Shrinking Real Wages Show Rural India in Massive Distress: Data

By The Wire Staff

February saw a big contraction, of 3.1% in rural wages. Inflation that rural labourers have had to deal with, ranged between 7.1 and 7.5% between November 2023 and February, 2024 has further added to financial distress

New Delhi: Data from the Centre for Monitoring Indian Economy (CMIE) points to a combination of rural wage contractions with high rural inflation, with the trend of already slow and sluggish consumption continuing, displayed sharp rural distress. Reports cite the high demand for work under the rural employment programme—MGNREGA— also as an important indicator reinforcing this conclusion.

Real rural wages contracted in as many as 25 of the 27 months up to February 2024.

February saw a big contraction, of 3.1%. The highest contraction recorded before this was 2.9% in September 2022.

The drop has been sharp in the four months to February, compounding life in rural India, with rural inflation going up.

Inflation that rural labourers had to deal with, ranged between 7.1 and 7.5% between November 2023 and February 2024.

The Financial Express reports that the distressing rural consumption story has been in the making for some time. “Wholesale dispatches of tractors, for instance, were virtually flat in 2023 compared with 2022. The trend has worsened in recent months; in the January- March quarter, they fell by about 23% over the corresponding quarter in 2023.”

The newspaper also notes that sales of two-wheelers , especially those of low-end models, have been down for some time. It cites “HeroMotocorp, which sells big numbers in the rural market, the four-year CAGR or compounded annual growth rate in wholesale volumes, was negative in every month in the year to February, 2024.”

“Rural consumption went up by just 0.5% y-o-y in the second quarter of FY24, the slowest pace recorded in eight quarters, an analysis by Motilal Oswal showed,” says Financial Express.

Businessline reports citing MoSPI data, that rural inflation has stayed higher than urban figures for most months between March, 2019 and March, 2024. “The recent numbers too, show that since July, 2023, rural inflation always stayed higher. Data shows this was mostly owing to food prices and the pandemic.” It writes that MoSPI data also shows that the Consumer Price Index “of most essentials has risen quite a bit between 2019 and 2024. A few commodities that saw higher inflation include tur dal, onion, groundnut oil, moong dal and potato.”

Development economist Venkatesh Athreya told BusinessLine, that “indirect taxes also play a role in rising inflation and that this affects the rural population more.”

A recent survey by Lokniti-CSDS asked the electorate a question on price rise. Has it increased or decreased in the last five years? 71% of those surveyed said prices had shot up. Along with unemployment, it was inflation that was the topmost issue bothering voters surveyed. Across geographies, the surveyors found that villages were more affected and the percentage of those saying price rises were a particular pain point, were 72%, higher than the overall figures. More than two-thirds of the poor (76%) said price rise was a big issue.

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