Market surveys by Nielsen IQ show steady pick up in rural consumption in the last four quarters
The real wages growth trend do not give confidence about a quick consumption recovery.
Taken together, recent news reports, higher rural wages, lower inflation and the fall in demand for work under MGNREGA could indicate the green shoots of a turnaround in rural consumption
As of June 2023, the unemployment rate among diploma holders stands at 12.1%, while it's 13.4% for graduates and 12.1% for post-graduates, according to Kotak's report.
Real rural wage growth has been negative or marginally positive since 1998, except for a brief period between 2010 and 2014
The rural labouring poor have served as a pool of workers available at dirt cheap wages, thus keeping overall wage pressures in the economy low
It is highly unlikely to witness demand-led inflation in India, unlike advanced economies, wherein massive fiscal stimulus made it exceptionally good for the household sector
Contracting real wages an obvious reason for lack of rural demand
Rural wage growth has fallen off the cliff. It is therefore small wonder that, at the fag end of its term, the Modi government has been trying its best to dole out sops to this class.
A continued property market slowdown and a vegetable glut may have pushed landless labourers back to villages, seeking daily jobs and depressing wage growth
Tanvee Gupta Jain of Macquarie Capital Securities says between January to March, CPI may be close to 6.5% range, because of easing of base effect. But it is still better than RBI's first target of 8 percent by January 2015, she adds
Sonal Varma, economist at Nomura India, thinks everyone is overplaying the role of commodity price fall on CPI considering it is largely a non-tradable basket because it has food and services in it. Hence the impact is rather low.
A big component of the CPI is the food inflation that has risen primarily because of a strong 17.5 percent growth in rural wages through the 11th plan period from 2007 to 2012.