Changes in Rural Poverty Among Occupational Groups in Odisha: An Analysis of Post-Reform Period

Abstract

This article is an attempt to study the changes in rural poverty and its link with growth of farm sector output for Odisha in the post-reform period. The rural household-type (occupational groups) classification of National Sample Survey Organisation (NSSO) from the unit-level data of Consumer Expenditure Survey (CES) has been used for the class analysis of rural poverty. The Odisha economy has recorded high growth in net state domestic product (NSDP) in the post-reform period. During the decade of the 1990s, the state witnessed a negative growth in farm output, lower reduction in rural poverty and distress occupational mobility from farm to non-farm sector. However, in the next decade, the farm sector registered high growth, higher rural poverty reduction and occupational mobility within the farm sector. There has also been higher growth in monthly per capita expenditure (MPCE) and faster reduction in rural poverty among all the rural occupational groups in the decade of the 2000s. Thus, it is the growth of the farm sector, which remains the major driver of rural poverty reduction in Odisha.

Keywords

Rural poverty occupational groups farm sector growth non-farm sector growth Odisha

Introduction

Odisha is a state situated in the eastern region of the country and has a huge natural resource base. It has a long coastal belt, vast forest cover and huge mineral reserves, along with good climate and fertile land. Though, the state has enormous potential for growth, the state has been considered as one of the backward states since decades. The state has the second highest incidence of poverty among the states of India after Bihar (Planning Commission, 2014). Odisha’s annual per capita income for the fiscal year 2014 was ₹24,928, which was about 62 per cent of the all-India average of ₹39,904. As per the latest planning commission report 2014, using Tendulkar’s poverty estimation methodology for the year 2011–2012, around 33 per cent of Odisha’s population are poor in comparison to 22 per cent for All India. This shows that the state still lags behind the national average. The state has witnessed a slow urbanisation process, and according to the latest 2011 census, 83 per cent of the state’s population still live in the rural areas. The main occupation of the rural population is agriculture. More than 60 per cent of the state’s rural population depends on the agricultural sector for their livelihood. The industrial sector of the state is mainly dominated by the mining activities. The mining sector activities are located in the rural hinterland of the state where the tribal population lives. Though the post-reform period has seen a huge flow of foreign direct investment (FDI) into the mining sector and resulted in the higher growth rate of this sector, employment generation was dismal (Das & Satyananda, 2016). Hence, it is the agricultural sector that remains the backbone of Odisha’s economy.

The decade of the 1990s saw a slowdown in the agricultural growth (Patnaik & Shah, 2010) and an acceleration in mining output growth (Das & Satyananda, 2016) in the state. The reason for slow growth in agriculture was because of the shift in the focus of the Government of Odisha from agriculture towards mining due to the huge demand for iron ore by China for the Commonwealth game and the demand for coal for the power sector (Das & Satyananda, 2016). Some of the recent studies observed that the growth and relative economic position of Odisha has improved in the recent past (Samantaray et al., 2014). The author took both the income and non-income indicators (literacy rate, infant mortality rate and maternal mortality rate) to show the improved economic position of Odisha. Das and Bibhunandini (2015) also argue the inclusive nature of growth in Odisha in the recent decades by using the district-level income and monthly per capita expenditure (MPCE) data. The period after 2002–2003 has seen a revival of agricultural growth (Patnaik & Shah, 2010) and a higher decline in poverty (Panda, 2015), in comparison to the previous period, which is one of the highest among the Indian states. Hence, it seems that there is a link between agricultural growth and poverty reduction in the state. If it is true, it is important to have detailed analysis of the occupational groups of rural Odisha and their poverty reduction. It is imperative to explore whether the incidence of poverty reduction is associated specifically with certain agrarian classes like the ‘self-employed’ and ‘agricultural labour’ or is it universal, that is, spread across different farm and non-farm classes?

According to Gulati and Malhotra (2015), 90 per cent of the total poor in Odisha belong to the rural areas, and hence eradication of rural poverty through increase in farm productivity plays an important role. With this background, the main objective of this article is to verify whether the reduction in poverty of rural Odisha is driven by the growth of the farm sector. Further, in this article, an attempt has been made to explain the variations of poverty in Odisha for the rural sector and among the various rural occupational groups (household-type). The rest of the article is organised as follows. The second section describes trends in net state domestic product (NSDP) growth and poverty in Odisha. The third section deals with poverty among farm and non-farm sector in rural Odisha. The fourth section presents occupational group-wise poverty in rural Odisha. The fifth section discusses about the demographic changes and changes in income/expenditure among the households in rural Odisha. The sixth section presents the concluding remarks.

