Agricultural diversification in India is steadily accelerating towards high value crops and livestock activities to augment farm income. Some of the factors that influence the nature and pace of agricultural diversification from staple food to high value crops are technological change in crop production, improved rural infrastructure and diversification in food demand. The nature of agricultural diversification differs across regions due to wide heterogeneity in agro-climatic and socio-economic conditions. Generally, the pattern of agricultural diversification shows a shift from crop production to livestock production during the 1980s to 1990s. The livestock sub-sector across different regions has grown as a result of the mounting demand for livestock products, namely, milk, meat, eggs, etc. Diversification in favour of horticulture and livestock commodities is more pronounced in rainfed areas. The focus of this paper relates to diversification of food production and consumption in both rural and urban areas of India. With rising incomes, the patterns of diet normally change from a basic cereal-based diet to non-cereal items. Several recent studies have found evidence of this in India. Analyses of expenditure patterns of Indian households in urban and rural areas based on National Sample Survey data provide evidence that the income elasticity of demand for cereals is very low or zero for the population as whole, even though households at low income levels may still have a positive income elasticity of demand for cereals (Kumar, 2000). A varied diet is likely to include protein, fats and other non-cereal items such as fruits and vegetables.