©Reuters. Tilottama Pradhan, a housewife, poses for a photograph outside her one-room house in Tarada village in Puri district in the eastern state of Odisha, India, December 15, 2023. REUTERS/Jatindra Dash
2/2
By Aftab Ahmed, Saurabh Sharma and Jatindra
BAHBOLIYA MAHADA, India, (Reuters) – Jakir Khan, an Indian farm worker, says he has cut back on food as his income has halved. There are fewer and fewer job opportunities, he says, in his small village in the state of Uttar Pradesh.
Khan says his monthly income has fallen to 5,000 Indian rupees ($60.17) from 10,000 Indian rupees before the pandemic, while his weekly food expenses have increased by 60%. In November he asked his relatives for a loan of 100,000 rupees.
Khan, like millions of others, is struggling with the economic slowdown in rural India, home to 60% of its 1.4 billion people, which is painting a starkly different picture than the country’s spectacular economic growth and prosperity. its urban population.
Reuters interviewed nearly 50 families in rural areas like Khan’s in three Indian states – Uttar Pradesh, Odisha and West Bengal – and 85% of them reported stagnant or lower incomes compared to years before the pandemic. They said inflation is high and forces them to borrow money to support already reduced consumption.
Households attribute lower incomes to fewer jobs, more people competing for the same job leading to lower pay, and lower agricultural production, which reduces the demand for agricultural labor.
While there is some indicative data showing that rural recovery has been slow, there is no recent, publicly available survey of incomes and consumption in India’s vast rural hinterland.
“Who doesn’t want to eat meat? But times are hard and I can’t afford it. I only eat meat on other people’s weddings,” said Khan, speaking in Bahboliya Mahada, a village surrounded by sugarcane fields and banana plantations .
India’s statistics bureau expects overall annual growth of 7.3%, the highest among major global economies, for the current fiscal year ending in March, fueled by sectors such as construction and financial services.
But growth in agricultural production, which contributes about 15% to GDP and employs more than 40% of the workforce, was seen slowing to 1.8% in the current fiscal year, from 4% in a year ago.
“I’m a bit worried. A number of indicators don’t paint a big picture,” Dhiraj Nim, an economist at ANZ, told Reuters. These include an increase in seasonally adjusted demand for the government’s minimum job guarantee program for rural areas, low agriculture growth in the September quarter and higher inflation in the hinterland, he said.
“Even industries that tend to be more rural-focused in terms of employment are not doing well,” he said.
Prime Minister Narendra Modi is seeking a third term in elections due in May this year, and economists say the government may have to spend more on rural subsidies to ease the situation. Analysts, however, expect Modi to breeze through the election despite a struggling opposition and the appeal of his Hindu nationalist platform.
Asked for comment on the rural economy, the government’s economic policy body, NITI Aayog, said multidimensional poverty is estimated to have fallen to 11.28% of the population from 29.17% between 2013- 14 and 2022-23, or about 250 million. people.
“Of these (114.3 million) belong to Uttar Pradesh, West Bengal and Odisha, the states where Reuters conducted this poll,” it said in a statement.
“The entire agenda of the Modi government is about inclusion and inclusive growth,” NITI Aayog vice-chairman Suman Bery told reporters on a visit to Singapore earlier this month.
“To focus on short-term agricultural performance is to overlook everything that has happened in providing a whole host of safety nets during and after Covid,” he added.
“There is a lot that needs to be done structurally, but I don’t think you can reasonably argue that the overall program hasn’t been inclusive.”
LOWER AGRICULTURAL INCOMES
The rural economy has been hurt by a decline in production of some key crops, such as wheat, over the past three years due to rising temperatures, erratic monsoon rains and falling reservoir levels.
On top of that, higher food inflation has forced the government to ban exports of wheat, some grades of rice and onions to keep prices down, but this has hurt farm incomes even more.
More than 44% of households surveyed by Reuters said they were earning less than before the pandemic years, while about 41% reported the same income levels as before and the rest reported an increase in their income.
Brokerage firm Motilal Oswal said rural non-agricultural wages contracted for the second consecutive year, while agricultural wages grew just 0.2%, the lowest growth in 3 years.
Rural spending is estimated to have fallen by 0.5% in the July-September period.
Arun Kumar, an economist and former professor at Jawaharlal Nehru University in New Delhi, said the income gap between the organized, predominantly urban sector and the unorganised, predominantly rural sector “can be a factor of 5”.
He said it is difficult to quantify the gap because the government has not published detailed consumption data in years.
Higher food inflation is leading most rural families to cut back on key sources of protein such as chicken, lentils, eggs and milk, which are more expensive than grains and vegetables.
The reduction in food comes despite the government providing free grains to 800 million Indians since 2020.
ANZ said in a report that a slow recovery in indicators such as rail passenger traffic, while demand for air travel increased, was indicative of greater inequality in consumption.
Nearly 30 families Reuters spoke to had taken on additional debt in recent months from commercial banks, local lenders or relatives. Most of this debt was to repay previous debts or meet food expenses.
Tilottama Pradhan, a housewife from a small village called Tarada in Odisha, said she had taken a third loan of Rs 60,000 from a local lender. She has cut back on meat and fish and buys cheaper, locally produced vegetables.
“We are very cautious with our expenses as our income is not increasing. We have taken a new loan to repay the old loan installments,” Pradhan said.
The Reserve Bank of India (RBI) in a report released last month said that 42.7% of customers availing consumer loans already had three live loans at the time of disbursement and 30.4% of customers have availed more than three loans in the last six months. The report did not specify whether the accumulated risk in consumer lending was found in rural or urban areas.
URBAN CONTRAST
While rural incomes have remained stagnant in recent years, according to WTW, a consultancy and brokerage firm, average wages in companies increased 10% in 2023, following annual increases of 7.5%-9.8% between 2020 and 2022.
This has meant strong demand in urban consumption, as seen in sales of items such as smartphones, televisions and cars.
For example, SUV sales increased 22% in 2023, well above pre-pandemic figures, a figure seen as an indicator of strong demand from urban consumers. But two-wheeler sales, seen as a proxy for rural consumption, remain below pandemic levels despite rising 9% in 2023.
“India is such a large country that even if we say 100 million people are doing well, it is larger than most European countries,” economist Kumar said.
“So people on the outside might only see this, what is happening to 100 million people, not what is happening to 1.3 billion other people. But sooner or later this will affect India’s history.”
($1 = 83.0950 Indian Rupees)