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In this economically dynamic world, CPI (Consumer Price Index) plays a very pivotal role in reflecting the change in the standard of living. For the smeared section of society, such as agricultural labour depending on schemes like MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act), the CPI Index can impact their wages significantly.
The MGNREGA scheme, launched in 2005, guarantees 100 days of wage employment in a financial year to rural households whose adult members volunteer to do unskilled manual work. This rule aimed at providing security to labour wages by providing employment opportunities during the lean season.
The CPI tracks the inflation of goods and services consumed by the average household. This includes goods and services like transportation, food, clothing, etc. For MGNREGA whose income is already at par level, any uptick in inflation has a very deep impact on them. As the price of commodities rises, their purchasing power diminishes, exacerbating their economic vulnerability.
The real wages of MGNREGA agricultural labourers effectively fall during periods of high inflation. Even though the government sets the nominal wage rates, workers' earnings are worthless because of inflation's deterioration of purchasing power. This phenomenon has the potential to deepen the economic deprivation cycle for households that are already poor.
For the upgradation of MGNREGA, the Ministry of Rural Development uses CPI-AL (Consumer Price Index of Agricultural Labor).
CURRENT SCENARIO
According to the report from Economics Times, CPI-AL for December 2023 stood at 7.1%, which shows an increase of 20% from December 2022. This will lead to an increase in the wages of MGNREGA labour. However, this increase varies by region based on the CPI-AL figure on that region. The average MGNREGA wage increase across India is ₹28 per day. The average wage for 2024-25 will be ₹289 as against ₹261 for FY'23-24.
As mentioned, it varies from region to region. For example, in Karnataka, it is ₹349, in Bihar it is ₹245, in Uttar Pradesh it is ₹ 237, while in Punjab it is ₹322.
CRITICISM AND DRAWBACKS
This scheme faces some criticism. While the CPI-AL provides some protection against inflation, some argue that it still does not keep pace with the rising cost of living and may not accurately capture the inflation faced by rural labour as their basket of goods differs from that of the urban population tracked by the index. It takes time to revise the wages of MGNREGA workers to reflect changes in the CPI index, which further exacerbates the situation of labour.
Thank you.
Regards,
Harsha Sindhi
Kautilya, IBS Mumbai.
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