Open Forum

New Delhi, 22 January 2025 

Urban-Rural Gap

HIKE IN INCOME, WAGES VITAL

By Dhurjati Mukherjee 

Unlike his predecessor late Dr Manmohan Singh, Prime Minister Narendra Modi speaks volumes about his government’s plans, achievements and future targets, which may not be the reality and remain unfulfilled. While the economy is suffering from food inflation and economists seek a boost to consumption expenditure, lagging for months, Modi recently referred to a State Bank of India survey which reportedly showed urban-rural gap in the monthly per capita consumption expenditure (MCPE) having declined to 70 percent in 2023-24 from 84 percent in 2011-12. 

This reduction does not, in any way, show that rural incomes have increased, and consumption shown an uptrend. On the other hand, it can be said that urban incomes may not have increased. Moreover, the real picture will come out if the average incomes of the lower segments of both urban and rural areas – say 40 percent of the total – are considered. This is necessary to revealthe distressing scenario in rural sector and plan accordingly and allocate budgets realistically.  

The survey showed that MCPE in rural India increased from Rs 1430 in 2011-12 to Rs 4122 in 2023-24 without taking into account the inflationary increase in these 10 years. Here too there’s need to segregate the incomes of the economically weaker sections and lower income groups i.e. those of small and marginal farmers, small traders and hawkers and those working in the unorganised sector to find out whether their incomes have truly increased. 

Meanwhile, in a rather difficult economic scenario the budget would be presented on the first day of February. There is no need to rejoice at the slight increase in MPCE for a country aspiring to reach a developed status. Even the Fast-Moving Consumer Goods(FMCG) companies are talking about sales of their products remaining stagnant for a few years. All this is obviously because incomes have not increased. The unorganised sector workers are the hardest hit as not just unemployment but also underemployment is rampant in the country. 

Let us take the example of midday meal cooks, whose salaries have remained unchanged at Rs 1000 per month since fixed way back in 2009. Adjusted for inflation, the value of this amount comes to a mere Rs 540 per month. The actual money they get depends on how much the state government is willing to enhance. While Kerala pays the highest at Rs 12,000, in many others such as Delhi, Goa and some north-eastern states it remains Rs 1000.Importantly, the national floor minimum wage, below which no state can fix its minimum wage, is Rs 5340 per month. But strangely since the cook-cum-helpers (CCH) are unrecognised as workers, government is not bound to pay minimum wages. The same is the case of anganwadi workers, whose low income has remained unchanged over the years, with governments remaining silent spectators. 

Added to this is that in the private sector, due to the critical job scenario, there is an insignificant annual increase in wages, which is more or less, or even lower if the inflation is considered. Even in the education sector, both in urban and rural areas, highly qualified teachers in private schools and colleges get 40 percent less than their counterparts in government educational institutions. 

A doctorate friend of this writer in Kolkata gets around Rs 40,000 in a private college after serving for over 12 years, which would have doubledhad she served in a government college. Can the salary structure not be regulated by Centre jointly with state governments by ensuring that a minimum scale must be given to qualified teachers and professors? 

It is pertinent to refer to the recently released job plan of Confederation of Indian Industry (CII) which suggested a seven-point agenda, including an integrated national employment policy, support to labour-intensive sectors and setting up an international mobility authority. This authority could work with the Ministry of Skill Development &Entrepreneurship to help develop various types of skills, not just technical. These may be worth considering in a situation where job creation is the crying need of the day. Also, the proposal of trade unions to increase the minimum EPFO pension to Rs 5000 per month needs to be seriously considered.   

All these efforts could lead to consumption expenditure increase steadily. Thus, the obvious thrust in the forthcoming Budget should be on ensuring that incomes and wages of the unorganised sector are increased while budgetary grant for the MGNREGS is adequate to provide at least 100 days a year, if not more employment. Some economists have been talking of a similar scheme in the urban sector and the government may think of starting such a scheme for at least 60-70 days for the urban unemployed. There could be public-private participation for the latter scheme and big business groups may be roped in to finance it, to some extent. 

The earnings of the lower tiers of the population must be substantially increased and unemployment controlled to ensure increase in consumption expenditure. Obviously, the government can work out a strategy and ensure its implementation in the coming two to three years. Is it not appalling that the wage increase has been just 0.7 percent between 2017-18 and 2022-23? And if the increase in wages of only the rural sector is considered, it will be much less and may show a negative trend if the inflation is considered.  

Given the situation that around 60 percent of India’s total income has been going to the top 10-12 percent with the bottom 50 percent getting a little over 10 percent, this scenario needs to change. In fact, if one looks to Europe the percentages are 25-30 percent for Europe, China 40 percent while in US, it is 40-45 percent, according to Piketty and other international sources. Thus at least, some change can be brought about if the government is serious on the matter and changes its strategy in favour of the lower segments of society.   

In this scenario, the increase in standard deduction, currently pegged at Rs 75,000 per annum for salaried individuals and pensioners being envisaged may not help much. Also reducing the tax structure to help a section of the middle class may not witness consumption growth. The requirement for much-needed consumption boost, is to ensure increasing wages and incomes of the rural populace and the lower segments of the population in cities. Additionally, thrust is imperative at expanding and improving social infrastructure spending in the rural districts, specially the backward areas. For all of this to fructify, revenue generation needs to be considered and increased.---INFA 

(Copyright, India News & Feature Alliance)