Trends in Net State Domestic Product Growth and Poverty in Odisha

The post-reform period has seen a higher growth rate at the national level and in most of the states of India (Balakrishnan & Parameswaran, 2007; Kaur, 2007; Panagariya, 2004; Wallack, 2003). Odisha’s economy lags behind the national average in terms of both level and growth of NSDP. The long-run growth rate of Odisha’s economy during the period from 1950–1951 to 1997–1998 was around 2.7 per cent (Meher, 2003). According to him, the slow growth rate of the economy is due to the slower growth of the agricultural sector as it constitutes the major share of the income in the economy. This section analyses the sectoral composition of NSDP and trends in NSDP growth and poverty level of Odisha’s economy in the post-reform period with an emphasis on agrarian growth. The sectoral growth rates and sectoral composition of NSDP are calculated using NSDP data from Economic Political Weekly (EPW) Research Foundation. The period of analysis is from 1990–1991 to 2012–2013. The data set had two base years, 1993–1994 and 2004–2005. So splicing method is used to get a continuous series with one base year, 2004–2005. Figure 1(a) presents the output trends of the sectors of Odisha, which has been rising over the year. The trends of NSDP of the tertiary sector increases at a faster rate only after 2002–2003, having a significant impact on the overall NSDP trends. Hence, the state economy is going through a structural transformation in output during the period. Figure 1(b) presents the sectoral composition of output for the state for the years 1993–1994, 2004–2005 and 2011–2012, taking into consideration the NSSO quinquennial round years. While both primary and secondary sectors have witnessed a reduction in their respective share in total output, that of the tertiary sector has been increasing. For calculating growth rates, the series are smoothened using 3-year moving average. The graph of NSDP shows a break in the year 2002–2003 (Figure 1[a]). Hence, the post-reform period can be divided into two phases. The first period is from 1990–1991 to 2002–2003 and the second period is from 2003–2004 to 2012–2013. For the sub-sectors, the same break period has been taken. To calculate the period-wise compound annual growth rates (CAGR), dummy variable regression method has been used instead of ordinary least square for two different periods, to save degrees of freedom. The dummy variable regression used for this purpose is given below:

\ln Y_{t} = a_{1} + a_{2} D_{1} + a_{3} t + a_{4} D_{1} t + u_{t}

(1)

where lnYt is the logarithm of income, t is the time trend, and ut is the random disturbance term. The D1 is the dummy variable, which took value 0 for the first period (1990–1991 to 2002–2003) and 1 for the second period (2004–2005 to 2011–2012).

Table 1 presents the sectoral growth rates of real NSDP of Odisha and India in the post-reform period. The economy of Odisha has seen a growth of NSDP at 5 per cent during the whole period from 1990–1991 to 2011–2012, while the growth is higher (6.4%) for the same period at the national level. In comparison to the first period, the second period witnessed a higher growth rate among all the sectors in both Odisha and India. In both the periods, all-India sectoral growth rates are higher than the sectoral growth rates of Odisha. But the rise of growth rate in the second period in comparison to the first period is higher in Odisha than at the national level. The primary sector of Odisha has seen a 3.6 per cent growth rate in the second period from 0.4 per cent growth rate in the first period. The growth rate of primary sector of Odisha in the second period is higher than the national level. The causes of a spurt in growth rate of the primary sector in Odisha after 2002–2003 need to be analysed. Patnaik and Shah (2010) also found the same result for Odisha’s growth in the primary sector. With the high growth in the post-reform period, there is a major structural change in output and employment in Odisha. Regarding the share of income, though the primary sector’s contribution to output has been declining, around 60 per cent of the labour force still depend on this sector for their livelihood in rural Odisha. It is the tertiary sector which has become more prominent and, by now, accounts for more than half (around 56%) of the NSDP, followed by the secondary sector (24%) and the agricultural sector claims for meagre 20 per cent share of the total NSDP of Odisha during the period 2011–2012.

Table 1.

Growth of Real NSDP in Odisha and India During Post-reform Period (%)

Sector	Odisha			India
	1990–1991	2002–2003	1990–1991	1990–1991	2002–2003	1990–1991
	to	to	to	to	to	to
	2001–2002	2011–2012	2011–2012	2001–2002	2011–2012	2011–2012
Primary	0.4*	3.6	1.8	2.5	3.3	2.5
Secondary	2.3	4.8	4.0	4.7	8.1	6.2
Tertiary	6.3	9.9	7.7	7.1	9.1	7.8
Total	3.2	7.0	5.0	5.5	7.9	6.4

Source: Authors' calculation from DES Data on NSDP.

