Rural wage growth down from 8.4% under UPA to 0.2% under NDA, farmers now not getting support price: Crisil

By Rajiv Shah
Even as regretting that investment in India is failing to pick up, in its latest report on four years of Prime Minister Narendra Modi's government, Crisil, India's leading rating agency, has lamented that things have been worse for the country's rural sector, which, it has said, "has been riddled with challenges including slower agricultural growth, poor farm price realisation, slowdown in construction activity, and sluggish rural wage growth."
In fact, Crisil warns, "An unhappy hinterland can turn out to be the proverbial Achilles’ heel for any government during elections", asking the Modi government to take mitigating measures that may help improve the situation "in the short run, such as increase in minimum support price and price deficiency payment scheme", even as strengthening "the non-agriculture rural economy by front-loading infrastructure development and construction activities."
Noting that "sluggish growth in agriculture and non-agriculture rural wages during this period hurt incomes", Crisil said, "Sub-normal monsoon in fiscals 2014 and 2015, coupled with twin disruptions from the lingering impact of demonetisation (in fiscal 2017) and GST implementation glitches (in fiscal 2018) dampened rural wage growth between fiscals 2015 and 2018."
According to Crisil, "real agricultural wage growth" -- calculated by adjusting inflation -- grew on an average by 9.5% between fiscals 2010 and 2014, but slipped to 4.8% during fiscals 2015 and 2018. Things have been worse for non-agricultural real wage growth, it said. These "grew 4.8% on average during fiscals 2010 to 2014", but "by a sluggish 0.2% on average during fiscals 2015 and 2018."
Further pointing towards rural distress over the last four years, Crisil noted, "In fiscals 2015 and 2016, agricultural production fell due to poor rains, and when production picked up in the next two fiscals, collapse in agricultural prices hit farm incomes." Thus, "Real agriculture GDP growth, which averaged 4.3% from fiscals 2010 to 2014, declined to 2.4% on average during fiscals 2015 to 2018 despite witnessing record high production in fiscal 2017, followed by a bumper production in fiscal 2018."
Worse, said Crisil, even in nominal terms -- calculated without taking into account inflationary impact -- "the average agriculture GDP growth, at 7.7% between fiscals 2015 and 2018, was lower than the 15.4% growth during fiscals 2010 to 2014." Things only deteriorated in 2017-18, suggested the top rating agency: "The nominal GDP growth for fiscal 2018, at 4.2%, was the slowest in the last 13 years due to collapse of agricultural inflation."
Rural incomes went down also because the Government of India failed to provide minimum support price (MSP) to the farmers, suggested Crisil.
"Between fiscals 2010 and 2014, minimum support prices or MSPs (across crops for which these are announced) grew ~12% on average, while the period between fiscals 2015 and 2018 has seen an increase of only ~5%", it said, adding, "In 2017, of the 14 major crops (which account for 80% of the total area sown), eight crops, mostly pulses and oilseeds, were selling below MSP."
Pointing out that "construction has been a major employer of rural workforce", Crisil said, "The share of rural workforce in construction rose from 3% in fiscal 2000 to 11% in fiscal 2012 when it grew at 9% (average) per year in real terms", though regretting, "Most of the slowdown post fiscal 2015 was seen after demonetisation."
The construction sector, it said, "Slowed on average during fiscal 2015 to 2018 on account of the disruption from demonetisation", adding, "Real construction GDP growth, which averaged 5.2% over fiscals 2010 to 2014, moderated to 3.4% on average between fiscals 2015 and 2018."
Further noting that "the cash crunch following demonetisation reduced private consumption growth", Crisil said, "Within private consumption, rural consumption was particularly hit as farm realisations wilted during this period." It added, The fall in private consumption also reduced fresh investments in industry... Lower investments further reduced demand for manufactured products in the economy."

Comments

Praveen said…
Crisil must be accurate but this means bad time for NDA who face election. Even UPA opened the coffers for farmers in the last year of their rule but it far from helped upa in the election . Even if NDA does the same , they will find it difficult to convince the voters despite Modi’s appeal . Jaisi karni vaisi bharni. Good article !
Uma Sheth said…
It is surprising that the NDA has allowed such a big fall--surely they are aware of the consequences.