Rural wages take a hit on falling inflation, attraction for farm sector slips

Across India, the average wage rate in 23 agricultural and non-agricultural occupations was at Rs 266.26 for November 2014 against Rs 256.52 in the corresponding period last year, the Labour Bureau data revealed.

FP Staff January 07, 2015 19:43:51 IST
Rural wages take a hit on falling inflation, attraction for farm sector slips

The rate of growth in the rural wages has grown at a paltry 3.8 percent in November, which according to data from the Labour Bureau, is the lowest growth since July 2005 and this is seen influencing the RBI's decision to effect a cut in interest rates.

"The deceleration in rural wages — the 3.8 per cent nominal growth is lower than the annual consumer price inflation of 4.09 per cent for rural India in November — could further strengthen the case for the Reserve Bank of India (RBI) to initiate policy interest rate cuts sooner than later,"a report in The Indian Express said.

Rural wages take a hit on falling inflation attraction for farm sector slips

Farm sector no longer pays. Reuters

Across India, the average wage rate in 23 agricultural and non-agricultural occupations was at Rs 266.26 for November 2014 against Rs 256.52 in the corresponding period last year, the Labour Bureau data revealed.

The importance of the state of rural wages is important both in terms of economy and politics of the country.

The wages plays its part in the social dynamics of a rural society and it is intrinsically linked with inflation.  Although UPA's flagship programme MGNREGA helped generate employment and streamline wages to some extent in rural India, it also triggered a price rise leading to inflation.

"MGNREGA could have provided a floor to overall rural wages and pushed up costs and therefore adding to inflation but the direct impact of MGNREGA in terms of additional demand may be limited. This is because the coverage of MGNREGA so far has not been significant enough to exert major pressure from demand arising out of cash transfers. Overall at the all India level, only 24.2 per cent of the families in rural areas received MGNREGA job and even among them the average number of days of employment is only 37 during 2009-10."—a Reserve Bank of India report said.

Rural wages take a hit on falling inflation attraction for farm sector slips

Referring to chief economic adviser in the finance ministry, Arvind Subramanian's view that "monetary conditions are getting tighter", The Indian Express report noted that it is probably the right time for the central bank to cut interest rates.

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