Rural Distress, Farmer Suicides, Drought Measures

Explained: The paradox of stagnant rural wages

Explained | Governance | Mains Paper 2: Laws, Institutions & Bodies Constituted For The Vulnerable Sections
Note4Students

From UPSC perspective, the following things are important :

Mains level: Issues related to Rural Governance;

Why in the News?

From 2019-20 to 2023-24, India’s economy grew at 4.6% annually, with the farm sector at 4.2%, yet rural wages remain stagnant.

Disparity between Rural Wages and Economic Growth:

  • Divergent Growth Trends: While the Indian economy has experienced significant GDP growth (averaging 4.6% annually from 2019-20 to 2023-24), rural wages have stagnated, with real agricultural wages showing minimal growth and often negative real wage growth due to rising inflation.
  • Labor Supply Dynamics: The surge in female Labor Force Participation Rates (LFPR) in rural areas has increased the overall labor supply, exerting downward pressure on wages as more workers compete for the same or fewer jobs, primarily in low-productivity agricultural sectors.
  • Capital-Intensive Growth: Economic growth has become increasingly capital-intensive and labor-saving, leading to a disproportionate share of income going to capital rather than labour.
    • This trend results in fewer job opportunities in high-paying sectors, further exacerbating the stagnation of rural wages.

What are the major factors behind the Stagnant Rural Wages?

  • Increased Female Labour Force Participation (Surplus of Labour): The rural female Labour Force Participation Rate (LFPR) has seen a sharp rise, particularly due to government initiatives that have freed up women’s time for outside employment.
    • However, this has led to a significant increase in the overall rural workforce, causing a surplus of labor that exerts downward pressure on wages.
  • Majority of choosing Agricultural Employment: Although more women are entering the labour force, the majority are finding employment in agriculture rather than in higher-paying non-farm sectors.
    • This results in a surplus of workers in an already low-productivity sector, which suppresses wages further.
  • Capital-Intensive Economic Growth: The Indian economy’s growth has increasingly come from capital-intensive sectors that require fewer workers.
    • Consequently, the share of income generated is shifting from labour (wages) to capital (profits). This trend limits demand for rural labour, leading to wage stagnation.
  • Low Demand for Non-Agricultural Labor: Wage growth in rural non-agricultural sectors has been even weaker, with real wages declining. This reflects limited job opportunities outside of agriculture, partly due to low demand for labour in industries that are more capital-intensive.

What are the steps taken by Govt to address the issue of Low Rural Wages?

  • Income Transfer Schemes: Both central and state governments have introduced various income transfer schemes, like Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) which provides an annual income support of Rs 6,000 to farmer households in rural areas.
    • Many states have launched income-support schemes specifically for women, such as Maharashtra’s Ladki Bahin Yojana, which provides Rs 1,500 per month to women from low-income households.
  • Employment Generation Programs: Schemes like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) provide a safety net by guaranteeing 100 days of wage employment for rural households.
    • The government has also promoted rural entrepreneurship through initiatives like the Mudra Yojana, which offers micro-loans to rural businesses and enhance employment opportunities.
  • Skill Development Initiatives: The government has been investing in rural skill development programs to promote employability in non-farm sectors.
    • Programs under schemes like the Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY) focus on upskilling rural youth and women to enable them to find better-paying, non-agricultural employment.
  • Rural Infrastructure Development: Initiatives to build rural infrastructure, such as the Pradhan Mantri Gram Sadak Yojana (PMGSY), create temporary employment in construction and improve access to jobs, markets, and services.

Way forward: 

  • Diversification of Employment Opportunities: Enhancing support for non-agricultural sectors through targeted investments in skill development, vocational training, and entrepreneurship programs can create diverse job opportunities.
  • Strengthening Agricultural Productivity: Implementing policies that focus on modernizing agricultural practices and improving productivity can increase the income of rural labourers.

Mains PYQ:

Q  Though there have been several different estimates of poverty in India, all indicate reduction in poverty over time. Do you agree. Critically examine with reference to urban and rural poverty indicators. (2015)

Q Examine the pattern and trend of public expenditure on social services in the post-reforms period in India. To what extent this has been in consonance with achieving the objective of inclusive growth? (2024)

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