Rural wages rising with declining growth pace: Nomura

Wages of rural labour in India are rising but the pace of growth has slowed down significantly in the last few years, Japanese brokerage firm Nomura said today.
"Growth in the average daily wage rate for rural labourers moderated to below 10 per cent year-on-year in June, significantly slower than 16.3 per cent in 2013, 17.6 per cent in 2012 and 20.9 per cent in 2011," Nomura said in a report.
Rural wages under the National Rural Employment Guarantee Scheme are indexed to Consumer Price Index based inflation.
The report said the nominal wage growth has tempered due to moderation in real rural wages, reflecting the slowdown in demand for rural workers and on account of lower food price inflation, mainly in cereals, reflecting the slower pace of rise in minimum support prices.

Reserve Bank Governor Raghuram Rajan had recently said the slower growth in wages in rural areas is one of the positive factors for inflation.
The correlation between nominal rural wages and CPI inflation was 0.9 during 2001-14.

"Such high correlation is because rural wages form a substantial portion of the total input cost for the non- tradable (food and services) CPI basket," the report said.
Nomura further said that moderating cost of production (wages) is one of the key reasons why it expects the underlying trend in CPI inflation to ease.
CPI has shown signs of declining trends in the past few months as inflation eased to 7.8 per cent in August from 8.59 per cent at the start of the fiscal.