The rising inequality

Recently, Prime Minister Modi claimed that during his third term, which seems to be a foregone conclusion, India would emerge as the third-largest economy in the world. This sentiment found endorsement at the recently concluded World Economic Forum in Davos. In 2019, Modi aimed for a $5 trillion economy by 2024. Similar aspirations, though not on the same scale, were voiced by state chief ministers like Yogi Adithyanath of Uttar Pradesh and Stalin of Tamil Nadu, aiming for $1 trillion state economies by the same date. While these ambitions are laudable, it is important to examine whether these claims are translating into reality and, more pertinently, a better quality of life for all Indians, especially for the rural poor. A country’s economy is one thing; its individual earning capacity is another. The best yardstick to understand the anomaly or paradox in these claims is to examine where the Indian rural poor are headed. 

The state of the poor

The litmus test for India’s economy should not be the earnings of leading Bollywood stars, which are in multiples of crores, or the cars of the CEO of an Indian IT firm, but rather how the genuinely poor live.

The total population in India was projected at 1,417,173,173, or 1.42 billion, or 142 crore people, for the year 2022. India is the most populous country in the world, overtaking China in 2023. By 2029, India will cross the 1.5 billion milestone. India’s current population is 17.16% of the world population, which is now 8.1 billion. Of the total Indian population, 64.13% in 2022 was rural poor, as per the World Bank data.

Food inflation was 9.5% in December 2023, the highest in four months. The item-wise breakdown is 27.6% for vegetables, 20.7% for pulses, 19.7% for spices, and 11.1% for fruits. For the rural poor, 70% of their daily income is spent just on food alone, while the norm should be 15%.

Invariably, the rural poor are vegetarians, not because they do not like to eat meat but because they simply cannot afford it. A kilo of mutton (goat meat) costs Rs 700, chicken anything between Rs 150 and Rs 300, and buffalo meat costs Rs 400. Can a poor agricultural labourer afford this on a daily basis? And fruits are, without doubt, off their daily menu. It is, indeed, a luxury for the poor because they cannot afford it. The double-digit inflation for pulses and vegetables, the mainstay of the poor’s diet, is a real cause for worry. Let us now turn to what this means in terms of rural wage rates. They are an indicator of economic inequality.

The following example, based on the rural wage rates published by the Labour Bureau, serves the author’s purpose. These rural wage rates are based on actual market quotations rather than on responses provided in the surveys. Also, unlike data gathered from income tax records, which have value in determining the distribution of income, wage data conveys information on the living standards of the rural poor at the bottom of the pyramid. However, the data refers only to male workers and not females. Nevertheless, they are revealing.

The absence of data on women workers is a serious omission, as women in India have historically constituted approximately half the male workforce in the cultivation of crops. For certain crops like mustard, in northern India, the entire weeding of the mustard crop is done by women, and their number runs into crores, not thousands. And their income goes for family sustenance. This author has made a strong case when there was a move to introduce a genetically modified herbicide-resistant mustard crop in India (as of today, the move continues), arguing why such a move will render this vast number of women labourers jobless. We must assume that the agricultural wage rate for women has moved alongside that of men, so that we may rely on the latter alone.

Adjusting the data to inflation, we find that there is only a marginal (4.6%) rise in the agricultural wage rate in the period 2014–2023. The Sixth Economic Census of India (2013–2014) reports that 51.7% of the employed are in rural India. Of these, the overwhelming majority (68.9%) are non-agricultural workers. This implies that for about 35% of India’s workforce, real wages have not grown since 2014. Hence,
it is very important to note that, though there is growth in the Indian economy, the per capita income of those workers at the bottom of the pyramid is
not rising.

Even for the section of the rural workforce for which data show an increase in the real wage rate, this increase is dwarfed by the growth of per capita in the economy as a whole. Over the period 2014–2023, while the real per capita income in India has increased by 37%, the real wage of agricultural labour has increased only by a miniscule amount of just 5%.
In sum, why does such inequality matter in a country like India? Inequality leads to societal chaos—
violence, disease, and unequal opportunities—which translate simply to unemployment.

(The writer is a former professor at the National Science Foundation, Royal Society, Belgium)