The lower wages have dented demand, including that of consumer goods, from rural India
Chief Economic Adviser, Arvind Subramanian.
Hyderabad: Chief economic adviser Arvind Subramanian on Tuesday said that inflation will decline below the RBI’s targeted level of six per cent — a development that would allow RBI to slash its policy rates. The Narendra Modi government, however, will have very little to cheer about as it is the declining rural wages, which is keeping the demand side subdued and could lead to widespread discontent in the politically sensitive rural India.
“After a decade of growth, rural wages have started declining… It will have consequences for monetary policy going forward,” said Mr Subramanian addressing students at the University of Hyderabad here. The lower wages have dented demand, including that of consumer goods, from rural India. HSBC PMI on India’s manufacturing sector showed that consumer goods sector has grown the least in April. In the last one month, the BSE Consumer Goods index has declined by 1.6 per cent and BSE FMCG index slipped by 3.3 per cent.
Reacting to the farmers’ suicides, the CEA said that the government needs to develop a mechanism to curb volatility in agricultural prices, by providing farmers with crop insurance. A majority of farmers who have committed suicide are those who cultivated cash corps. The prices of these commodities are dependent on global supply and demand factors, making them highly volatile.
He, however, declined to predict the impact of rural wages on the economic growth saying that the government need to wait for the monsoon.
( Source : dc correspondent )
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