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Chapter 6 Creating opportunities in the rural non-farm economy 189
population densities and surplus labour availability. The relationship between
agriculture and other sectors evolves through different levels of development: at low
levels of development it encourages growth elsewhere in the economy; as countries
grow, there is a more mutually beneficial relationship; and eventually, agriculture is
of little importance as a motor of economic growth. 301 Conversely, slow income
growth in agriculture leads to weak consumer demand, limited agricultural input
requirements, little growth in agro-processing and stagnant wages. Under these
circumstances, little dynamism can be expected in the non-farm economy, and
poor rural households will be pushed towards survival strategies that will include
low-return, non-farm activities and migration. All this suggests that, particularly in
agriculture-based countries, where there is growth in the agricultural sector there are
likely to be opportunities to catalyse the growth of the non-farm economy and create
a virtuous cycle of rural growth and employment generation.
In addition to agriculture, however, there are today a number of other factors at
national and global levels that may influence the shape and development of the
rural non-farm economy. 302 The first is the process of urbanization, which can be
an important part of a pattern in development for reducing rural poverty. Proximity
to urban areas is positive for the non-farm economy: Indian villages close to towns
and cities have a better record of reducing poverty than others, 303 and this is
common in other countries too. Dispersed patterns of urbanization appear to be a
particularly important force for the growth of the rural non-farm economy.
Dynamic regional towns and small cities can provide widespread market
opportunities – many of them agriculture-related – for products, services and
labour, which can be accessed by rural households living within their orbit. Figure
13 looks at the relationship between dispersed urbanization – defined as the
population living in urban centres of less than 500,000 as a proportion of the total
population (excluding those living in cities larger than 500,000 people). The figure
shows that the higher the proportion of the population living in dispersed urban
centres, the lower the rate of rural poverty. This finding is consistent with other
recent work that finds that migration out of agriculture into the rural non-farm
economy and secondary towns is strongly associated with poverty reduction, while
expansion of mega-cities is not. 304
Improved transport and communication linkages between the rural and urban
areas offer new opportunities for rural households, particularly in transforming and
urbanizing economies. In India, for example, rapid rural non-farm growth is
occurring along transport corridors linked to major urban centres, largely
independent of their agricultural base. In South East Asia and China, high population
densities and low transport costs have led to labour-intensive manufacturing for
export markets being subcontracted to rural industries. 305 In Mexico, urban centres
create manufacturing and service employment opportunities within a radius of