Rural distress can’t get buried in growth story3 min read . Updated: 19 Jun 2018, 04:24 AM IST
Despite claims of an economic recovery, rural wage growth of non-agricultural labourers continued to be in negative territory for the fourth month in a row
Data released by the Central Statistics Office last month suggested a recovery in economic growth during the fourth quarter of 2017-18, with the economy expanding by 7.7% compared to that in the first quarter, when growth was at its lowest at 5.7%. This has given some cause for celebration in an economic situation where most other indicators were suggesting the economy was heading into some sort of crisis.
But a second set of data released by the Labour Bureau that tracks rural wages shows that not all is well as far as the rural economy is concerned. Despite claims of an economic recovery, rural wage growth of non-agricultural labourers continues to be in negative territory for the fourth month in a row. The wage data is now available up to February 2018 and it shows that real non-agricultural wages have been declining since November 2017. While real wages of agricultural labourers have moved out of negative territory after declining for two consecutive months, the growth at 0.2% is negligible.
It is not just the overall story; the trends, too, present a contradiction. Real wages for agricultural labourers were growing at 5.3% in June 2017. Since then, the growth rate of wages continued to decline every month before turning negative in December. The story for non-farm labour is the same, with wage growth turning negative since November 2017 after declining from 4% in June 2017.
Clearly, whether the economy is doing well or not depends on which India is being talked about. It also shows that rural India, or Bharat, is not keeping pace with the rest of the Indian economy.
Contradictions have always existed, but these seem to have widened over the years, with inequality rising secularly since the 1990s. But it is not just about inequality. The misery is no longer about rural India growing slower than the rest of the economy; it is now a story of acute distress and misery, which has intensified in the last four years. If nothing else, farmer’s unrest in different parts of the country only strengthens the story of rural distress.
While the trend in revival of growth rates may have given rise to temporary cheer, inflation data released last month suggests the cloud of uncertainty is still lurking, with inflation rising to 4.9% in May 2018. More worrying, core inflation was at 6.2%, above the threshold limit of the Reserve Bank of India.
Food inflation continues to remain low at 3%, but behind it is the story of the collapse in prices of major agricultural commodities. The collapse of sugar prices has already threatened many lives; similar is the case for several other crops, including pulses.
But even on the growth front, the overall growth rate of the economy is only 6.7%, which has been decelerating from its peak in 2015-16. The trend is certainly downward for the economy as a whole, not very different from the story coming out of rural India.
The future of the growth story will depend not only on what happens to inflation, but also on what happens to rural India. The story on the export front or the investment front is dismal, suggesting that the two engines are yet to show any revival. But the so-called revival of growth driven by government expenditure may also not last long, with fiscal deficit breaching the comfort zone and current account deficit spiralling out of control in the face of rising petroleum prices and a weakening rupee. The real driver of the economy in the best to the worst of times has been domestic demand, led by the rural economy. It will be a mistake to ignore it for the smokescreen of growth revival.
The reality of whether the Indian economy is reviving depends on which India is being referred to. While India may be witnessing a revival of growth rates based on quarterly GDP estimates, Bharat has seen situations worsen since the first quarter of last year. It also depends on the prism through which these are seen. For economists, the Bharat story may just be a temporary setback and, perhaps, insignificant in the large scheme of things. But not so for a government heading into general elections less than a year away.
While economists may choose to ignore the discontent and distress in the rural economy, for the democracy of this country, there cannot be an India growth story in which Bharat is not included.
Himanshu is assistant professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi.