Rural wage growth trailing inflation, govt should continue support: Report

Rural wage growth is trailing inflation and the government needs to continue with policy support to help people in the mofussil areas, a credit information company said on Thursday.

Village women work at a dry pond Pic: Reuters

Rural wage growth is trailing inflation and the government needs to continue with policy support to help people in the mofussil areas, a credit information company said on Thursday. In a report, Crif High Mark observed that rural wages are unable to keep pace with rising inflation and sought continued interventions from the policy front on this.

"With rising rural inflation, decline in real rural wages and slowing rural demand, it is important for the government and policymakers to continue their support to the rural sector," it said.

Rural inflation had remained above urban inflation in the first half of 2022, it said, adding that rural consumption declined and average rural unemployment decreased.

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The rural business confidence index, which takes inputs from macroeconomic indices, credit bureau data and the survey of companies operating in the rural areas, grew by nearly 10 points to 73.5 in 2022.

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"The government has focused on providing relief and credit flow to small business and other sectors that were affected by the pandemic. This has likely resulted in more positive macroeconomic outlook across industries in the rural sector," the report explained.

As per the survey, 70 per cent of respondents said government policies and schemes drove rural growth in 2022. It also said that a larger proportion of people (17 per cent in 2022 as against 7 per cent in 2021) expected a deterioration in the overall access to credit.

Citing the credit bureau data, the report said rural loan disbursements grew 26 per cent by value and 64 per cent by volume in FY22, when compared to FY21.

There was, however, a 5 per cent de-growth in commercial loan volumes in FY22 as against FY21, even though there was handsome growth in all other segments both by volumes and values, it said.

The average ticket size for retail loans slid to Rs 1.3 lakh in FY22 as against Rs 1.9 lakh in FY21, despite a nearly doubling of the volumes.

Loan performance improved across retail, microfinance and commercial loans segments with loans overdue for 91-180 days decreasing between June 2021 and June 2022, it said.

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