Rural transformation is defined “as a process of comprehensive societal change whereby rural societies diversify their economies and reduce their reliance on agriculture; become dependent on distant places to trade and to acquire goods, services, and ideas; move from dispersed villages to towns and small and medium cities; and become culturally more similar to large urban agglomerations” (Berdegué et al. 2014). Rural transformation involves reorganization of a society in a given space, rather than emptying of space and the moving away of people and economic activities (Timmer and Akkus 2008). It is also believed that the transformation process is imbued within the larger changes in economic structure in a country that is recording a decline in the relative importance of agriculture in the overall economy, migration towards urban areas, and is accompanied with a transitory phase of demographic growth. Furthermore, rural transformation incorporates a slow blurring of the sharp economic, social, and cultural differences between rural and urban areas and their merger along a continuous continuum or gradient. Timmer and Akkus (2008) also underscore that despite the presence of such common elements across nations, rural transformation results in varying levels of economic growth, of social inclusion and environmental sustainability.

Up to the 1970s decade, rural transformation was co-terminus with the structural changes as countries shifting from agriculture towards greater reliance on industry and services. In the initial phase, agricultural sector is considered a provider of labour, wage goods/food grains and raw materials for the expanding industrial and tertiary sectors. An economy facing structural transformation it is contended, experiences a reduction in the income and subsequently employment share of primary sector and expansion of the share of secondary and tertiary sectors (Johnston and Mellor 1961). Urbanization resulted as people moved from rural areas to places where industry and services were located. During this stage, rural development initiatives were aimed at attaining modernization in agriculture, whose growth would drive the well-being of rural populations. Green Revolution can be seen as one such transformative policy innovation (Lipton 1968; Schultz 1968; Hayami and Ruttan 1971). Since the 1970s the concept of “rural” lost its strict identification with agriculture, and was increasingly associated with diversified economies, inter-sectoral linkages, and rural–urban linkages, and the unit of analysis was no longer the farm sector alone, but encompassed broader, interacting systems (Berdegué et al. 2014). Today rural transformation and rural development are no longer synonymous with agriculture, agricultural modernization or agricultural development. In fact, the 2008 World Development Report (Agriculture for Development), classified developing countries as “agriculture-based,” “transforming,” and “urbanized.” According to this classification, only 14 percent of the world’s rural population lived in agriculture-based countries, 77 percent are in transforming countries such as India, and nine per cent are in urbanized developing countries such as Brazil (World Bank 2007).

As per the International Fund for Agricultural Development (IFAD 2016), rural transformation is a sub set of the larger trend of structural transformation contoured by the inter-linkages between agriculture, the rural non-farm economic sector including both manufacturing and service activities. It also believes that rural transformation is an essential component, as is accompanied by increasing agricultural productivity, commercialization and diversification of production and livelihood opportunities within primary sector and the rural non-farm sector. Rising output in agriculture and the rural non-farm economy provide the surplus food to meet the demands of urban growth (Ibid.). Haggblade et al. (2007) note that the rising labour productivity in agricultural sector releases workers to undertake non-farm activities such as manufacturing and services. Simultaneously, increasing farm incomes are invested outside agriculture, and also raise demand stimulating diversification of economic activities. The enhanced share of people involved in non-farm sector supports the growth of towns and cities. Furthermore, the authors opine that responding to the growing demand for labor in the towns and cities, agricultural workers shift location thereby linking towns with their hinterlands, often encouraging daily or seasonal commuting. Such a process is often termed ‘a virtuous cycle’ of growth. Amongst the drivers of rural transformation of utmost the importance reportedly are employment diversification, changes in the rural economic base, adoption of multiple livelihood strategies along with their enabling conditions and finally, urbanization of rural regions that reduces the relative isolation of rural areas and people. In the case of stagnant rural regions, conditions are far less positive, as there is outmigration of poor rural people who are forced out of the subsistence agriculture (Ibid.).

Rural non-farm activities are highly diverse and variegated, depending on whether they are distress induced or are an outcome of a vibrant primary sector (Basu and Kashyap 1999; Kashyap and Mehta 2007). Non-farm sector spans allied activities such as forestry, natural resource extraction, food processing, non-food manufacturing and also tertiary activities, including retail trade, transport, tourism and business, personal and community services. These activities involve tradable or non-tradable non-farm goods and services. Except for capital-intensive activities, such as processing of agricultural commodities, the non-farm goods and services produced are usually labour intensive and their production takes place in micro/small enterprises, often involving only a single own-account worker (IFAD 2016). Hence the size of rural non-farm sector ranges from household based and village primary production of low-quality products that use local raw materials (e.g. rice milling and handloom weaving) to small factories that use mechanical power and technology, and units involved in production of higher-quality products (such as metalworking, machinery and farm equipment repair shops) (Ranis and Stewart 1999). In terms of organisation, activities in the rural non-farm sector may include sub-contracting work to farm families by urban based firms (embroidery, garment stitching and other artisanal work done by women), non-farm activity in village and rural town enterprises (diamond polishing, factory workers), and activities that require commuting between rural residences and urban jobs (Lanjouw and Lanjouw 2001; Chandrasekhar and Sharma 2014). The characteristics of agriculture and the rural non-farm sector play decisive roles in the pace and quality (mainly, inclusiveness) of rural transformation, as does the capacity of manufacturing to productively and quickly absorb the labour released by agriculture (IFAD 2016).

However, for an inclusive rural transformation process it is imperative that there is adoption of distinct agricultural policies and modernizing approaches. These should be designed to facilitate the transition to greater specialization and diversification in production and trade for increasing numbers of smallholder farmers and small rural enterprises (Ibid.). It has been noted that India is experiencing the type of rural transformation where the movement of labour between agriculture and the rural non-farm sector is associated with higher labour productivity and wages thereby favouring poverty reduction (Binswanger-Mkhize 2013).

The rural transformative forces often create conditions for favourable social impacts—betterment of health, nutrition and life expectancy, improvements in education, and empowerment of women. Additional aspects are increased access to public services and development of roads and telecommunications services. Since structural transformation is the cause and effect of economic growth, it may lead to profound economic, cultural, social and environmental imbalances and inequities as well, that present major challenges in addition to offering opportunities for investments to promote growth and sustainable development (IFAD 2016).

Urbanisation is intrinsically linked to the economic growth and development process as postulated by von Thünen (1826) and Christaller (1966). The developing regions of Asia, Africa, and Latin America are experiencing a decline in the rural population, with the emergence of numerous small and medium urban centres that are growing faster than the rate of population growth of large urban agglomerations and mega-cities (Currie-Alder et al. 2014). The emergence of these provincial small and medium urban centers, and their linkages with ‘deep’ rural areas, is a critical feature of the rural transformation process (Tacoli 2006). These towns and their rural hinterlands are functionally related in a rural-urban continuum in terms of products, labour, markets and services. Rural workers commute to work or study in the urban center, shop in it and urban merchants rely on th...