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We study the role of inter-linkages between total factor productivity (TFP) in agriculture and nonfarm employment for rural development in India. Recent studies have shown that rural nonfarm employment together with public investment in physical and social infrastructure help to alleviate poverty in the rural areas. We show that those states of India that have managed to exploit the inter-linkages between agriculture and nonfarm sector, have attained higher levels of rural development. We use a dataset comprised of 14 states of India from 1973 to 1993 for our analysis. In Chapter 2, we analyze the issue of convergence in agricultural TFP among the Indian states. Employing recent panel convergence tests, our analysis indicates that conditional convergence holds true for Indian agriculture. After controlling for fixed factors, we find evidence that the late starters (eastern, central and southern states) have caught up with the leaders (northern states) in terms of their TFP growth rates. This indicates that, contrary to earlier studies that reported divergence in agricultural growth among Indian states, productivity growth in Indian agriculture in the post-Green Revolution period has shown signs of convergence in the long run. Extending the previous analysis, in Chapter 3, we find that the rural development gap among states in India has decreased substantially, through growth in farm productivity and nonfarm employment. Balanced development of the farm and nonfarm sectors have helped states to catch up with Kerala, which was the leading state in India in terms of rural development at the beginning of the period. We construct an indicator of rural development defined as the ratio of TFP growth in agriculture and rural farm-nonfarm employment ratio. Controlling for state-specific fixed factors and idiosyncratic yearly shocks, we provide evidence of convergence in rural development across India in the long run. In Chapter 4, we find that inter-state differences in agricultural TFP and rural development can be explained by differences in nonfarm employment and infrastructure among Indian states. Tests of causality indicate that there is a symbiotic relationship between farm and nonfarm sectors in rural India. Therefore, states that have a growing nonfarm sector, together with higher levels of physical and social infrastructure, have attained higher levels of agricultural and rural development. This thesis supports the need for policies designed to increase nonfarmemployment in the rural areas as described in Chapter 5. Exploiting positive linkages between improved public infrastructure, greater rural nonfarm employment and higher productivity growth in agriculture will create the conditions for spatially balanced rural development across states in India., 2002, Includes bibliographical references

Includes bibliographical references

Impact of Rural Small and Medium Enterprises on Agriculture:A Sectoral Approach, Includes bibliographical references (p. 19-20)