Rural Wage Stagnation in India: Trends, Drivers and Solutions

Authored by: Somiha Chatterjee, Akshita Sharma

Edited by: Kavita Majumdar and Riya Singh Rathore


As rural India shows steady growth, trends in real wages depict a different story with stagnating agricultural and non-agricultural wages for both men and women. This paper analyses trends and studies the drivers behind the dismal state of rural wages in India. It also examines the Union Budget 2021-22 to assess its focus on addressing this rural wage distress in light of the findings.



Strict lockdowns imposed at the outset of the pandemic triggered a demand crisis in the economy, impacting both rural and urban masses. Despite this, the rural economy emerged as a bright spot, with agriculture being the only sector that recorded a 3.4% growth (KPMG 2020: 4). There are several reasons behind this. 

Apart from good monsoon rains, a 7% increase in agricultural land under cultivation, and plentiful water in irrigation reservoirs, government interventions undertaken to mitigate the pandemic’s impact kept the rural economy afloat (KPMG 2020: 9). The increased spending to INR 1 lakh crore under MNREGA, transfers under the PM-KISAN scheme, free food grains under the PM Garib Kalyan Anna Yojana collectively helped boost rural demand.

This reflected in higher rural sales reported by FMCG and automobile companies when in the second quarter of 2020, rural FMCG sales grew three times compared to national growth. In July 2020, Mahindra & Mahindra, which has the largest consumer base in rural India, witnessed a 28% hike in their domestic tractor sales — reportedly their highest ever July sales (Mahindra 2020). Reports also showed a spike in first-time e-commerce shoppers in rural India. 

However, despite these relatively temporary signs of growth and recovery in the rural economy, rural wages growth has remained stunted. In fact, rural wages have been stagnant for a decade. 



While the rural economy has been steadily growing, as reflected by the Gross Value Added (GVA) reaching INR 19,40,811 crores in 2019-20 (Figure 1), rural real wages depict a different story. Figures 2 and 3 illustrate the stagnating agricultural and non-agricultural wages for both females and males in the sector. 

For both genders, non-agricultural occupations have yielded higher wages than agricultural occupations. This can be attributed to the excess supply of labour in agriculture. The kinks observed in 2014-15 is explained by changes in the wage series in 2013 (Kundu 2019). After that, it is evident that rural wage growth has not been encouraging. 


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