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LATEST NEWS UPDATES | Is the worst over for rural economy? -Mayank Mishra

Is the worst over for rural economy? -Mayank Mishra

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published Published on Jan 28, 2016   modified Modified on Jan 28, 2016
-Business Standard

Four of the 6 large states have seen uptick in rural wages, following equally sharp increase in coverage of the rural employment guarantee scheme

After months of stagnation, rural wages have started inching up, albeit marginally. Coinciding with a renewed push to the rural employment guarantee scheme in the second half of 2015, rural wages have shown a marginal uptick since August. It remained nearly flat from December 2014 to July 2015.

It was in August last year that the jobs provided under the Mahatma Gandhi National Rural Employment Guarantee Scheme (NREGS) rose 35 per cent over a year earlier.

Business Standard analysed rural wages and NREGS data for six large states for the months of September, October and November to see whether there was any correlation between the two. These three months were chosen because of the availability of data. There are no data available for rural wages for the month of December.

Four of the six large states have seen an uptick in rural wages, in some cases quite sharp, following an equally sharp increase in coverage of the rural employment guarantee scheme. Tamil Nadu exhibited a negative correlation, probably because of recent incidents of flood in the state.

In Bihar, on the other hand, rural wages grew nearly 10 per cent in these months over the same period a year earlier. NREGS data for these three months show a sharp rise — of more than 100 per cent — in the number of households provided jobs under the scheme.

Madhya Pradesh saw a rise of more than 10 per cent in rural wages in September and October and a modest one in November, according to Labour Bureau data. The number of households covered under NREGS has been consistently going up in the state since September.

In the case of Rajasthan, there was sharp growth of eight per cent in rural wages in September, and modest ones in October and November, despite substantially more jobs provided under NREGS in all three months over the same period last year.

In Maharashtra, on the other hand, rural wages remained flat and so did the number of households provided jobs under the scheme.

Uttar Pradesh and Tamil Nadu bucked this trend. In the most populous state of Uttar Pradesh, rural wages grew at a rate in excess of 10 per cent, despite a fall in the number of NREGS jobs in October and November. The state, however, saw substantially more households covered under the scheme in the preceding months of May, June, July, August and September. An uptick in rural wages could be a result of that.

The case of Tamil Nadu is different from other states in the sense that rural wages there have fallen despite a substantial increase in coverage of NREGS in all months since August 2015.

A positive correlation in recent months between rural wages and the coverage of NREGS suggests that at least a section of the rural population might get partial relief from acute rural distress. Business Standard had reported a few days ago that the rural job scheme was likely to see a record allocation in the forthcoming Union Budget, to boost rural consumption. In case that happens, and if the present trend continues, there might be further recovery in rural wage growth.

Does it mean the worst is over for rural economy? Experts are not so optimistic yet. ICRA Senior Economist Aditi Nayar says “Rural wage growth has trailed rural CPI inflation in several months of 2015, squeezing demand of households that derive a dominant share of their income through wages. The unfavourable trends in rabi sowing suggest that demand from farm households dependent on crop cultivation might remain slack in the immediate term.”

CARE ratings Chief Economist Madan Sabnavis is of the view that an increasing allocation for the rural job scheme alone will not solve the problem, unless “wages given are properly indexed to retail inflation for rural areas”.

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Business Standard, 26 January, 2016, http://www.business-standard.com/article/economy-policy/is-the-worst-over-for-rural-economy-116012600282_1.html


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