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Vir Singh, about 55, was born in the farming village of Nunera, Gurugram district, Haryana, where he has lived and worked as a labourer all his life.
The economic liberalization of 1991, the economic boom of the 2000s, and the transformation of Gurugram into a technological and monetary hub – Singh has witnessed India’s economic transformation for more than three decades. But unlike the tens of millions of people who left rural India to migrate to developing cities in search of greater economic opportunities, Singh never left Nunera.
Instead, it waited years for the “inverted Kuznets U-curve” to take effect. In the 1950s, American economist Simon Kuznets proposed a now-famous speculation that as the length of an economy increases and moves from an agrarian economy to a commercial economy, the source of income inequality first increases and then decreases.
In April, Ashima Goyal, a member of the Reserve Bank of India’s financial policy committee, told the Press Trust of India that inequality had risen in India, but that “the remarkable ‘inverted Kuznets U-curve’ tells us that this is in a given period. It grows and is expected to decrease over time. “
Nunera is only forty-five kilometres from Gurugram, but over the years the economic adjustments have been minimal, for a finely paved two-lane road that runs through the village and dozens of farms that developers have erected as weekend getaways to the town. -rich.
One afternoon, as warm winds lifted the sand, Singh was running in a concrete-mix pool to build dozens of five-foot pillars at the site of a structure, where he had presented himself at 6 a. m. He worked well into the night. ” For 500 rupees,” Singh said, noting that in smart months he works 12 to 15 days.
Most of the time, he wonders about the dehadi – the salary – as other people wonder about the weather before leaving home. “There are only paintings on farms or on small structures,” Singh said. “On farms, we earn 300 to 350 rupees a day. Here, it’s 500 rupees. In the last four years, wages have risen slightly from Rs 30 to Rs 40. I stopped asking for a steady increase in wages. No one here will pay more if I do. not paintings, someone else will.
Singh was hopeful that things would improve in Nunera for his family of four, a hope based on Gurugram’s economic transformation, the evidence of which was seen in the expensive sedans that passed through the village, in the stories of wealth and prosperity he had heard. of returning migrant workers.
All he wanted, he says, was higher wages, but that hope has now turned to disappointment. Today, high inflation and his wife’s health expenses have weakened his financial situation and he is 25,000 rupees in debt.
“I’m seething with anger,” he said. After a long silence, Singh suddenly asked about the time of day. It’s 11:15 a. m. I’m hungry at 11 a. m. but I’m still working,” he says, slapping his stomach with his hands.
In the last three months of 2023, gross domestic product grew by 8. 4%, with India retaining the crown of the fastest-growing primary economy. Its stock market outperformed Asian peers. There are repercussions: Last year, Bloomberg reported that India had a “new hotspot for luxury spending. “
However, a huge hole has emerged between the functionality of its money market and its formal economy and the more than 170 million families in the country’s rural areas, where about 65% of the population lives.
Over the past decade, true rural wage growth, which economist Jean Drèze considers one of the most important and overlooked macroeconomic signs in India today, has remained stagnant.
Real wages are obtained after adjusting for the effect of inflation. If real incomes rise, Americans possess the purchasing power to purchase more goods and services, which affects demand and the overall well-being of Americans in an economy.
According to a survey of government knowledge conducted by the Indian Council for International Economic Relations Research, a group of economic experts, during the first term of Narendra Modi’s government, the true expansion of rural wages in the agricultural and non-agricultural sectors fell to 3% and 3. 3%. . % of around 8. 6% and 6% respectively between 2009-’10 and 2013-’14. However, during the second term of the Modi government, the scenario worsened with a negative expansion: -0. 6% for agricultural wages and -1. 4% for non-farm wages.
“There have been few studies on the recent wage stagnation because not many people were paying attention to it until last year,” Drèze, a visiting professor in the Department of Economics at Ranchi University, told India. “India has long faced the challenge of slow expansion of rural wages, the highest in the last 35 years. But today, this stagnation is diminishing despite the immediate economic expansion. “
“One explanation for this long-standing trend is that India has a huge reserve army of low-skilled personnel who lack marketable skills, even though they have many other skills,” he said. “This helps keep wages low. “
On May 8, Reuters reported that Modi had drawn up plans to develop a rural source of income consistent with the capita to 50% by 2030, even as he seeks a third term in India’s general election.
To create non-farm jobs in rural India, Modi plans to boost investment in small industries, according to Reuters. Earlier, on February 28, 2016, while addressing a giant gathering of farmers in Bareilly, Uttar Pradesh, Modi said he would double farmers’ incomes by 2022, when the country celebrates its 75th anniversary of independence. The crowd applauded.
