The present paper adopts a diagnostic approach; problems of non-farm employment in
rural sector are identified by studying pattern and process of rural employment using data
from the NSS quinquennial survey results on employment, unorganized manufacturing and
also the CSO Economic Census results. Preliminary analysis shows that the share of non-
farm sector in the rural workforce has increased significantly in the recent period. Productive
employment in the rural sector however remains important. The share of women in the
rural workforce has increased significantly, but one-third of rural female workers employed
on the basis of usual status are actually unemployed on the basis of current daily status of
employment. The study further investigates pattern of rural diversification using a mix of
data for aggregate and disaggregate levels. The findings suggest an increased importance of
distress-related factors in rural diversification. In the development-induced rural
diversification though agriculture is important; analysis of different sets of data suggests that
the role of agriculture in rural diversification is decreasing over the years. Alternate drivers
of rural diversification have significant implications for employment, poverty and inequity
of the region. The study finds that agriculture, manufacturing and tourism are the engines of
rural growth; and development-induced rural diversification in a region warrants growth in
one of the above engines. The growth of manufacturing in particular is important. In spite
of numerous public institutions to encourage manufacturing and business in rural sector;
productivity of rural manufacturing remains low, flight of primary-resource based
manufacturing to urban sector continues. The paper therefore argues for different kind of
incentives to encourage manufacturing in rural vicinity. A single window integrated service
centre to promote rural non farm sector is also important; in this regard rural non-farm
development agency (RUDA) of Rajasthan provides an example.