Gujarat and Madhya Pradesh have bucked the overall trend of rural wages slowdown that has taken place in the last 6-7 months, based on official data.
The all-India average rural wage across 23 agricultural and non-agricultural occupations worked out to Rs 266.3 in November, representing a 3.8 per cent increase over the same month the previous year. This growth amounted to the lowest in nearly a decade.
At the same time, Gujarat and MP posted higher wage increases, at 19.2 and 15.6 per cent respectively, for this period. So did Assam, Tamil Nadu and Haryana, whereas the eastern region states in particular – Bihar, Orissa and West Bengal — have posted low or even negative growth rates.
But the high growth rates in Gujarat and MP are from a low base. Rural wage levels in both these states are, interestingly, way below the national average and even relative to Bihar, Uttar Pradesh or West Bengal. The base effect, in a sense, explains why wage growth in their case is higher than for, say, Kerala — where rural workers are paid two-and-a-half times the national average.
There are three states that have registered more than all-India average wage growth despite a higher base: Tamil Nadu, Haryana and Rajasthan.
The broad story emerging even from a state-level analysis is that rural wage growth is clearly moderating. And this has mainly to do the overall economic slowdown, combined with falling crop prices.
During the high growth phase, especially from 2003-04 to 2011-12, states such as Gujarat and Maharashtra attracted huge migration labour flows from eastern India.
These did two things. First, by creating relative labour scarcity in their home states, they pushed up wage levels there.
Second, the flow of migrant labour increased the supply of workers in the industrially more advanced states. In doing so, they also ensured that local wage rates were kept below the national average.
But with the ongoing slowdown, job opportunities for migrant workers have started drying up. Stagnating wages have also made migration less of an attractive proposition. The reduced migrant inflow, in turn, has pushed up rural wages in Gujarat and MP, albeit from a low base.