NEW DELHI: Real rural wages contracted in 21 of the 23 months to October 2023, signalling that consumer demand in the hinterland remains weak. Although rural inflation has tapered off in the 14 months till October 2023 from the high of 7.9% in September 2022, the lot of rural workers has not improved much.
While the country’s agricultural sector fared well in FY23 with the agri GVA (gross value added) growing at a good 4% on the back of a 3.5% growth in FY22, for the current fiscal, the sector is estimated to turn in a tepid performance, growing at only 1.8%. The agri GVA for the September quarter came in at an 18-quarter low of 1.2% year-on-year.
The share of the workforce in agriculture had fallen to 42% in FY19 but went up to 46% in the following year and has stayed around those levels. Experts point out the elevated demand for jobs under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) is an indication of the surplus labour supply in rural India.
While the Periodic Labour Force Survey (PLFS) points to some migration back to urban areas in the past year, the numbers are not substantial.
As a consequence, consumption demand had been weak; experts attribute the anaemic growth in the private final consumption expenditure (PFCE) of 3.1% y-o-y — the slowest pace of growth for the quarter since FY12 — to the tepid demand in rural markets. Rural consumption went up by just 0.5% y-o-y in Q2FY24, the slowest pace recorded in eight quarters, an analysis by Motilal Oswal showed.
FMCG major Hindustan Unilever has been highlighting for some time now that the recovery in rural markets is taking time. After the announcement of its Q3FY24 results, the management indicated that the trend of urban growth outpacing that in rural markets continues.
Economists at India Ratings and Research believe that the the below-par growth in the agriculture sector implies that rural demand is likely to remain under stress. “The broad-basing of consumption demand will take more time,” they observed. There are concerns that the impact of the uneven monsoon on the kharif crop could be adverse and hit yields, and therefore, rural incomes too. The lower reservoir levels are also a worry as this could hurt the rabi crop, though rabi sowing has been reasonably good.
Source: The Financial Express
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