Note: All the entries are significant at 1% level, *significant at 10% level.

Figure 1.

Source: Authors' calculation from DES data on NSDP.

Table 2.

Sectoral Share of Employment in Rural Odisha and Rural India

Year/Sector	Primary	Secondary	Tertiary	Primary	Secondary	Tertiary
	Rural Odisha			Rural India
1993–1994	80.90	9.40	9.80	78.40	10.20	11.40
2004–2005	69.00	17.50	13.60	72.70	13.70	13.60
2011–2012	62.25	22.64	15.13	64.10	20.39	15.51

Source: NSSO rounds on employment and unemployment.

Table 2 presents the sectoral share of employment in rural Odisha and India in terms of the usual principal subsidiary status (UPSS) for the post-reform period. The rural employment share for the primary sector has declined, while there is an increase in share of the secondary and tertiary sector in both rural Odisha and rural India. The changes are, however, slower in the second period in comparison to the first period in rural Odisha. While in rural India the changes in employment share in the second period is faster than the first period, it implies that the major diversification from agriculture to non-agriculture in rural Odisha occurs in the first period; for rural India, it occurs in the second period. The first period in rural Odisha has seen a faster decline in the primary sector employment and a rise in employment share of the secondary sectors. Among the secondary sectors, it is the manufacturing and construction sectors, which have seen a high rise in the employment share. Though the mining sector has recorded a high growth in NSDP during this period, its employment share has declined, and its share in overall employment is meagre, less than 1 per cent. The first period has seen a negative growth of farm output, on the one hand, and a high reduction of farm sector employment, on the other hand. It reflects that the movement of labour from farm to non-farm sector is due to distress in the farm sector. Does it reflect that the income and expenditures of the person engaged in the farm sectors have declined and that of those in the rural non-farm sector has increased in this period? The second period from 2004–2005 to 2011–2012 has seen a growth in output of both the farm and non-farm sectors. This period has also witnessed a slower diversification of employment from farm to the non-farm sector, which are slower than the first period. Given these trends in growth and composition of employment, it will be interesting to study the changes in share of poor and their distribution across the sectors. Has the farm or non-farm sector witnessed a major decline in poverty? To answer this questions the headcount ratio (HCR) value computed using the Tendulkar Methodology has been taken from the Planning Commission, Government of India.

From Figure 2, it can be shown that the poverty ratio has been declining in both Odisha and all over the country during the study period. Poverty ratio is higher in Odisha than in whole of India in both the rural and urban areas in each of the NSSO rounds. The decline in poverty is more secular in all over India than in Odisha. During the period from 1993–1994 to 2004–2005 period, the poverty in India declined by 9 per cent, while it declined by only 2 per cent in Odisha. But during the period from 2004–2005 to 2011–2012, poverty declined more rapidly in Odisha, which is one of the fastest among the states (Planning Commission, 2014). The decline in poverty is 20 per cent in Odisha, which is much higher than the national average of 7 per cent. Still, around 32 per cent of the population in Odisha is poor, which is 10 per cent higher than the national level during 2011–2012. Odisha is a state where 83 per cent of the population resides in rural areas, and 90 per cent of the total poor in Odisha are from Rural Odisha (Gulati & Malhotra, 2015). Hence, it becomes important to know which sectors and occupational groups of rural Odisha contributed more to the decline in poverty?

Poverty Among Sectors of Rural Odisha

There are a number of studies which analysed the relationship between growth and poverty reduction. The general perception is that higher the economic growth, there will be larger poverty reduction. Hence, growth is a necessary condition of poverty reduction. Some studies point out that it is not growth but composition of growth, which matters for poverty reduction. In an underdeveloped country where the mainstay is primary sector, growth of that sector plays a vital role in poverty reduction. The farm sector has a direct impact on the poverty reduction through rise in productivity and agricultural wage, whereas the non-farm sector has an indirect impact on rural poverty through labour allocation from farm to the non-farm sector, and its impact on agricultural wage and poverty. Most of the mainstream scholarship is of the opinion that it is the growth of farm sector, which has resulted in reduction in poverty. Ahluwalia (1978), Datt and Ravallion (1998) emphasised the role of the farm sector, especially the farm productivity on rural poverty in India. The post-reform period witnessed a high growth of rural non-farm employment in India. Foster and Rosenzweig (2004), Lanjouw and Murgai (2009) emphasised the role of non-farm sector growth on rural poverty in India.

