Why is that the work-force participation rate in rural areas is more than in urban areas, but the level of economic development is lower in rural areas than in urban areas?

It is a truth universally acknowledged that an Indian in search of a higher income, a better standard of living, must necessarily migrate to an urban area.

Well, it may not be universally acknowledged just yet, but it should be!

One reason for rural-urban migration is opportunities that the urban centres provide. However more than 68% of the population lives in rural areas as per 2011 census report

The work-force participation rate in rural areas is higher at 41.8% as compared to urban areas at 35.31%. Agriculture is the primary occupation of nearly 53–60% of the population but contributes only around 20% of the GDP. The urban population, on the other hand, contributes about 63% to Indian GDP at present. And not just that, it is expected to rise to 75% by 2030, a joint report by CBRE and CREDAI. 

According to the report published by the Ministry of Statistics and Program Implementation in 2011, the average wage/salary received by regular wage/salaried employees of economically active age group was Rs. 428.66 per day for females compared with Rs. 550.23 per day for males in rural areas.

For urban areas, it was Rs. 609.70 and Rs. 805.52 per day for females and males respectively.This suggests there was a wide disparity of wages not only between the rural and urban population but also across genders. 

Why is this so? 

The above data shows that whether by absolute or relative proportions, more people work in villages/rural areas, but their collective and individual income is less than that of cities/urban areas. 

One could argue that there is surplus labour in rural areas as compared to urban areas. This may well push wages down.  As well as, that old, omnipresent spectre of disguised unemployment. 

But the shortage of skilled labour is always felt, and that, inevitably, results in a high unemployment rate. 

One could argue that there is surplus labour in rural areas as compared to urban areas. This may well push wages down.   

But the shortage of skilled labour is always felt, and that, inevitably, results in a high unemployment rate. 

Some of the probable reasons are discussed below:


1. First, nearly 59.3% of people in rural areas are categorized as self-employed, which consists of agriculture as the main activity with fishing, weaving, cottage industry, handicrafts, etc in its wake.
As much as 67 % of India’s farmland is held by the marginal farmers with holdings below one hectare, against less than 1 percent in large holdings of 10 hectares and above.
The employment structure is characterised by self-employment in the primary sector.
Agriculture in itself is a seasonal activity, largely dependent on the vagaries of monsoon and is often  exposed to the ill effects of natural and man made calamities like flood, drought, spurious seed etc. This leaves the rural households vulnerable and in perpetual poverty. 

2. Also, in rural areas, there is seasonal and disguised unemployment. The anti-poverty measures and policies by the government such as National Rural Employment Guarantee Act (NREGA), 2005, Prime Minister Rozgar Yojana (PMRY), 1993, Swarna Jayanti Gram Swarozgar Yojana (SGSY), 1999, perform poorly at the ground level and often do not benefit the grass root level. 

3. The remaining working population (about 35.5%) are categorised as casual labourers(landless labourers). Other problems relating to infrastructure are: 

  1. Lack of Irrigation facilities 
  2. Lack of mechanisation and innovation. 
  3. Inadequate storage facilities. 
  4. Lack of proper transportation facility. 

4. Also the Agricultural Produce Market Committee (APMC) Act, 1963, had some flaws, such as promoting Monopoly among others. Monopoly of any trade is bad, whether it is by some MNC corporation by the government or by any APMC. It deprives farmers of better customers, and consumers from original suppliers.

Other activities such as weaving, handicrafts, fishing and cottage industries face similar challenges. Government ought to create fertile grounds for non-agricultural activities as well. 

The main factors to be addressed in rural areas are: 

(i) Providing economic and political stability; 

(ii) Institutions establishing property rights and incentives;

(iii) Access to competitive input markets and remunerative output markets; iv) Adoption of productivity-enhancing technology, and 

(v) Real income growth in the non-agricultural agricultural sector. (vi) Improving the infrastructure. 


Paras Madhuram Jasrasaria 

FY BSc Eco(20-23)

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