Wage Growth As Critical As Farm Incomes To Ease Rural Distress: India Ratings

Doubling farmer incomes is inadequate to address rural distress, says India Ratings 

A farmer works in a millet field on the outskirts of Bengaluru, India, on Friday, June 9, 2017.
A farmer works in a millet field on the outskirts of Bengaluru, India, on Friday, June 9, 2017.

The government has set an aim to double farm incomes by 2022. Recently, it offered higher minimum support prices as one step towards that goal.

But pushing farm incomes alone may not be enough, said India Ratings and Research in a report on Thursday. Increasing rural wages and pushing up wage growth, which has stagnated, is equally critical, India Ratings said.

Daily wage workers constitute a larger chunk of the rural population than farmers. Also a substantial percentage of small and marginal farmers work as daily wage workers too. As per a recent survey by NABARD, only 23 percent of rural income comes from farming. Over 43 percent of average rural income comes from cultivation of crops and rearing of animals.

This implies that wage growth is as important, if not more important, than pure agricultural income. Wage growth, however, has been sluggish for three years now.

In nominal terms, average wage growth fell to 5.2 percent over the last three years, after growing at 20.9 percent in the three years prior, showed data put out by India Ratings.

In real terms, rural wage growth, including agricultural wage growth, fell to 0.45 percent between fiscal years 2016 and 2018 on average, from 11.2 percent between 2013 and 2015. In fact, real wage growth turned negative in the fiscal year ended 2016 and grew in single during the following fiscal years, the report showed.

At a disaggregated level, real wages for sowing rose by an average of 10.1 percent between 2013 and 2015, before falling to under 1 percent.

Real wage growth in the ploughing, tilling and harvesting segments has been nearly flat if you take the average of the last three years. The animal husbandry segment has done only marginally better, shows the data.

The report observed that at the end of March 2018, wages for three of five major agricultural occupations, were nearly the same as in April 2015.

Wage growth among non agricultural segments has exhibited a similar trend, with both nominal and real wage growth weakening significantly.

In the fiscal year ended 2017, real wages for sweepers, drivers and non agricultural labourers saw a contraction. On average over the three years between 2016 and 2018, real wage growth has either been flat or expanded at a pace of just about 1 percent.

The recently announced hike in minimum support prices to 1.5x of A2+FL, may only provide notional comfort if not augmented by developing adequate rural infrastructure to improve productivity and provide employment.
India Ratings Report