Figure 2.

Source: Authors' estimation from Planning Commission Poverty HCR data.

The rural economy consists of both farm and non-farm sectors characterised with heterogeneous occupational structure. Hence, the composition of poverty among these sectors might differ. It is important to look into the sectors and occupational groups, resulting in reduction of poverty in Odisha. Though various studies have looked into poverty at the national and state levels, very few studies analysed poverty at the sectoral level. Given two important sources of poverty reduction, an analysis of poverty reduction has been made in this section at the sectoral level in rural Odisha. Agriculture remains the main livelihood option for the state of Odisha, and, hence, it becomes important to have a look into the sectors causing a poverty reduction in rural Odisha. A reduction of poverty in a group could be due to the increase in income and mobility of individual/households within groups. This section presents poverty changes among sectors and occupational groups.

The National Industrial Classification (NIC) codes have been used for classification of economic activities in the farm and non-farm sectors and population involved into various occupational groups. The NIC codes for the year 1987, 1998, and 2008 have been used for the NSS rounds 50th, 61st and 68th, respectively. The HCR has been calculated among these classes across the sectors. Table 3 presents poverty HCR among the sectors for rural Odisha and rural India in the post-reform period. The period from 1993–1994 to 2004–2005 is considered as the first period and 2004–2005 to 2011–2012 is considered the second period. Broadly, poverty has declined over the years in both the sectors (farm/non-farm) and regions (Odisha/all India). Interestingly, the extent of decline is not similar between sectors and regions. Specifically, it is heartening that poverty in rural Odisha has declined by 26 per cent over a period of two decades (1.3% per annum), similar to that of rural India (25%). But, nearly all of this decline (25%) has happened during the second period (viz. 2004–2005 to 2011–2012) in Odisha unlike the whole of India. The decline is more evenly spread in the latter.

Table 3.

Poverty (HCR) among Sectors in Rural Odisha and India

Sector	Rural Odisha			Rural India
	1993–1994	2004–2005	2011–2012	1993–1994	2004–2005	2011–2012
Farm	65.11	68.21	41.34	54.69	45.34	27.90
Non-farm	52.70	48.65	29.31	41.70	34.96	22.13
Total	62.35	61.27	36.42	51.37	41.96	25.59

Source: Calculated from NSSO unit level data of CES survey using the NIC classification.

The first period from 1993–1994 to 2004–2005 has seen a 1 per cent reduction in rural HCR in Odisha, while rural India has seen a 10 per cent reduction in rural HCR during this period. In rural Odisha, in the first period, HCR for the farm sector has increased by 3 per cent, whereas, for rural India, it declined by 9 per centage points. The decline of HCR for rural non-farm sectors of Odisha is 4 per cent, while the decline for the whole of India is 7 per cent. Hence, the total decline in HCR in rural Odisha in the first period has been contributed by the decline in HCR of the rural non-farm sectors, while, for the whole of India, the reduction in rural poverty occurs both in farm and non-farm sectors. The annual reduction in poverty in this period for rural Odisha is 0.16 per cent, while, in rural India, it is 1.67 per cent. The second period between 2004–2005 and 2011–2012 resulted in a poverty reduction of 25 per cent in rural Odisha, whereas it is 16 per cent in case of rural India. While the decline in HCR for farm sectors in rural Odisha is 27 per cent, the decline in the rural India is 17 per cent. The poverty reduction for the rural non-farm sector in rural Odisha is 19 per cent, while it is 13 per cent for rural India. Hence, the second period witnessed a higher poverty reduction in rural Odisha in comparison to the national level. The annual poverty reduction for rural Odisha is 5.79 per cent, while, for rural India, it is 5.57 per cent. The decline in HCR for rural Odisha in both farm and non-farm sectors in this period is higher than rural India. While the annual reduction in poverty in the farm sector of rural Odisha is 5.63 per cent, it is 5.49 per cent at the national level. For the rural non-farm sector, the annual poverty reduction in Odisha is 5.68 per cent while it is 5.24 per cent at the national level. Hence, rural poverty reduction in the second period happens to be in both the farm and non-farm sectors, and the decline is faster in Odisha in comparison to whole of India.

