RBI paper points to sharp fall in rural wages since 2014

G Naga Sridhar Hyderabad | Updated on May 01, 2018 Published on May 01, 2018


Global slowdown, commodity crash, contraction in food prices, MGNREGS decline cited

The rural economy appears to be under stress, going by the trends in rural wages, especially those of agricultural labourers. According to a Reserve Bank of India (RBI) study, there has been a “significant deceleration” in rural wages since 2014.

Rural wage dynamics have an impact on inflation and overall economic growth. The RBI working paper, titled ‘Rural Wage Dynamics in India: What Role does Inflation Play?’, by Sujata Kundu, says rural wages saw high growth from FY08 to FY13, followed by significant deceleration. From a peak of 38 per cent growth in 2014, wages of agricultural labourers slowed to almost zero. The same was the case with wages for masons.

“Because of a spell of high inflation, growth in real wages even slipped into negative territory,’’ the paper said.

The study used monthly wage data for both agricultural and non-agricultural labourers from Wage Rates in Rural India (WRRI), published by the Labour Bureau, Shimla. WRRI is the newest series of rural wage data, available from 1998.

Real wage growth in the last four years has turned negative, particularly for agricultural labourers, following an uptick in inflation. “One could identify a mix of events happening during this phase not only on the domestic front but also globally, most of which began around 2013-14: the global slowdown in growth; collapse of international primary commodity prices; and major contraction in food prices.’’ the study said.

The Mahatma Gandhi National Rural Employment Generation Scheme, which was a driving factor for rural wages from 2008-09 to 2011-12, also seems to have lost momentum in recent years. The average number of employment days per household has ranged between 40 and 50, though the promise is for 100 days in a year. The average person-days per household stood at 45.9 in 2013 and 37.7 in 2014. But in 2016, they dropped to 15.3.

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Published on May 01, 2018
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