The 2014-2025 period contrasts with the earlier decade, showing a slowdown in real wage growth....

 India's 2004-2014 period saw higher real wage growth, particularly in agriculture, contrasted with 2014-2025 which experienced a significant slowdown and even real wage declines in rural areas, attributed to factors like agricultural terms of trade shifts, demonetization, and GST. While overall income grew, productivity and effective management of inflation are key to sustaining real wage increases. The period since 2014 has shifted from high inflation to a low-inflation environment, a positive sign for real wage growth if productivity can keep pace and ensure inclusive economic outcomes.

Real Wage and Income Trends

2004-2014: This period exhibited strong real wage growth across various sectors, with real agricultural wages increasing by around 4.4% annually and rural non-agricultural wages by 3%.

2014-2025: The trajectory shifted significantly, with real rural wages declining in many occupations. This slowdown coincided with events like back-to-back droughts in 2014-15, demonetization, the introduction of GST, and a general slowdown in the economy.

Role of Inflation

2004-2014: While overall income grew, the higher-growth period could have benefited from moderate inflation.

2014-2025: This period marked a successful transition from a high-inflation to a low-inflation environment. Benign inflation is crucial for supporting real wages, as it ensures that the purchasing power of wages doesn't erode quickly.

Role of Productivity

Both Periods: Productivity is a primary driver of real wage growth, as increased output per worker allows for higher wages without driving up prices.

2014-2025: A lack of significant employment growth (jobless growth) despite economic expansion has been a concern. For real wages to increase sustainably, especially in the post-2014 era, higher productivity is essential to create more and better-paying jobs.

Conclusion

The 2014-2025 period contrasts with the earlier decade, showing a slowdown in real wage growth despite a more favorable, lower-inflation environment. To improve real wages and income for a larger section of the population, particularly in rural areas, policies need to focus on accelerating productivity growth, fostering robust employment creation, and managing the benefits of low inflation to ensure inclusive development.