Poverty Headcount Ratio among Occupational Groups in Rural Odisha

The previous section presents poverty changes among farm and non-farm sectors. The occupations within the farm and non-farm sectors are not homogeneous. Hence, it is important to identify the occupational groups, experiencing a poverty reduction in rural Odisha. Though there are some studies by Sundaram and Tendulkar (2003), Thorat and Dubey (2012), at the all-India level, no such studies have been attempted at the state level. This section will consider the mobility of individuals and the changes in real MPCE among the occupational groups in rural Odisha.

Table 4.

Poverty (HCR) Among the Occupational Groups in Rural Odisha and India

House Hold Type/Year	Rural Odisha			Rural India
House Hold Type/Year	1993–1994	2004–2005	2011–2012	1993–1994	2004–2005	2011–2012
Self-employed in agriculture	55.27	59.07	32.10	43.77	34.15	22.61
Agricultural labour	79.72	79.05	59.63	71.52	62.86	37.83
Self-employed in non-agriculture	56.62	47.24	25.18	45.98	36.98	20.02
Other labour	65.85	71.50	45.44	55.84	45.94	33.12
Others	33.75	28.84	14.64	27.00	21.21	12.88
Total	62.34	60.90	35.69	51.52	41.87	25.40

Source: Calculated from unit level data of NSSO, CES survey.

NSSO makes disaggregation of the surveyed households according to occupational groups, what the NSS reports describe as ‘household types’. These are classified by the reported major source of income during the last year for the household as a whole. Five household types¹

For Detailed discussion on Household type look into Sundaram and Tendulkar (2003)

are distinguished for the rural households by ownership or lack of physical or human capital, viz. (a) self-employed in agriculture, (b) self-employed in non-agriculture, (c) agricultural labour, (d) other labour, and (e) other. The farm sector consisted of the first and third categories, whereas the other three formed the rural non-farm sector.

Table 4 presents the HCR among the occupational groups in rural Odisha and India. In the first period, the poverty HCR of the agricultural labour remains the same, that is, 79 per cent. Hence, the rise in poverty in the farm sector (Table 3) is due to the rise in HCR among the self-employed in agriculture or cultivators. The HCR has increased at an annual rate of 0.63 per cent for the self-employed in agriculture, while the HCR has declined slightly for the agricultural labour at an annual rate of −0.08 per cent in the first period. Among the self-employed in agriculture, whether it is the marginal, small, medium or large landholding, which has seen a rise in HCR and whether it has an impact on tenancy can be taken as a further research problem by the researcher. While the poverty ratio in the farm sector for rural Odisha rises, the farm sector for rural India has witnessed a declining trend in the first period. Both the self-employed and agricultural labour in the first period have seen a decline in HCR for rural India. The decline in HCR is faster in self-employed occupational group. The annual reduction in poverty HCR for the self-employed is 2 per cent, where it is 1.10 per cent in case of agricultural labour in rural India. The entire decline in poverty of rural Odisha in the first period is due to the reduction of poverty in the rural non-farm sectors. Among the rural non-farm occupational groups, the poverty has been declining among the self-employed in non-agriculture and the ‘others’ category (regular wage employees) of rural Odisha. The poverty is increasing for the casual labour, which constitutes a major proportion of the population in the rural non-farm sectors. These are the sections of the population who are daily wage earners and who do not have any trade union and are not getting any social security benefits. Rural India saw a poverty reduction among all the occupational groups and the reduction in poverty HCR is faster than their counterpart of rural Odisha. While the annual reduction in poverty for rural Odisha in the first period in self-employed non-agricultural category is 1.51 per cent, for rural India, it is 1.78 per cent. For others in rural Odisha, the annual poverty reduction is 1.32 per cent, while, in rural India, it is 1.95 per cent. While an annual change in poverty for other casual labour of rural Odisha has witnessed a rise in HCR of 0.78 per cent annually, it has seen annual reduction of HCR by 1.61 per cent for rural India.

The second period has recorded a reduction in poverty HCR in farm sectors of rural Odisha and India among both the self-employed and agricultural labour. Within the farm sector, the decline in HCR among the self-employed agricultural sector is faster in rural Odisha, whereas the decline in HCR for agricultural labour is faster in the case of rural India. The annual reduction in poverty for self-employed agricultural sector in rural Odisha is 6.52 per cent, whereas it is 4.83 per cent for rural India. The annual decline in HCR for agricultural labour for rural Odisha is 3.51 per cent whereas it is 5.69 per cent for rural India. The decline in HCR in the second period is much higher than the first period. But in the second period, all the rural non-farm occupation groups have seen a reduction in poverty HCR. The reduction is faster in rural Odisha for all the groups in comparison to the rural India. The annual change in poverty reduction of rural Odisha among the rural non-farm sectors is higher for others, followed by self-employed, and then the other casual labour. The annual reduction in poverty HCR for the self-employed non-agriculture for rural Odisha in the second period is 6.67 per cent, while it is 6.55 per cent in rural India; for the other casual labour of rural Odisha is 5.21 per cent, while it is 4 per cent in India and 7 per cent for others of rural Odisha, while it is 5.61 per cent for rural India.

