This paper examines the effect commercialization (sale ratio, market transaction, co-operative sale), and diversification (crop, animal husbandry, and non-farm diversification) may have on farmers’ income. In investigating so, this paper takes into account the structural factors which could also affect farmers' income. The results show that increasing diversification (crop and non-farm diversification), and increasing commercialization in terms of ratio of crop sold, number of transactions that farmers undertake in crop and animal husbandry markets, and selling of crops to mandis, co-operative and government agency, could improve farmers' income. These findings substantiates the policy suggestions made by Dalwai Committee Report 2018 with regard to commercialization and diversification as important policy instruments for raising of farmers' income.