission is a fine example of how administrations can work towards creating such an ecosystem and promoting home-grown enterprises. But most importantly, the communities must take charge of their transformation. External factors can catalyse, but only a can-do spirit can create and sustain irreversible change.

The writer is the co-founder of the Swades Foundation & works full-time as its Managing Trustee & Director.

The thoughts and opinions shared here are of the author.

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