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BENEATH THE SURFACE

Whither rural non-farm activities?

Abdul Bayes
***Whatever could be the reason, the policy implication is that rural infrastructure and especially access to electricity should assume top priority in policy agenda. The recent experiences of shortfall in ADP achievements and anarchy in the energy sector point to the pitfalls that deter developmentof RNFA.***
Quite a number of scholars have dwelt on the role of the rural non-farm activities (RNFA) In greasing growth and reducing poverty in rural areas. The most recent empirical evidence also points to a preponderant growth of RNFA throughout Asian rural areas. It has been revealed that RNFA constitute one-fifth to one fourth of household income and account for 20-40 percent of rural employment generation. More important than this, they are bracketed as a beacon in the rural livelihoods.
One seminal study nicely narrated RNFA as follows: "During the economic transformation, the emergence and the rapid expansion of the non-farm economy in rural areas and the towns that serve them becomes a major source of growth in income and employment. From relatively a minor sector, often largely part-time and subsistence-oriented at the early stages of development, the rural non-farm economy develops to become a major
motor of economic growth in its own right, not only for the coun tryside but for the economy as a whole. Its growth also has impor tant implications for the welfare of women and poor households, sometimes helping to offset inequities that can arise within the agricultural sector."
Available empirical evidences suggest that in the 1990s the growth of non-agricultural income in rural areas of Bangladesh outpaced agricultural income. For example, between 1988-2001, non-agricultural income has grown at 4.2 percent per annum compared to 0.3 percent for agricultural income.
At the same period, employment has increased at a rate of 2.7 percent and 1 percent, respectively. Two discernible impacts of this transformation are noteworthy. First, the poor segment of the rural society engaged themselves in non-agricultural activities and thus raised their income levels and second, agricultural wage increased as a result of labor having been transferred from agricultural to non-agricultural sector. By and large, the growth of
RNFA could be dubbed as propoor.
Therefore, like any other developing country, generating productive employment for the growing labour force remains a formidable challenge for Bangladesh. Recent rise in the proportion of the working age population has added to the labor force and the majority of them still remain in rural areas despite the rapid rural urban migration. The capacity of absorbing the incremental rural labour force in agriculture has become extremely limited for various reasons.
First, there is no scope of expansion of land frontier; the arable land in fact has been declining over time. Second, cropping intensity has almost reached the limit by accounting for about 200 in the recent past. Third, the growth of crop production now depends almost entirely on technological progress resulting in low employment elasticity of output. In other words, land is now releasing more labor paripassu the rise in land productivities. And finally, despite all the developments in
the past, there still exists a need for increasing labor productivity and reducing unit cost through mechanization.
Information on primary and secondary occupation of sample households and the relationship with RNFA could be captured from a Brac-backed repeated sample survey of 62 villages. First, the importance of RNFA as both primary and multiple occupations significantly increased during the last two decades; nearly half of the rural workers now embrace RNFA as primary and secondary involvement. This compares with one-third in the 1980s.
A number of factors could be adduced to this change: expansion of transport and communication networks, positive role of NGOs through micro-credit programs, etc. The rise of mechanic as primary occupation could be adduced to the growth of irrigation pumps and mechanized agriculture. Business activities boomed during 1988-2000 period and then did not increase much. Service had increasingly been emerging as primary occupation
for rural labor force. However, the share of unemployed force increased from 3 percent to 5 percent.
What is the contribution of RNFA to household income? From the household survey it appears that the share of income from RNFA now constitutes more than half of the total household income compared to a little over one-third in the 1980s. It may be mentioned here that RNFA accounts for 25-50 percent of rural income in Asia. However, the household income grew roughly at 4 percent per year over the entire period and most of the incremental income came from the RNFA. The growth of income frqm RNFA soared high at about 7 percent per year compared to a feeble 1.4 percent per year growth in agricultural incomes. As a result, the share of non-farm sector in rural household income has been increasing very fast over the years.
In this context, we can possibly invoke the ’push" and the "pull" debate. Questions are raised whether the expansion of the rural non-farm sector is due to soaking of surplus rural labour in marginal low-paying occupations, as agriculture cannot provide employment for the growing labor force. That is, workers are "pushed out" of agriculture into low-productivity work in rural non-farm economy. Thus, the rural non-farm sector may be the employer of last resort. But it is not only the landless, lacking employment in agriculture, who
have engaged themselves in rural non-farm activities. Households with better resource positions, i.e. with more land and education are engaged in rural trading and service sector activities.
Despite the robust growth of RNFA in rural areas between 1988 and 2000, the slowing down of the pace of progress afterwards warrants explanation. We reckon that expansion of road communication networks, access to electricity, and other major developments that cause d RNFA to expand, have seemingly stalled in recent years. We also observe that the micro-credit programs of NGOs apparently lost the appeal in alleviating poverty. It might have also so happened that educated workforce have migrated outside rural areas.
Whatever could be the reason, the policy implication is that rural infrastructure and especially access to electricity should assume top priority in policy agenda. The recent experiences of shortfall in ADP achievements and anarchy in the energy sector point to the pitfalls that deter development of RNFA. Second, growth centres need to be established in remote areas so that the nexus between agriculture and non-agriculture is maintained for a pro-poor growth process. And finally, NGOs should focus more on targeted credit rather than serving as subcontractors of international agencies for assistance.
Abdul Bayes is a Professor o( Economics at Jahangirragar University. He can be reached at abdulbayes@yahoo.com.