Rural employment transformation and livelihood diversification in Northeast India

Rural labour markets in Northeast India have undergone substantial restructuring over recent decades, yet the region’s distinctive structural, geographic, and socio-economic characteristics have received limited scholarly attention. This study examines the transformation of rural livelihoods in Northeast India by analysing the growth, composition, welfare implications, and determinants of rural nonfarm employment (RNFE) between 1993–94 and 2021–22. Drawing on unit-level data from four quinquennial NSS Employment–Unemployment Survey rounds (1993–94, 1999–00, 2004–05 and 2011–12) and the 2021–22 Periodic Labour Force Survey, covering 152,653 observations across eight Northeast states, the study employs a multi-method analytical framework. Descriptive trend analysis and wage comparisons document sectoral shifts; Lorenz curves and Gini coefficients assess within-category income inequality; a multinomial logit model identifies socio-economic determinants of occupational choice; and a two-stage least squares instrumental variable approach establishes the causal effect of RNFE participation on household welfare. The findings reveal that agriculture’s share in rural employment declined sharply from 76.6% in 1993–94 to 46.5% in 2021–22, driven primarily by service-sector expansion rather than the low-productivity casual construction dominance observed elsewhere in India. Nonfarm regular and self-employment are associated with significantly higher wages and consumption levels, and instrumental variable estimates confirm a positive causal impact on household welfare. However, access to higher-return nonfarm jobs is unequally distributed, favouring educated, upper-caste, and economically better-off households, producing rising within-sector inequality. These findings underscore the need for region-specific policies targeting skill formation, inclusive enterprise promotion, and gender equity to ensure that Northeast India’s nonfarm transition yields equitable and sustainable development outcomes.