Table 5.

Share of Population (%) and Real MPCE (₹) among the Occupational Groups in Rural Odisha

House Hold Type/Year	Percentage of Population			Real MPCE(₹)
House Hold Type/Year	1993–1994	2004–2005	2011–2012	1993–1994	2004–2005	2011–2012
Self-employed in agriculture	14.92	19.00	19.10	425.40	483.49	570.16
Agricultural labour	33.42	28.04	18.69	337.56	331.95	413.48
Self-employed in non-agriculture	4.57	10.39	12.82	386.52	365.57	458.18
Other labour	38.72	33.24	38.23	428.75	416.49	528.12
Others	8.34	9.31	11.14	570.98	651.13	757.20
Total	100.00	100.00	100.00	407.71	422.05	531.28

Source: Authors' calculation from unit level data of NSSO, CES survey.

Table 6.

The Share of Population (%) and Real MPCE (₹) Among the Sectors in Rural Odisha

Sector	Population Share			Real MPCE
	1993–1994	2004–2005	2011–2012	1993–1994	2004–2005	2011–2012
Farm	77.73	64.54	59.11	392.24	377.52	489.74
Non-farm	22.26	35.45	40.88	461.53	494.80	579.11
Total	100.00	100.00	100.00	407.71	422.05	531.28

Source: Calculated from NSSO unit level data of CES survey using the NIC classification.

It is the agricultural labour households which record the highest HCR of nearly 80 per cent in the year 1993–1994, and it declines to 60 per cent in 2011–2012. These households possess little, if any, physical or human capital assets, and depend for their livelihood on irregular, fluctuating and uncertain casual labour employments, related mainly to seasonal agricultural activities that are dependent on the vagaries of weather. Agricultural labour households form 19 per cent of the total rural population (Table 5) but account for an overwhelming 31 per cent of the rural poor; this clearly represents the most vulnerable segment of the rural economy in the period 2011–2012. It is the non-agricultural rural labour whose population as well as the share to total poor have been increasing more than triple over the period. There is a diversification of population from agricultural labour to other labour of non-farm sectors in rural Odisha (Table 5). It has seen a rise in the percentage of poor among the other labour, which shows a distress-driven mobility between these two groups. The first half of the decline in poverty has been contributed by the non-farm self-employed and the other. For the self-employed in agriculture and other labour of the non-farm sector, the HCR increases, and it remains the same for the agricultural labour. But the share of agricultural labour has declined throughout, and share of other labour has seen a rise. This might be the result of the diversification of population from farm to non-farm sectors. The HCR has declined for all the groups in the second period. Rural agricultural labour and casual labour constitute the most vulnerable and economically disadvantaged segments, with the highest HCR across household types, in the rural areas. The former, that is, the agricultural labour households, also account for the numerically dominant share of the poor rural population. The lowest HCR is recorded in the other households in rural Odisha, that is, the regular wage and salaried households in the rural population. The analysis can be combined with the growth story of the agricultural sector in Odisha. The first period has seen a growth of the rural non-farm sector as seen in the high growth of secondary sector in general and mining and registered manufacturing in specific, and hence the declines in poverty are among the non-farm economic groups. The poverty HCR has risen among the farm occupational groups due to negative farm growth in this period. The second period has seen a poverty reduction among all the economic groups, which can be explained due to a high growth of farm sector and the linkage of the farm with the non-farm sector. Hence, it’s the growth of the farm sector, which resulted in the reduction in poverty at a higher rate. The poverty HCR of a group depends on the population mobility and income of that group. Hence, it is important to have a look into the population mobility between sectors in rural areas and the change in income/expenditure, which has been discussed in the next section.

