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LATEST NEWS UPDATES | India bearing the cost of ignoring rural distress -Himanshu

India bearing the cost of ignoring rural distress -Himanshu

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published Published on May 23, 2018   modified Modified on May 23, 2018
-Livemint.com

In the last three years, wages of agricultural labourers have increased only by 0.5% per year while those of non-agricultural workers have declined by 0.25% per year, the worst so far in 30 years

The agrarian economy continues to be plagued by falling output prices, declining incomes and increased variation in agricultural production pointing to a situation of uncertainty and vulnerability among most rural residents. This has created an unprecedented demand deflation in rural areas with a decline in prices for most of food items, including the ones that have seen stagnant production or decline in production. The demand deflation is primarily a result of slow growth or stagnation in farmer’s incomes but is also a result of decline in the incomes of wage workers who are net consumers of food. Together, these two groups account for two-third of all rural households.

The data on rural wages is now available up to January 2018 and these suggest a decline in real terms for both agricultural as well as non-agricultural labourers. Following the back-to-back droughts of 2014 and 2015 when real wages of casual workers declined sharply, wages rate growth had recovered after July 2016 with normal monsoon in 2016. However, this was short-lived and the twin impacts of demonetization and the goods and services tax (GST) contributed to a worsening of the rural economy leading to a return of the trend of deceleration in wage rates since April 2017.

Real wages of agricultural workers on a year-on-year (y-o-y) basis have declined since December 2017; for non-agricultural workers they have been declining since November 2017. So is the case of construction workers, another representative category of rural workers, where wages have been declining in real terms since November 2017.

In the last three years, wages of agricultural labourers have increased only by 0.5% per year while those of non-agricultural workers have declined by 0.25% per year, the worst so far in 30 years.

However, trends in tractor sales and fast moving consumer goods in recent months suggest an upward movement and this has been interpreted as revival of demand in the rural economy.

The increase in tractor sales may have been a result of large-scale loan waivers which benefited the rural rich and those with access to institutional credit but it is difficult to conclude that it suggests a sign of an overall revival in the rural economy.

The reality appears to be more complex than these numbers suggest. The decline in agricultural as well as non-agricultural wages is a sure sign of continued distress in the rural economy, notwithstanding the signs of “green shoots” reported by the high frequency sales data.

However, these two contradictory trends also suggest worsening inequality in rural areas and increasing vulnerability of most rural poor.

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Livemint.com, 21 May, 2018, https://www.livemint.com/Opinion/FQuUpJD0sohExkXxZBt2EP/India-bearing-the-cost-of-ignoring-rural-distress.html


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