Rural Wages in India- Reasons and Way Forward

Despite the decent-to-good growth in the country’s GDP and farm sector, the rural wages have been stagnant in India. Indian economy has seen an average annual growth of 4.6% between 2019-20 and 2023-24. There has been a notable surge of 7.8% in the GDP in the past three years. The farm sector has grown at 4.2% over the five-year span and 3.6% in recent years. However, rural wage growth has not matched this economic progress. According to the Labour Bureau, for the current fiscal year, the rural wages has grown at 0.5% in real terms.

What is the status of Rural Wages in India? 

1. Indian Growth Rate not Translating into Higher Rural Wages- While India’s GDP has shown resilience, and has averaged around 4.6% from 2019 to 2024, this GDP growth has not translated into higher rural wages. The average nominal wage growth has been around 5.2%. However, when adjusted for inflation, the real wage growth has witnessed a negative growth at -0.4%.

2. Rural Wage Disparities- Reserve Bank of India data highlights stark differences in rural wages across various states. For ex- Agricultural workers in Madhya Pradesh earn an average of Rs 229.2 per day, while the agricultural workers in Kerala earn Rs 764.3 per day.

What are the reasons behind the Low Rural Wages in India?

1. Rising Labour Force Participation Among Women- The female LFPR in India has grown from 24.5% to 41.7% from 2018-19 to 2023-24, with rural female LFPR rising from 26.4% to 47.6%. This increased labor supply has led to a greater pool of workers, which has exerted downward pressure on real rural wages.

2. Flawed Indian Growth model- India’s economic growth has increasingly relied on capital-intensive, labor-displacing sectors. This has reduced the demand for labor, and hence suppressed rural wage growth.

3. Agricultural Dependency and Seasonal Nature of Work- Rural India is highly dependent on agriculture. Agriculture as an occupation is seasonal in nature. The fluctuation in labor demands based on crop cycles, has led to rural wage instability.

4. Labor Oversupply and Migration Patterns- High population growth and limited job diversification in rural areas has led to an oversupply of labor. This labor surplus has been compounded by reverse migration after COVID-19. This has pushed more people into agriculture and has further depressed the rural wages.

5. Skills Gap and Education- Many rural workers possess inadequate educational qualifications and lack marketable skills. This skills gap limits their bargaining power and depresses the rural wages.

What schemes have been launched for rural growth?

What Should be the Way Forward?

1. Agricultural Diversification- Encouraging diversification in rural economies by promoting allied sectors such as animal husbandry, fisheries, and agro-processing, could generate supplementary income sources, and reduce sole dependence on agriculture and improving overall earnings.

2. Technology Adoption and Innovation- Integrating technological advancements into agricultural practices and access to modern farming techniques, machinery, and market linkages can elevate rural incomes.

3. Infrastructure Development- Improved infrastructure like better roads, irrigation systems, and connectivity can stimulate economic activities, create job opportunities, and attract industries to rural areas, boosting wages.

4. Focus on Migrant Workers’ Welfare- Ensuring fair wages, adequate living conditions, and social security benefits for the workforce can incentivize a balanced distribution of labor and wages across states.

5. Promotion of Agri-Entrepreneurship- Encouragment and support rural entrepreneurship by providing incentives, mentorship, and market access to aspiring agripreneurs, could create a ripple effect, generating jobs and augmenting rural incomes.