INDIA 1960-2010:
STRUCTURAL CHANGE,
THE RURAL NONFARM
SECTOR, AND THE
PROSPECTS FOR
AGRICULTURE
Alwin Dsouza, Arizona State University
This presentation is dedicated to the memory of Dr. Hans P.
Binswanger-Mkhize who sadly passed away in August 2017
ReSAKSS-Asia conference December 12, 2017

Outline
1. Rapid growth, but slow structural
transformation
2. Poverty, labor markets.
3. The rural non-farm sector and its drivers
4. The vision for agriculture, policies and
programs

The stylized Structural
Transformation
 At the outset of Structural Transformation (ST), labor and
economic output are both concentrated in Agriculture
 Because labor productivity in agriculture is lower than in
industry
 the share of labor in agriculture exceeds the share in
nonagriculture
 During ST, the gaps in labor productivity and between the
agricultural shares of labor and output widen
 A turning point is reached when the productivities and the
shares start converging
 recently estimated by Peter Timmer at between 1600 and 9000
dollars per capita incomes ($ of 2000)
 Convergence is driven by rapid absorption of labor in the

Structural transformation: Korea
and India

Structural Transformation in
India

Productivity Growth in
Agriculture
* till 2007
Indicator
Growth rates for decade
or three year avg. centered on last year shown
Average
growth rate
of 2006---
2009
1961---
1970
1971---1980 1981---
1990
1991---2000 2001---
2009
Agricultural
GDP growth
3.8 1.5 3.3 2.7 2.8 3.1
Growth of Agric.
Output per
worker
0.6 0.4 2.3 1.2 1.1 1.5
TFP growth
India*
0.0 0.0 2.0 1.5 1.9*
TFP growth
China*
0.0 0.0 2.8 4.2 2.7*
Total
population
growth
2.1 2.3 2.2 2.0 1.6
* Till 2007

Structural Transformation has been
very slow, a turning point may be far
away
The rural and agricultural labor forces are still
growing
Rural-urban migration is very slow
After a sharp slowdown, agricultural
productivity growth has accelerated only very
recently
Increasingly divergence in labor productivity
between agriculture and non-agriculture

The rural non-farm sector: the major
source of rural income and employment
growth

India’s structural transformation is
stunted
Much of the growing labor force is stuck in rural
areas
The largest growth in nonagricultural employment is
in the rural non-farm sector rather than in urban
areas
In all sectors there are few high quality jobs with
security of employment and benefits
While the urban-agricultural productivity differential
has been rising, rural urban income differences
grew little on account of non-farm growth

Major reforms in policies and
programs are required
 More responsive, accountable and better financed
research system
 Efficient use of inputs through better technology
and genetically advanced crops.
 Better financed, diversified and accountable
agricultural extension system.
 Greater role for private sector in both research and
extension
 Expansion of electricity for effective use of irrigated
water.

The marketing and value
chain
This sector is modernizing very rapidly
Remaining constraints in marketing systems need
to be eliminated
Competition in the sector needs to be fostered to
contain margins between producer and consumer
prices
Efficient farmer organizations and contract
farming need to develop much faster

Thank You