This must be without precedent — a premier policy document not expressing concern over a deceleration in rural wages in a still-poor country like ours. To quote the Economic Survey 2014-15: “Factors like high rural wages, higher level of MSP, and rise in input cost have been instrumental for elevated inflation in the last few years. At present, growth of all these drivers have been slowed down considerably.”

What’s worse, the rate of growth of rural wages has fallen from over 20 per cent in November 2011 to less than 5 per cent three years later, whereas the drop in inflation levels has at best occurred over the last year. The cut in MGNREGA spending in UPA II is perhaps showing here. The Budget speech makes a mention of raising rural wages, but the government’s view becomes clear from another passage in the Survey: “High growth rates in rural income/wages triggered by substantial increases in minimum support prices (MSP) and the launch of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGA) created demand pressures…”

By isolating the MGNREGA as a cause for inflation, the government has opted for a fringe view, downplaying the role of other factors. There is also a fundamental question that remains unanswered. What level of inflation is desirable for encouraging production? The Sukhamoy Chakroborty committee report of the mid-80s regarded 5 per cent as just right, but that is presumably for the economy as a whole. The food sector deserves a higher mark-up, because food is the most important thing that anyone can produce. Therefore, a deceleration in MSP and wage growth is distressing.

Let’s stop grudging the ₹1 lakh crore food subsidy for shoring up farmers and wage workers, and subsidising consumers. We must do all that it takes to keep farm incomes growing at a higher rate than the rest of the economy.

A Srinivas, Deputy Editor

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