Exploring the Stagnation of Rural Wages Amidst India’s Economic Growth

Context:

Despite India’s impressive economic growth in recent years, rural wages have remained stagnant, particularly in real terms. This situation calls for a deeper examination of the dichotomy between macroeconomic expansion and the subdued increase in rural incomes.

Relevance:

GS III: Indian Economy

Dimensions of the Article:

1. Rural Wages Versus Economic Growth in India
2. Factors Contributing to the Lagging Rural Wages:
3. Steps the Central Government Undertakes to Fight Low Wages in Villages
4. Conclusion on Rural Wages vs. Economic Growth in India

Rural Wages Versus Economic Growth in India

Overview of Economic Progress:

• India’s GDP has shown an average growth rate of 4.6% from 2019-20 to 2023-24, with a notable increase to 7.8% during the last three fiscal years.
• Agricultural Sector Performance: This sector recorded growth rates of 4.2% and 3.6% respectively over the same periods, indicating consistent economic expansion within agriculture.

Trends in Rural Wages:

• Wage Data Collection: The Labour Bureau monitors daily wage rates for 25 agricultural and non-agricultural occupations, utilizing data from 600 villages across 20 states.
• Wage Growth Dynamics: Although nominal rural wage growth averaged 5.2% annually from 2019 to 2024, real wage growth, when adjusted for inflation, experienced a slight decline of -0.4%.
• Current Fiscal Year Trends: Despite robust GDP growth rates, the current year continues to show minimal real wage growth in rural areas, suggesting a significant disparity between general economic growth and actual improvements in rural wage conditions.

Disconnect Between GDP and Wage Growth:

• This gap underscores potential issues in wealth distribution and the effectiveness of economic growth in enhancing the standard of living for rural workers. The data points to a need for more targeted policies to ensure that economic gains translate more directly into wage improvements for rural populations.

Factors Contributing to the Lagging Rural Wages:

Increasing female labour force participation (LFPR):

• The female LFPR has risen substantially, from 24.5% in 2018-19 to 41.7% in 2023-24. The rural female LFPR is now at 47.6%. Economic Survey 2023-24 reports that programmes like Ujjwala, Har Ghar Jal, and Swachh Bharat have freed time for rural women, which made them enter the workforce.
• Increased participation of labor force, especially rural women in the labor force increases the labor force size with an imbalance supply-demand.

Shift in demand for labor:

• All the increased female entry in the labor force are not being channeled to capital-intensive industrial employment that would pay well
• Capital-intensity type of growth was India’s focus in building the industry, which led towards less employment, therefore wages remained under pressure in rural areas.
• Labor in agriculture, whose level of productive effectiveness per worker is already very low, only increases the decline of wages.

Steps the Central Government Undertakes to Fight Low Wages in Villages

Transfer Income schemes

• State specific: Multiple state governments of the nation have brought direct income transfer schemes especially on woman, approximately Rs 2 lakh crore each year.
• Transfer effects: Transfers, such as those for women under Maharashtra’s Ladki Bahin Yojana, are very high support, topping up very meager earnings and serving to cushion in bad times.

Centre sector schemes:

Income transfer schemes from Centre, including

• Rs 6,000 per year supporting farmer households (PM-KISAN) and
• free grain supporting all poor households during pandemics (PM Garib Kalyan Anna Yojana [PMGKAY])

Also act as an important support for poverty and low rural incomes.

Conclusion on Rural Wages vs. Economic Growth in India

• Subdued Wage Growth: Despite India’s substantial economic growth, real wage growth in rural areas remains sluggish, with minimal improvements over the years.
• Economic Disparities: The persistent issue of subdued wage growth highlights significant economic disparities, where GDP increases have not proportionally benefited rural workers.
• Need for Targeted Policies: To bridge the gap between economic growth and wage improvement, it is crucial to address fundamental issues such as the limited demand for labor in higher-wage sectors and the surplus of labor in rural areas.
• Path to Inclusive Growth: Government interventions have offered some relief, but comprehensive strategies targeting the root causes of wage stagnation are essential. Enhancing labor market dynamics and creating opportunities in higher-paying industries are vital steps toward achieving inclusive economic prosperity in India.

-Source: The Hindu