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Falling employment, low wages and food inflation - the rural economy is in pain


Oct 17, 2018
United States
United States
Falling employment, low wages and food inflation - the rural economy is in pain
With priorities of the government changing, the agriculture sector is unlikely to see any major initiatives and reforms

Siraj Hussain

Inflation based on Consumer Price Index (CPI) for November is further proof that agriculture produces only marginal surpluses. Only last year, observers were worried that the planners were not engaged enough to see that India is now surplus with most agricultural commodities.

In November 2019, core inflation, which strips out food and fuel, was just 4 percent. Food inflation reached a high of 8.7 percent. In urban areas, it touched 12.3 percent, the highest since 2014 when Modi 1.0 took power. Even in rural areas, food inflation in November stood at 8.8 percent.

While inflation is on the rise, rural wages are not showing any increase. Rural wage data is released by the Labour Bureau for 12 major agricultural occupations, but the average across these occupations is not available. For various agricultural operations, the wages vary widely.

In September, for ‘general agricultural labourers’, the average daily wage rate pan-India was Rs 286.59 for men and Rs 223.55 for women. However, there are large variations across states. Kerala had the highest daily wage rate of Rs 702 for men. The wage rate in Madhya Pradesh (Rs 197.23) and Gujarat (Rs 211.58) was less than that of Bihar (Rs 259.05).

Compared to September 2018, the real wage in September 2019 for ‘general agricultural labour’ went down by 4.9 percent for men and 5.1 percent for women.

It is not that only wage earners are under distress. The rural economy has not recovered after the shock of demonetisation. Sale of two-wheelers decreased by 16.18 percent in the first nine months of this year compared to the last year.

In a recent paper titled India’s Employment Crisis, authors Santosh Mehrotra and Jajati K Parida of Azim Premji University have estimated that employment in the agriculture sector declined to 20.53 crore in 2017-18, from 23.19 crore in 2011-12. Employment of youth of 15-29 years declined even faster to 4.18 crore, from 6.07 crore. It is clear that the youth were preferring employment in sectors outside agriculture.

The non-manufacturing sector created nearly 40 lakh jobs per year between 2004-05 and 2011-12, but slowed to just about 6 lakh a year between 2012-13 and 2017-18. Most of these jobs were probably created in the then booming construction sector.

Such a reduction in the number of workers in agriculture should have raised their wages, but the downturn of prices in most commodities has resulted in low wages despite lower employment.

Post damage to kharif crops in 2019 in the wake of excessive rains, the market prices of several commodities have recovered. The prices of soybean, maize and several pulses have gone up from last year’s level.

In November 2017, when the market prices of pulses had hit record lows, the government allowed free export of pulses, and quantitative restrictions (QRs) were imposed on the import of tur, peas, moong and urad. Now, due to rising prices, there is already a clamour to ease QR for moong and urad. Such a decision will depress the prices and may ease food inflation, but will harm the pulse farmers, who have already suffered damage to standing kharif crops after the untimely and excessive rains.

Even the PM-Kisan programme, an ambitious scheme of direct income support, has also slowed for reasons not clearly understood. Between December 2018 and March 2019, 4.74 crore small and marginal land owners were registered for receiving instalment of Rs 2,000. The number of new landowners registered came down to 3.08 crore land owners during April 1 to July 31, 2019, even though the scheme was expanded to cover those landowners who owned more than 2 hectares. Between August 1 to November 30, the number of new landowners registered further went down to only 1.20 crore. This is despite the fact that Aadhaar seeding of data has still not been made compulsory.

The government has provided Rs 75,000 crore in the Budget estimate of 2019-20 for the PM-Kisan scheme, but only Rs 36,000 crore has been disbursed till the end of November. More money in the hands of landowners can provide some boost to the rural economy, especially in a poor state like Uttar Pradesh where Rs 6,000 of PM-Kisan (in a year) adds about a month’s income to farmers.

Balancing between the interests of producers and consumers is not easy and the government has to do a fine balancing act. Its mettle will be tested from now till the arrival of rabi crop in April 2020.

With the government’s energy focussed on changing the very idea of the Indian Republic, the agriculture sector is unlikely to see any major initiatives and reforms which can reboot the rural economy.

Siraj Hussain is Visiting Senior Fellow, ICRIER. He retired as Union Agriculture Secretary. Views are personal.

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