Structure of Odisha’s Economy

The second and the subsequent section of this article present the growth, poverty in Odisha and the change in poverty among the occupational groups in rural Odisha. There is high growth and poverty reduction in Odisha in the post-reform period. With structural change and growth of an economy, both the output and employment have shifted from traditional to modern sectors. The economy moves from farm to non-farm sector. With high economic growth, poverty too is declining. But, the poverty reduction among the groups may not be the same and has been affected by the mobility between the occupational groups and the change in the income of these groups. Therefore, it has become important to know that whether there are any major population mobility and change in income among the major household types in rural Odisha. Whether the structure of Odisha’s economy has seen major changes with a change in HCR?

The NSSO unit-level data on consumer expenditure survey (CES) has been used to calculate the change in population share between the sectors and among the economic groups. The MPCE has been used as a proxy of income as income data for the occupational groups, not available in India. The adjustment has been made to convert all the MPCE data into 2004–2005 real series. The real mean expenditure for the sectors and among the rural occupational groups has been estimated.

Table 6 presents the population mobility and the change in real MPCE among the sectors in rural Odisha. During the period 1993–1994, around 78 per cent of the population was engaged in farm activities in rural Odisha and the rest 22 per cent of the rural population engaged in the non-farm activities. The percentage of the population in farm activities has declined, and the percentage of non-farm activities has increased over the period. The decline in farm activities and the increase in non-farm activities in rural Odisha are faster in the first period in comparison to the second period. The diversification from rural farm to the non-farm sector over the period is higher in the case of rural Odisha in comparison to the rural India. The population in the first period in rural Odisha, depending on the farm sector, has declined by 1.54 per cent, whereas the decline is slow (1.20%) in the second period. The annual rise in rural non-farm sector is 5.38 per cent, which is increasingly higher than the second period annual growth of 2.18 per cent in rural Odisha. Thus, Table 6 shows that rural Odisha has recorded a higher growth in rural non-farm sector employment in the first period and a decline in farm sector’s employment growth. While the annual growth rate of real MPCE for the farm sector in the first period has seen a decline by 0.34 per cent, the annual growth rate for the rural non-farm sectors for the period has seen a rise by 0.65 per cent in rural Odisha. The second period witnessed a high annual growth rate of farm sectors at around 4.24 per cent, which is faster than the growth of rural non-farm sectors (2.43%). The second period has achieved a high growth in real MPCE among both the rural farm and non-farm sectors in comparison to the first period. The real MPCE of the farm sector in the second period has grown faster than the non-farm sectors in rural Odisha.

The first period has witnessed a very low growth in output of the farm sectors in Odisha, and the period has witnessed population mobility from farm to the non-farm sector. Hence, the mobility in the first period is distress driven as it arises due to agrarian distress (slow agriculture growth). Though there is growth in rural non-farm employment in this period, the real MPCE growth of this sector is slow, showing a distress in the rural non-farm sector. Thus, it means the growth in employment in the rural non-farm sector in this period is on the low-paid unorganised sector. The second period has seen a high farm sector’s growth in Odisha (Table 1). Though the non-farm sector too has seen a growth in output, in terms of employment growth, the second period has seen a low growth in comparison to the first period. The growth in farm sector in the second period resulted in slow growth in employment in the rural farm sector. The growth in the farm sector resulted in an increase in real MPCE in the farm sector, which is even higher than the growth of real MPCE of the rural non-farm sector in rural Odisha. The second period has seen a slow diversification and high growth in real MPCE among all the occupational groups.

Turning to rural household types, the population located in self-employed (agricultural as well as non-agricultural) households accounted for nearly 54 per cent of the total rural population, which increased to 58 per cent over the years. However, share of the population located in rural (agricultural as well as non-agricultural) manual labour households is 38 per cent, which declines to 31 per cent from 1993–1994 to 2011–2012. Residual (non-manual, non-self-employed) households were 9 per cent of the total rural population, which rise to 11 per cent. Within each of the two major groups of the self-employed and rural labour households, agricultural ones dominated over the non-agricultural ones.

The first period from 1993–1994 to 2004–2005 has witnessed a reduction in the percentage of the population engaged in self-employed agricultural and agricultural labour and a rise in self-employed non-agricultural and non-farm casual labour. This is because of the negative growth rate of the agricultural sector, and, hence, people have been shifting to the rural non-farm sectors. The labour mobility from farm to non-farm sectors in the first period is due to the distress in the farm sector. Though there is a movement from farm to the non-farm sector in rural areas, the HCR has declined only for the non-farm self-employed population (Table 4). For the other casual labour, the poverty HCR does not change and remains the same in the first period though there is a non-farm sector growth in that period. The rural non-farm growth of mining and manufacturing is highly capital intensive and does not result in the generation of employment as proposed by Mohanty (2016). In the first period, the decline in HCR is higher for the self-employed non-agricultural population followed by others. The poverty has increased for the other labour showing that it is the causal rural non-farm workers who have not benefited much from the diversification from farm to non-farm and where the self-employed in rural non-farm do benefit. The HCR has increased among self-employed agriculture.

