Generation of employment which is productive in nature is essential for poverty reduction in a country as labour is the main asset of poor. The relationship between employment and poverty operates through labour market, quality and quantity of employment. People residing in rural areas are dependent on agriculture for their livelihoods. It is important for them to get themselves engaged in other non-farm related activities also to diverse their income sources. Rural diversification is important for several reasons. Agriculture sector bears the burden of more than 60% of workers, with share of only 30%in GDP. Therefore, labour productivity has been very low in agriculture. Urban sector comprises of its own share of problems. As a result, the rural non-farm sector becomes an escape route for the agricultural workers. In order to increase the wage rate of agricultural workers and to shift them to more productive area, it is important to diversify. However, it may not always be beneficial for the poor and vulnerable sections of the society.

Why is "Rural diversification" important?

Both 1 and 2

Rural diversification arises from the fact that there is greater risk in depending exclusively on farming for livelihood. Diversification towards new areas is necessary not only to reduce the risk from agriculture sector but also to provide productive sustainable livelihood options to rural people.