Rural Wages over the Past Five Years

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March 12, 2019
12 months

Why in news?

A study on rural wages over the past 5 years was recently published based on the Labour Bureau data on wages.

What are the highlights?

  • 2018 - Rural wages have grown 3.8% year-on-year in December, 2018.
  • Given the annual rural consumer price index (CPI) inflation of 1.5%, it means wages rose just over 2.3% in “real” terms (wages adjusted for inflation).
  • Last 5 years - The average year-on-year wage growth for December during 2014 to 2018 (NDA government) stands at 4.7% in nominal terms and a mere 0.5% in real terms.
  • In comparison, for the same month of the preceding 5 years (2009 to 2013), nominal rural wages grew by an annual average of about 17.8%.
  • With average CPI inflation for agricultural workers at 11.1% over the same period, the real growth in wages was still higher at 6.7% a year.

What is the new trend?

  • The lower wage growth in the last 5 years has not been confined to agriculture-related work alone.
  • The average growth in December for eight main agricultural occupations was higher (5.14%) than for general wages (4.68%)
  • On the other hand, the December year-on-year wage growth for skilled workers has lagged behind overall rural wage growth in 3 out of the last 5 years.
  • The average growth in wages for construction and general non-agricultural labour has been even lower.
  • In other words, the crisis in rural India now is not just about farm incomes, as it is equally 'off-farm' as 'on-farm'.
  • Agricultural productivity with favourable rainfall conditions and remunerative farm prices, and non-farm employment at better wages are the main sources of poverty reduction in rural areas.
  • But notably, both of these crucial elements for poverty reduction have been absent in the past five years.


What does this call for?

  • The wage trend coincides with increasing divergence in wholesale inflation in food and non-food items in recent times.
  • E.g. In December 2018, wholesale inflation for food items was -0.07% but it was 4.45% for non-food items.
  • This is a sign that the terms of trade have turned decisively against agriculture.
  • The government will thus have to examine how this state of affairs can be remedied.
  • Non-farm employment in rural areas clearly needs a boost.
  • Historically wages for non-farm employment have been boosted by spending on health and education.
  • The focus now needs to be on quality assurance in these sectors, particularly when it comes to public provision of these services.
  • Besides, the question of agricultural prices and terms of trade also needs to be considered, with a pro-farmer trade policy.
  • As, the world price of commodities has a significant impact on terms of trade for Indian farmers.
  • Farmers need to be allowed to take full advantage of increases in world prices.
  • Properly working commodity markets that are globally integrated and allow for various forms of insurance and safeguards must be a priority.


Source: Indian Express, Business Standard

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