The transformation of the Indian countryside has been slow and messy
One of the celebrated success stories of India’s growth experience over the past decade was the rapid transformation of the countryside, with a massive shift in the rural labour market away from farm jobs.
Two labour economists have now challenged the empirical foundations of that success story, raising deep questions on the nature and scale of that transformation. Their research also raises questions on the ability of India’s official statistical machinery to capture the evolution of an economy in transition.
The story of India’s rural transformation was based largely on the official data on employment released by the National Sample Survey Office (NSSO). The last employment survey conducted by the NSSO showed that between 2004-05 and 2011-12, a huge section of India’s workforce, 33.3 million to be precise, left farm jobs to take up non-farm occupations, primarily in the construction sector.
The NSSO data was greeted with cheer by most economists and economic commentators, as it signalled a dramatic shift away from the farm sector, with the proportion of workers dependent on agriculture falling below the 50% mark for the first time since India’s independence. One of the most influential theories in development economics, the Lewis model (so-called after the name of its originator, the Nobel-winning economist, Arthur Lewis), relates to such a shift from the farm to the non-farm sector involving a transition from low-productivity jobs to high productivity ones. Most countries across the world, including the Asian tigers, have gone through such a transformation on their development journey, with each decade lowering the proportion of people dependent on farm jobs, and raising the proportion of people engaged in industrial or formal sector jobs. The NSSO data release was thus interpreted as the beginning of precisely such a transformation in the country, and 2011-12 was seen as a Lewisian turning point in the evolution of the Indian economy.
However, when the economic tables of the Census were released, it painted a diametrically opposite picture of the labour market in rural India.
According to the Census, between 2001 and 2011, there was a net addition of 29 million workers to the country’s agricultural workforce. The ratio of such workers in the overall workforce fell only marginally by 3.7 percentage points across the entire decade to 54.6% in 2011. In stark contrast, the NSSO reported that the proportion of farm workers (those involved in agriculture and allied activities) increased by 17.4 million between 1999–2000 and 2004–5, and subsequently declined by 33.3 million between 2004–05 and 2011–12. Thus in a period roughly matching the Census rounds, the NSSO reported a net decline of nearly 16 million farm workers. Thus, according to the NSSO, the ratio of farm workers fell sharply by 12.7 percentage points over the past decade to 47.6% in 2011-12.
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