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Sluggish wages could trigger rural discontent, undermine BJP in coming elections

Given the fact that the BJP will be facing most forthcoming elections, both in states and the Lok Sabha, as the incumbent, it might have to bear the biggest brunt of this discontent

editorials Updated: May 25, 2018 08:03 IST
A farmer ploughs his rice field after heavy rainfall in Mathura.  Big farmers most always like to squeeze wage payments to agricultural workers as much as possible.
A farmer ploughs his rice field after heavy rainfall in Mathura. Big farmers most always like to squeeze wage payments to agricultural workers as much as possible.(Reuters File Photo)

The nominal rural wage growth (for men) has fallen to its lowest level since November 2014 according to the latest available data. The value would be negative if one were to adjust for inflation. This means wages have fallen in real terms.

A slightly long-term perspective shows a different picture though. Rural wages rose sharply under the UPA government until 2011. This was followed by an equally sharp fall. While the down slide was arrested under the present government, the quarterly wage growth has, by and large, been stagnant.

Sluggish rural wage growth makes sense when seen in the context of poor agricultural growth under the present government. It needs to be kept in mind that wage growth has not risen despite most central government rural spending programmes meeting their targets. This shows that headwinds to rural wages, most of which are generated in the unorganised sector, due to policies such as demonetisation and GST have overpowered the tailwinds that government spending must have generated.

Big farmers would always like to squeeze wage payments to agricultural workers as much as possible. Statistics show that caste is an important determinant in deciding whether a person employs agricultural labourers in rural areas or gets employed as one. Most of the upper caste and dominant OBC population belong to the former category while an overwhelming majority of the Scheduled Caste population and rural poor belongs to the latter group. If a low growth in rural wages were accompanied by a high growth in agriculture, the former would have gained in a big way. Because this has not happened, neither of the groups is likely to have benefited. This could trigger rural discontent across the class and caste divide. Given the fact that the BJP will be facing most forthcoming elections, both in states and the Lok Sabha, as the incumbent, it might have to bear the biggest brunt of this discontent.

Another factor might complicate matters even more for the BJP. Cheap crude oil during a large part of its tenure allowed the NDA government to reap windfall gains in taxes without risking inflation. Now that the oil cycle has reversed, things are drastically different. The government is already under pressure to take a haircut in its petroleum taxes to reduce prices. If it does so, its ability to spend more in rural areas will decrease. This can put more downward pressure on rural wages. If it does not, growing fuel prices are bound to lead to an inflationary upsurge. Rural labourers are among the most vulnerable groups to inflationary spikes.