Rural incomes slow down, may necessitate stimulus

NEW DELHI: Rural wages, critical for the overall economy, barely rose during 2018-19, stoking a slowdown in demand, consumption and corporate earnings.

Several consumer product firms that reported tepid January-march results have attributed this to falling rural sales. Some economists say the situation is grave enough to warrant a stimulus by the incoming government.

Real or inflation-adjusted agricultural wages grew 2% in February, compared to a 1.5% rise the previous month. Similarly, growth in real non-farm wages has been weak. They grew 1.4% in February, compared to 2% the previous month.

According to data from the labour bureau reviewed by Hindustan Times, neither measure has risen above 4% in the past nine months. Together, they convey a picture of depressed rural earnings. Last year, rural wages actually declined during several months. For instance, real or inflation adjusted growth in agricultural wages remained in the negative territory for each of the four months between April and July 2018.

“I think a collapse in agricultural prices has really taken the shine out of the rural sector,” said NR Bhanumurthy of the National Institute of Public Finance and Policy. He said it’s puzzling that income transfer schemes such as PM-KISAN haven’t helped much. “Probably it came too late.”

Steadily growing rural wages fuel demand for manufactured goods. Higher consumption demand quickens the pace of economic activity, as consumer companies step up their output.

The fourth quarter saw several macroeconomic and corporate indicators slump. For instance, sales in India’s largest consumer goods manufacturer Hindustan Unilever fell to their lowest in 18

ACCORDING TO DATA, NEITHER REAL OR INFLATION-ADJUSTED AGRI WAGES NOR REAL NON-FARM WAGES HAS RISEN ABOVE 4% IN THE PAST NINE MONTHS