Regional dimensions and determinants of income diversification in rural India

Using a nationally representative data-set this paper examines the sources of farmers’ income and their determinants. The study finds that middle income regions are more diversified relative to the poor and rich regions. Around 60% of the total income is contributed by agricultural and allied activities and remaining comes from farm and non-farm wage including salaries and non-farm businesses. Diversification is more prevalent in agro-climatically fragile regions characterised by greater risks to primary source of income. It is also found to be higher in low-income regions with relatively better infrastructure. Households in economically well-off regions tend to specialise; and those who diversify do it for income enhancement. In sum, income diversification is more associated with distressed factors. The paper suggests region-specific policies for sustenance of income generating activities for a smooth economic transformation.