However, government data revealed that although the average monthly income source of a family of five has increased from Rs 6,426 in 2012-2013 to around Rs 10,200 in 2018-2019, farming families are still in abundant monetary distress. , with around 50% debt and the average of notable loans is over 59%, as reported by IndiaSpend in September 2021.
According to government data, about 82 million families – or 410 million other people – farmed land with a domain of less than or equal to 2 hectares. In this cohort, which accounts for 88% of all farming families in the country, about 38. 7 million families are in debt with notable average loan amounts of Rs 33,220, Rs 51,933, and Rs 94,498 for farmers with land holdings between 0. 01 and 0. 40 hectares, 0. 41-1. 00 hectares, and 1. 01-2. 00 hectares, respectively.
Economists say India’s rural economy is a consequence of the functionality of the agricultural sector, and that emerging farm incomes affect rural consumption, agricultural and non-farm wages, and even wages in sectors such as production and construction.
Drèze describes the years between 2007 and 2013 as an anomaly in the long evolution of rural wages. [Rural wages] were rising by five to six percent a year in real terms. This is unprecedented for the India. Es very likely that this increase has something to do with the tightening of labor markets that followed the implementation of the National Rural Employment Guarantee Law. Today, we have returned to the old trend of near stagnation of genuine wages, in a more serious form because it lasted 10 years. years, even when the economy is developing at an immediate pace,” Dreze said.
Himanshu, an associate professor of economics at New Delhi’s Jawaharlal Nehru University, who goes by only one name, told IndiaSpend that several factors boosted rural wages between 2007 and 2013, when the United Progressive Alliance was in power.
In addition to the implementation of the Mahatma Gandhi National Law to Guarantee Rural Employment, agricultural productivity, emerging minimum costs (MSP) for crops, the expansion of the structural sector and urbanization have driven rural wages to record levels.
But today, according to Himanshu, none of those points work. “Whichever way you look at it, [the real expansion of rural wages] has slowed. There is palpable and visual misery in rural areas. Companies have found that there is virtually no expansion in volumes for their products. This is mainly a drop in demand over the last 10 years compared to the previous period.
“Demand from non-farm sectors such as production and structure has also slowed and other people are turning to agriculture. Agricultural costs – in terms of MSP – have not evolved as quickly as non-agricultural costs. The terms of industry have evolved to the detriment of agriculture. And this has lowered wages,” Himanshu said, noting that even though the structural sector is full of investments, there is hardly any positive progression in rural wages.
In 2021, Modi said India would invest about $1. 4 trillion (or about a hundred trillion rupees) to build ports, roads, waterways, and economic zones, which would also create millions of jobs. Knight Frank, a real estate consultancy, said in a 2023 report that India’s booming real estate market in its top eight cities would propel the real estate sector to contribute about a fifth to the economy by 2030, employing a hundred million workers, or about 80%.
Between May 2019 and May 2024, the Nifty Realty index, the benchmark index of the real estate sector, made up of 10 stocks on the National Stock Exchange, rose more than 280%.
On the other hand, the real average wage in rural areas of formal sector staff between 2018 and 2023 increased from Rs. 182. 44 to Rs. 205. 80 for male staff and from Rs. 136. 95 to Rs. 157. 95 for female staff. Between 2021-2022 and 2022- On January 23, the real wage increase for the same cohort registered a negative growth of -0. 1% and -3% respectively, according to a study of data published by the Labor Bureau by Arindam Das and Yoshifumi Usami.
“The first thing other rural people do when they increase their income is convert their kaccha houses into pucca houses, which happened between 2007 and 2012,” Himanshu said. “There has been a multiplier effect. And this has been reflected in the call for labor in the structures sector. Construction personnel are not hired on primary infrastructure projects because the labor intensity of those projects is low. The contribution to GDP expansion of infrastructure investment that we are seeing [now] is capital-intensive than labor-intensive. .
Pronab Sen, an economist and former chief statistician from India, told IndiaSpend that labor-intensive projects such as rural housing and road structures have a positive effect on rural wages due to higher labor intensity.
“In rural India, agriculture is no longer the engine of economic activities. And the select trades are developing quite rapidly,” Sen said. “So there’s a surplus of labor. “
Economists analyze indicators such as sales of two-wheelers to assess the functionality of the rural economy. Around 20. 2 million two-wheelers were sold in 2018, compared to 15. 8 million in 2023. At the same time, gaming app vehicles, or SUVs, accounted for more than a portion of India’s record sales of four million cars in fiscal 2023, Reuters reported.
Jayati Ghosh, a professor of economics at the University of Massachusetts Amherst, said economic shocks such as demonetisation and the Covid-19 pandemic have severely affected India’s huge informal sector and the millions of people working there.
