Paper short abstract:

The urban-biased informality discourse ignore rural non-agrarian informal sector as a potential site of accumulation and rural development engine.It fails to capture the differential rural accumulation outcomes linked to the nature of agriculture labour productivity and market growth.

Paper long abstract:

The urban-biased discourse on informality ignores the role of rural non-agrarian informal sector as a potential site of accumulation and an engine of rural development. Although the existing literature acknowledges the role of rural non-farm sector in agriculture household income diversification, the role of agriculture labour productivity in the growth of rural non-farm accumulation is neglected. This paper argues that differences in agriculture labour productivity drive variations in rural accumulation processes in India. Using the 67th (2010-11) and 73rd (2015-16) rounds of NSSO all-India level survey data on informal enterprises, we find that labour productivity in rural informal sector is higher in higher agriculture labour productivity (HAP) states than in lower agriculture labour productivity (LAP) states. We also find that the differentiation within informal enterprises in rural manufacturing is higher in HAP states with a substantially higher use of wage labour than in LAP states. The period between 2010-11 and 2015-16 is also associated with worsening agrarian crisis in both HAP and LAP states, albeit of a different nature. During this period, the share of informal enterprises that do not hire wage labour declined in both rich and poor states. Consequently, there is deepening of differentiation within informal sector. On one hand, HAP states have higher share of enterprises that hire wage labour and LAP states have higher share of enterprises that do not hire wage labour but operate on subcontracting. Therefore, the paper argues the centrality of agriculture labour productivity growth in shaping the paths of rural non-agrarian accumulation.