Republic of India Livelihoods in intermediate towns

Social Dynamics of Non-farm Economy

A Study of Two “Rural” Settlements of Madhubani District, Bihar
Surinder S. Jodhka
1. Introduction: In the development discourse and academic writings on economic change in contemporary India, Bihar is almost always presented as one of the least developed regions/states of the country. Though estimates of poverty vary and the pace of economic growth has seen some acceleration in the recent past, Bihar continues to be counted among the poorest states of India, nearly at the bottom. The per capita income of Bihar in 2008-09 was only Rs. 13,728, a mere 33.7 percent of the national average. Though it went up to 28,317 rupees five years later, in 2012-13, which works out to be 41.18 percent of the national average, it was still less than one-fourth of the richest state, Haryana, which stood at 122,660 rupees for the same year. The state has seen virtually no industrial growth during the past decade. Though the share of secondary sector in its total state income went up from 13.8 percent in 2003-06 to 21.2 percent in 2010-13, manufacturing remained nearly stagnant and grew merely by 0.2 percentage points, from 5.6 to 5.8 percent during the same period¹.
Bihar is also the least urbanized region of India. Against the national average of 31 percent plus, Bihar had only 11 percent of its population living in urban centres in 2011, only slightly higher than a decade ago when it was 10.5 percent. While the urban population for the entire country grew by 3.4 percent during this period, Bihar added only another 0.8 percent to its urban population.
The high density and growth rate of population also adds to its problems. Bihar is the third most populous state of India, after Uttar Pradesh and Maharashtra. In 2011, the total population of the state was more than a 100 million, with a growth rate of 25.42 per cent for the previous decade. With more than 1100 persons living per square kilometer, Bihar is the most densely populated region of the country, nearly three times more than the national average of 382 persons per square kilometer.
However, Bihar is an important state of the Indian union. As a political region, it has pioneered significant changes in the Indian democracy. The region has been a site of social churnings, which have enabled the erstwhile “backward” communities to rise politically, significantly transforming the regional power structure and social profile of the local level political elite. These changes and mobilizations have given birth to new aspirations for mobility and development among those who, for long, had been on the margins of the society in Bihar. A direct outcome of such a development has been the increase in out-migration from the state for employment and education across sections and communities. This ‘rise of the plebian’ has also produced a growing pressure on the political and administrative establishment for delivery and accountability.
Over the past two decades or so, the state has seen some significant economic changes. Even though a large proportion of its population continues to be demographically rural, its dependence on agriculture has been declining. A good proportion of rural incomes come from a variety of non-farm economic activities and from remittances sent to their families by the migrant workers working in different parts of the country. This is particularly true about the relatively “backward” pockets of the state.

1.2: Non-farm Economy in Contemporary Bihar: As mentioned above, even though Bihar continues to be among the poorest regions of the country, its economy has been growing at a significantly faster pace, much faster than it did during the first four or five decades after independence. Besides the growth of roads and communication networks, the agricultural economy of Bihar has also witnessed some growth, albeit concentrated only in some parts of the state. The Economic Survey of 2013-14, published by the Government of Bihar claims, with pride:

During 1999-00 to 2005-06, the state income at constant prices grew at an annual rate of 5.7 percent. After that, the economy witnessed a turnaround and grew at an annual rate of 12.0 percent. It should be noted here that the rate of growth achieved by the economy during 2006-13 is not only much higher than what was achieved in previous period, but one of the highest among all the Indian states (page xx).

According to official sources, the state witnessed growth in all spheres of its economy during the period 2006-13. Registered manufacturing grew at 18.2 per cent, construction grew at 21.9 per cent, communication at 38.4 per cent, trade, hotels and restaurants at 15.1 percent, and the banking and insurance sector grew at 23.5 per cent. The agriculture sector also grew, though at a lower pace of nearly 6 per cent (ibid).
In an economy where land-holdings are consistently getting smaller and the proportion of rural population remains high, economic diversification and growth of rural non-farm activities are being popularly viewed as a possible way out. The opening lines of the Report of a study sponsored by the erstwhile Planning Commission is a good example of this common-sense about the rural non-farm sector:
…the agricultural sector is, by itself, incapable of creating additional opportunities of gainful employment in the wake of increasing population. As a result, the impetus for achieving sustained development in rural areas has to pivot around expanding the base of non-farm activities… it could provide the solution to the problems of rural areas such as poverty, unemployment and out-migration of the rural work force. The significance of the non-farm sector is even more pronounced in the agriculturally backward and low productivity regions… ².
While this may indeed be the case, we still know very little about the dynamics of non-farm economy, particularly its social and political dimensions. We also do not know much about its diverse regional contexts and its possible links with other patterns of change and impact on the larger economy.

Table 1: Non-Farm Workers in Bihar and India (in Millions)
Year	Total workers	Rural Worker (% Bihar)	National average (%)
1983	2.7	15.8	19.2
1993-94	3	14.2	21.9
1999-00	4.1	17.5	24.6
2004-05	5.8	22.8	27.9
2011-12	8.7	34.3	37.6

Source: Calculated from employment-unemployment surveys of NSSO