But, the second period from 2004–2005 to 2009–2010 has seen an increase in self-employed agriculture, while the self-employed non-agricultural population remains the same as in the period 2004–2005. The rise in population in the self-employed agricultural population might be due to the rise in the marginal landholding group, which has to be explored further. The share of agricultural labour has declined, while the casual labour and others have increased slowly in this period. The period has witnessed a mobility of population within farm sectors. The share of agricultural labour has declined, while the share of self-employed in agriculture (cultivator) has risen, showing a movement of agricultural labour towards the self-employed in agriculture. The second period has seen a revival of the agricultural growth and has seen stagnancy in the non-farm sectors in terms of the labour mobility. The mobility took place within the farm sector from agricultural labour to the self-employed agricultural population. The period has seen a reduction of poverty among all the economic groups. The decline in poverty is higher among the others, followed by self-employed in farm and non-farm sectors and the agriculture labour. Within the self-employed in agriculture, the higher decline in poverty is among the marginal and small landholding, which constitutes around 93 per cent of the population to the self-employed in agriculture group.

Though the first period has seen a fall in farm income/MPCE in rural Odisha, the second period has seen a rise in income both for the farm and non-farm sectors. At the national level, both the periods have seen a rise in income in both farm and non-farm sectors. The decline in farm income in the first period is because of the negative growth of the agricultural sectors in Odisha. The rise in income for the rural non-farm sectors is higher in the second period than the first period. The real MPCE for rural Odisha increases by 0.32 per cent annually in the first period, while the annual increase is very high at 4.31 per cent in the second period. Particularly, the rise in income is higher among the self-employed in agriculture, which increases by 4.47 per cent, followed by agricultural labour MPCE by 4.09 per cent annually. While the income from the other labour rises annually by 4.22 per cent, the self-employed in agricultural MPCE rises annually by 3 per cent. Among the household types, the MPCE is higher for the others, followed by self-employed in non-agriculture and self-employed in agriculture. The agricultural labour has the lowest MPCE among the economic groups. The others and the self-employed in agriculture have above-average MPCE of rural Odisha. Hence, the second period has seen a rise in income among all the household types in rural Odisha with a decline in HCR over all the groups. The growth of the farm sector in the second period has an impact on the income/expenditure increase and poverty reduction of farm and non-farm sectors.

Conclusion

The post-reform period in Odisha has been classified into two phases. The first phase (1993–1994 to 2004–2005) of the post-reform period has witnessed a negative growth for the farm sector with a slower reduction in rural poverty. Whatever small poverty reduction are there is because of the rural non-farm sector. The population mobility from the farm to non-farm sector in the first period is distress driven. The slow poverty reduction is due to the negative growth of the farm sectors, which is also seen in the reduction in the MPCE of the farm sector. The second phase (2004–2005 to 2011–2012) has witnessed a high growth of farm sector and a corresponding higher decline in poverty reduction. The reduction of poverty in the second period is among all the occupational groups but dominated by the farm sector and specifically self-employed in agriculture. The high growth of the farm sector led to a mobility of households from agricultural labour to self-employment in agriculture. The mobility of population in this period is within the farm sector. At the national level, both the periods have seen a poverty reduction among farm and non-farm sectors. While the first period of poverty decline is contributed by the growth in non-farm income, the second period of poverty reduction has been contributed by growth of the farm income for Odisha. With low levels of urbanisation and low growth in employment in non-farm sector, poverty reduction, at the state level, continues to be driven by the farm sector. At a policy level, reduction in poverty at the state level needs an active role of the state to increase productivity of the farm sector. In the present period of neoliberal policy regime, if the state wants to withdraw its support from productivity-enhancing investments, poverty might become an important problem for the state of Odisha.

Footnotes

Acknowledgements

The authors are thankful to Prof. R. Vijay, Dr. P. P. Mishra and Dr. Saswat GuhaThakurta for their valuable comments on the earlier draft of the paper, and to RSVSS of School of Economics, UOHYD for their suggestion on the paper.

Declaration of Conflicting Interests

The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.

Funding

The authors received no financial support for the research, authorship and/or publication of this article.

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