Role of nonfarm activities in the rural economy

The study shows that nonfarm activities not only make a major welfare contribution with respect to equity and income distribution, by productively absorbing a large quantity of rural labor and providing a major source of household income, but that many add more to the GDP than the substitute goods and services supplied by technically advanced capital-intensive producers. The nonfarm sector promotes increased agricultural productivity through design adaptation within the rural small-scale farm equipment industry, and stimulates agricultural growth through reduced marketing costs and through substantial income effects on food expenditures. Further, this sector is no more or less passive than any other economic sector. Among the policy implications emerging from the study are the need for a neutral policy environment with respect to firm size; the relevance of agricultural policies for the development of nonfarm activities; and the importance of developing the infrastructure in rural towns. (Author abstract, modified)