Agricultural Diversification and its Impact on Farm Income: Evidence from Himachal Pradesh

This paper analyses agricultural diversification and its relationship with farm-income outcomes in Himachal Pradesh using a holistic farm-enterprise framework adapted from the Bihar case study of Sen et al. (2017). The study combines primary evidence from 386 horticulturists across four agro-climatic zones with secondary indicators on infrastructure and horticultural growth. Diversification is measured through Simpson and Herfindahl indices and is interpreted as a structural movement from cereal-dominated farming toward fruits, vegetables, floriculture and other high-value activities. Survey-based SID values range from 0.58 in the Cold Dry Zone to 0.74 in the Mid Hill Zone. A separate secondary-data diversification series, constructed for infrastructure comparison, ranges from 0.55 to 0.81 and shows a strong positive relationship with composite infrastructure. Recalculation from the four displayed zonal values gives r≈0.97 between the secondary diversification and infrastructure indices, indicating that stronger infrastructure is closely associated with a broader commercial horticultural portfolio. From 2015-16 to 2023-24, the thesis series records an increase in the composite infrastructure index from 0.52 to 0.75, horticultural area from 233 to 270 thousand ha and production from 1.85 to 2.32 million MT. Beneficiary farmers report higher horticultural income (₹4.85 lakh versus ₹3.10 lakh) and stronger technology access than non-beneficiaries. Because diversification and income can be jointly determined, the paper specifies a two-stage least-squares model for final estimation from the respondent-level dataset. The results indicate that income-enhancing diversification in mountain agriculture depends on the quality of the enterprise mix and complementary investment in irrigation, markets, storage, technology and institutions.