Stoking a slowdown in demand, consumption and corporate earnings, rural wages, critical for the overall economy, barely rose during 2018-19.
Several consumer product companies that reported tepid January-March results have associated this to falling rural sales. Some economists also state that this situation is serious enough to warrant a stimulus by the incoming government.
In February, real or inflation-adjusted agricultural wages grew 2%, compared to a 1.5% rise the previous month. Similarly, growth in real non-farm wages has been feeble. They grew 1.4% in February, compared to 2% the previous month.
As per the data from the labor bureau reviewed by Hindustan Times, neither measure has increased above 4% in the past nine months. Together, they bear a picture of depressed rural wages. Last year, rural earnings actually declined during several months. For instance, real or inflation adjusted growth in agricultural wages continued in negative territory for each of the four months between April and July 2018.
Gradually growing rural wages fuel demand for manufactured goods. Higher consumption demand accelerates the pace of economic activity, as consumer firms step up their output.
The 4th quarter saw numerous macroeconomic and corporate indicators collapse. For instance, sales in India’s largest consumer goods manufacturer Hindustan Unilever fell to their lowest in 18 months in the January-March quarter. The company associated this fall to “moderating rural demand”.
The country’s factory production, as measured by the Index of Industrial Production, contracted or recorded negative growth in March for the first time in 21 months, lessening 0.1%, an obvious sign of slowing demand in the economy. Within IIP, manufacturing output shrunk 0.4% in March, mining and electricity saw weak growth at 0.8% and 2.2%.
Admitting a slowdown, the finance ministry, in its “Monthly Economic Report” for March, recognized a drop in private consumption and muted exports as reasons.
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