Villagers unable to buy even Parle-G?

Monthly data for rural wages suggests after having risen in 2018, it has stagnated at around 2% in last few months

NEW DELHI: On Wednesday, media reports said that India’s leading biscuit-maker Parle Products Private Limited could cut up to 10,000 jobs as “slowing economic growth and falling demand in the rural heartland could cause production cuts”. The company’s flagship brand Parle-G is available in packs worth R5, thus making is affordable to the poorest of consumers. To put this number in context, the daily average rural wage in India in June 2019 (latest available figure) was R328.

To be sure, other high frequency indicators (simply, data available on a much higher frequency than, say, GDP or other macroeconomic parameters) such as passenger car sales have been pointing towards a slowdown in demand in the Indian economy for quite some time. Domestic sales of passenger cars have actually declined for 12 consecutive months beginning July 2018. India’s GDP growth has gone down for four consecutive quarters beginning June 2018.

However, there is an important difference between what Parle’s announcement of job cuts and decline in car sales or slowing GDP growth suggest. The last two do not necessarily suggest a squeeze on the poorest segments of society as the burden of a slowdown in economic activity can also impact the relatively well-off disproportionately.

The first – poor people not being able to buy biscuits worth less than 2% of their daily wages – suggests that the economic slowdown is having a particularly severe impact on the poorest population in the economy. Is this indeed the case?

Unfortunately, there is no high frequency income or consumption data for the Indian economy. What we do have is monthly data for rural wages, which is available until June 2019. After having risen for almost all of 2018 (part of this was because of the base effect, a disproportionately high or low number in the corresponding period), year-onyear growth in rural wages (after adjusting for inflation) has stagnated at around 2% in the last few months. This figure looks good when compared to the tumultuous period under the first Narendra Modi government – real rural wage growth declined for 33 months between May 2014 and May 2019 – but is actually quite low. To be sure, there is nothing unprecedented about low rural wage growth in the recent past.

(See Chart 1: Real Rural Wage Growth Rate)