Low wages can cause discontent

With polls nearing, the BJP will bear the brunt of rural distress

The latest available data suggests that the nominal rural wage growth (for men) has fallen to its lowest level since November 2014. The value would be negative if one were to adjust for inflation. This means wages have fallen in real terms. A slightly long-term perspective shows a different picture. Rural wages rose sharply under the

UPA government until 2011. This was followed by an equally sharp fall. While the down slide was arrested under the NDA, the quarterly wage growth has been stagnant. Sluggish rural wage growth makes sense when seen in the context of poor agricultural growth. Also, wage growth has not risen despite most of the Centre’s rural spending schemes meeting their targets. This shows that headwinds to rural wages, most of which are generated in the unorganised sector, due to policies such as demonetisation and GST, have overpowered the tailwinds that government spending must have generated.

Statistics show that caste is an important determinant in deciding whether a person employs agricultural labourers in rural areas or gets employed as one. Most of the upper caste and dominant OBC population belong to the former category, while an overwhelming majority of the Scheduled Caste and rural poor belongs to the latter. If a low growth in rural wages were accompanied by a high growth in agriculture, the former would have gained in a big way. Because this has not happened, neither of the groups is likely to have benefited. This could trigger rural discontent across the class and caste divide. Given the fact that the BJP will be facing most forthcoming elections as the incumbent, it might have to bear the biggest brunt of this discontent.

Another factor might complicate matters even more for the BJP. Cheap crude oil during a large part of the NDA’S tenure allowed it to reap windfall gains in taxes without risking inflation. Now that the oil cycle has reversed, things are different. If the government takes a haircut in its petroleum taxes to reduce prices, its ability to spend more in rural areas will decrease. This can put more downward pressure on rural wages. If it does not, growing fuel prices are bound to lead to an inflationary upsurge, to which rural labourers are among the most vulnerable.