Woes of India’s villages: Real rural wage growth remains negative for 10 months in a row | The Financial Express

Woes of India’s villages: Real rural wage growth remains negative for 10 months in a row

Mohit Malhotra, CEO, Dabur, confirmed that the company’s rural business had grown very slowly in the September quarter. Malhotra said the rural markets were seeing credit and liquidity pressures.

Woes of India’s villages: Real rural wage growth remains negative for 10 months in a row
The numbers from FMCG players reflect the muted consumer demand in the hinterland.

The growth in real rural wages is now negative for the tenth straight month to September. While the contraction is largely due to elevated inflation, the sluggishness in the rural economy has left demand for labour subdued, thereby capping nominal wages.

Worse, rural India is yet to restore the millions of jobs lost during the pandemic. On a net basis, rural employment is even now 8.3 million less than it was before pandemic, according to a study by Kotak Institutional Equities. The services industry itself is yet to regenerate 7.9 million of the jobs lost during the pandemic.

Reflecting the bleak jobs scenario in the rural sector, households demanding work under the rural employment guarantee scheme continue to be above the October 2019 (pre-pandemic) level. Of course, in recent months, fewer people have sought these subsistence jobs.

Unemployment jumped by 1.3 percentage points to 7.8% in October led by an increase in rural unemployment. Sachchidanand Shukla, chief economist, Mahindra & Mahindra, points out that the government spending on rural development has been somewhat tepid post Covid. “While the spends on PM Kisan Yojana are direct transfers, the food scheme and the fertiliser subsidy don’t really put cash in the hands of consumers,” Shukla observed.

The numbers from FMCG players reflect the muted consumer demand in the hinterland.

Also Read: Goldman Sachs sees India’s GDP growth falling to 5.9% in 2023

Sanjiv Mehta, MD & CEO, Hindustan Unilever, had observed that in the September quarter, the market for the categories that the company operates in grew in mid-single digits. “Volume continues to decline in both urban and rural markets with a more pronounced drop in rural,” Mehta had said.

Mohit Malhotra, CEO, Dabur, confirmed that the company’s rural business had grown very slowly in the September quarter. Malhotra said the rural markets were seeing credit and liquidity pressures.

At Tata Consumer, volumes of local tea have grown at a three-year compounded annual growth rate of only 4.1%, partly hit by poor demand from the hinterland.
Rural spends by a clutch of ministries dropped 12% y-o-y in the June quarter on the back of a 34% y-o-y fall in Q1FY22, an analysis by Motilal Oswal showed.

Economists note the fall in wages has been sharper for non-agricultural workers, indicating the farm sector is in better shape than the non-farm peer. Moreover, many have needed to shift to lower-paying jobs in the construction sector since the services sector has not been doing well, the Kotak study revealed, though the data is not based on extrapolation of monthly surveys.

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First published on: 24-11-2022 at 06:30:00 am
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