“All of this has had an effect on real wages,” Ghosh told IndiaSpend. “When real wages fall, real income falls. And we saw that in the [now] discontinued 2017-2018 Household Consumption Survey. Rural income was less than it was in 2011-2012, which is incredible, if you think about it. This represents the vicious circle that the economy is in lately. Stagnant wages mean low demand, which means that small businesses that employ most of the labor force are not getting demand for their products. And this translates into low wages.
“Even for genuine urban wages, the average goes up, but the median doesn’t. This means that some staff do not earn higher salaries, even in urban areas,” Ghosh said.
Both Himanshu and Ghosh argue that India’s strong GDP expansion is not reflected in the state of the rural economy, and that this would have the effect of hurting domestic demand as time goes on. “India is a demand-driven economy,” Himanshu said. “We are not an export-oriented economy like China or Vietnam. Therefore, if domestic demand does not increase, disruptions are possible. Take, for example, storage disruptions in the automotive sector. One of the reasons why the weakness of personal investment is the lack of domestic demand: if corporations can’t sell, they’re not willing to invest. “
According to Drèze, this is starting to be noticed. The expansion of average customer spending has been weak over the past ten years,” Dreze said. “According to the most recent data released through the National Office of Sample Surveys, customer spending grew only 2-3% in genuine terms between 2011-2012 and 2022-23, compared to 5% to 6% between 2004-2005 and 2011-12. It also suggests that official estimates of GDP expansion in recent years are likely to be exaggerated. “.
After coming into force in 2014, Modi’s government prioritized expanding social spending and, according to the government, spent about $400 billion over 10 years on social services such as sanitation, cooking gas, bulk food grains, running water, electricity, and a variety of services. Money movement programs.
This is a trend that former economic adviser Arvind Subramanian has called “new welfarism,” a technique unique to social welfare in which the provision of essential goods takes precedence over the provision of public goods such as fitness and education. a correlation between social spending and electoral preferences.
Drèze contradicts this statement. There has been a substitution of [schemes such as MGNREGA and the old-age pension scheme] by other schemes, focusing, for example, on housing equipment. During the Covid-19 crisis, some social security plans had to be reviewed again. However, this did not last long. Overall, core spending on social plans is about the same today as it was 10 years ago, as a proportion of GDP,” Drèze said, noting that MGNREGA salaries have remained constant in real terms for 15 years. Since 2009, wages have increased. Each year only according to the level of value. “It’s been a long time. “
“I don’t believe in a new welfarism,” Ghosh said. [Consider] bulk cereals, for example. Previously, the deficient received these cereals at 2 rupees per kg. Today, the government supplies five kg of cereals in bulk, however, the value of the rest [of food] has increased. There isn’t much replacement on your net purchase. Frankly, the difference between 0 and two rupees is not that big.
Ghosh is referring to a statistic from the latest Household Consumption Survey released by the government: the difference between the average consistent with monthly expenditure consistent with the capita before and after the government’s social transfers for rural India is only 87 rupees. “The difference is marginal. ” Ghosh emits. I do not agree with the concept of a large increase in social spending. This shows that social coverage systems are not very expensive. “
According to research by the Financial Times, between 2014 and 2022, India’s GDP grew by an average of 5. 6% in terms of compound annual expansion rate, while on average, 14 other primary emerging economies grew by 3. 8% over the same period. Taking into account the old global economic trends, Drèze and Ghosh struggled to locate a trend on a global scale where, in a line graph, economic expansion and rural wages were moving in opposite directions.
Drèze said it would be unexpected if there were any other example of a country developing so rapidly over the past 10 years with virtually no increase in genuine rural wages. “It’s very, very rare,” Ghosh said.
Sushma, a farm worker in Chuharpur, Haryana, who goes by one name, also questions this trend, even if she can’t do it in macroeconomic jargon. Walking quickly through a giant box of pumpkin plants, picking and gathering the harvest of a basket on his head, he laments the 250 rupees he has been receiving for 4 years in exchange for about 8 hours of work.
“Milk, vegetables, cooking oil, atta [flour], bijli [electricity]. All costs have gone up,” he told IndiaSpend. In March 2024, vegetable inflation in India was 28. 3%; in February, 30. 2%. Since November 2023, food inflation (adding grains, vegetables, spices, cooking oil, milk, eggs, and meat) has risen by more than 8%.
“We don’t need to paint so hard just to feed our families,” Sushma said as she tossed pumpkins from a basket onto the floor of a makeshift warehouse at the edge of the field.
“I need to save money for the future of my two children. I don’t know what to do. I can only pray that our situation improves. I can’t let my kids work in a big city.
This article was first published on IndiaSpend, a data-driven, non-profit public interest journalism organization.