Indian farm wages: Trends, growth drivers and linkages with food prices

This study looks at trends in Indian farm wages, analyses their linkage with food prices, and identifies factors which drove their growth in real terms. Employ quantitative and qualitative analysis techniques for this purpose. A vector-error correction model (VECM) is used to determine the linkage between farm wage inflation and food inflation, and a pooled mean group (PMG) estimation method, used for dynamic heterogeneous panels, is used to identify the drivers of growth in real farm wages. In last 20 years (1998-99 to 2017-18), wages of India’s farm labourers increased at an average annual rate of 9.3 per cent in nominal and 3.2 per cent in real terms. For an average agricultural labourer, the daily wage rates increased from less than INR 45 in 1998-99 to about INR 229 in 2017-18. In real terms (2004-05 prices), this increase was from INR 50 to about INR 90 per day. The empirical analysis of the monthly wage time series identified a structural break in January 2007. Specifically, the curve is near-flat before this break-point subsequent which it rises sharply.