 "Lending, banks, credit, loans, cash, income, wage, earning")
The tepid rise in real rural wages could be a big indicator of the challenge for Union Finance Minister Nirmala Sitharaman to make growth broad-based.
The data sourced from the labour bureau shows that though after months of contraction real rural wage growth moved into positive territory in September 2021, the rise is so minimal that it seems like stagnation.
Real rural wages of general agriculture labourers (male) rose just 2.64 per cent in September, followed by 3.11 per cent in October, and again 2.64 per cent in November (see chart).
The fact that this moderate growth came after almost seven months of contraction, which started in December 2020 and lasted till August 2021 (except in May 2021, when wage growth turned positive), points to the fact that though economic activity might have been stabilising after the first and second pandemic waves, it is questionable whether it is benefiting all.
At the time of filing this report, the data on rural wages until November 2021 was available.
Wage growth moved into positive territory immediately after the first lockdown was lifted in June 2020 and remained so till November 2020, but then it again turned negative.
“There is a slight improvement in real rural wages from September 2021 but the bigger question is whether this is sustainable. We have seen in the past that barring minor blips here and there rural wage growth has been largely stagnant in the past five-seven years, which is one of the longest periods of time when wages in rural India have not grown,” Himanshu, associate professor at Jawaharlal Nehru University (JNU), told Business Standard.
He said such prolonged stagnation in wages also meant economic recovery was not percolating to the lowest strata of society and the worrying part was how to break the spiral.
Stagnant rural wage growth in real terms, along with continued robust demand for work under the MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) in 2021-22 despite the lifting of lockdowns and return of normal economic activity in the cities, does point towards a shaky recovery in rural areas.
Two-wheeler sales and the consumption of fast-moving consumer goods in rural India have been rather tepid in the first few quarters this financial year.
In FY22, the data sourced from the MGNREGA website shows that though less than in 2020-21, demand from households for work under the MGNREGA has been robust for the second year until December.
More than 20 million households demanded work under the scheme between April and December FY22.
Also, high prices have been eating into farmer incomes. The latest first advance estimate of national income shows that the farm sector is projected to grow at a robust 3.9 per cent in FY22, but after two years, the terms of trade in agriculture have once again gone against farming due to high inflation.
Terms of trade for agriculture broadly mean the price paid for buying inputs for raising crops against the prices received from selling them.
“Low wages in rural India mean low consumption and low demand for goods, which in turn means low production and low jobs. This vicious cycle needs to be broken,” Himanshu said.
S Mahendra Dev, director and vice-chancellor of the Indira Gandhi Institute of Development Research (IGIDR), said the slight improvement in real rural wage growth was not much when compared to the times when annual growth in wages was somewhere around 5 per cent.
“This is largely stagnant growth, more so if you consider that the slight growth has come after almost seven months of contraction. This is reflected in slow two-wheeler and FMCG sales in rural India,” Dev said.
