Real rural wages expected to rise as inflation eases: Economic Survey

Survey says agriculture needs 'reorientation' in view of new challenges

The Economic Survey 2022-23 tabled in Parliament on Tuesday said real rural wages had contracted in financial year 2022-23 (FY23) till November due to elevated inflation. But it hoped that they would rise thanks to the easing of international commodity prices and domestic food rates.

“Nominal rural wages have increased at a steady positive rate during FY23 (till November 2022). In agriculture, the YoY (year-on-year) rate of growth of nominal wage was 5.1 per cent for men and 7.5 per cent for women, during the period April-November 2022. In non-agricultural activities, the growth of nominal wage rates was 4.7 per cent for men and 3.7 per cent for women, during the same period,” the Survey said.

“Going forward, as inflation is expected to soften with the easing of international commodity prices and domestic food prices, it is expected that this will translate into a rise in real wages,” it added.

The Survey said rural inflation has remained above urban throughout the current fiscal year, reversing the trend seen in recent years.

“CPI-consumer based food inflation seems to have cooled down after reaching a high of 8.3 per cent in April due to a subsequent moderation in global food prices and a reduction in farm input costs. However, the cooling was more pronounced for urban inflation, which softened to 2.8 per cent in December 2022,” the Survey said.

The Survey said though the agriculture and allied sector had performed well, it needed “reorientation” in the backdrop of challenges like the adverse impacts of climate change, fragmented landholdings, sub-optimal farm mechanisation, low productivity, disguised unemployment, and rising input costs, etc.

It laid emphasis on developing food processing to ensure better returns for farmers, promote employment, and increase export earnings.

On the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), the Survey said works completed under the scheme had increased steadily over the years, with 8.5 million works completed in FY22 and 7.1 million completed so far in FY23 (till January 9, 2023).

It said a significant portion of these works were now being done in “individual land” whose share had increased from 16 per cent of total completed works in FY15 to almost 73 per cent in FY22.

“These works include creating household assets such as animal sheds, farm ponds, dug wells, horticulture plantations, vermicomposting pits etc., in which the beneficiary gets both labour and material costs as per standard rates,” the survey said.

Empirically, within a short span of two-three years, these assets have been observed to have a significant positive impact on agricultural productivity, production-related expenditure, income per household, and fall in indebtedness, especially from non-institutional sources, along with a negative association with migration.

“This has long-term implications for aiding income diversification and infusing resilience into rural livelihoods,” the survey said.

On agriculture, the Survey said the sector’s performance remains critical to growth and employment and investment must be encouraged through an affordable, timely and inclusive approach to credit delivery.

It may be noted that more than 75 per cent of rural female workers are employed in the agriculture sector, which implies a need to upskill and create employment for women in agriculture-related sectors such as food processing.

According to the Survey, the sector has seen an average annual growth rate of 4.6 per cent in the past six years. It grew 3 per cent in FY22, compared with 3.3 per cent in FY21.

In recent years, India has emerged as a net exporter of agricultural products. In FY22, agricultural exports touched an all-time high of $50.2 billion.

The Survey said this was partly attributable to good monsoon years and partly to the reforms undertaken by the government.