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Indian Express
29-07-2025
- Business
- Indian Express
What is driving rural distress in India?
— Ritwika Patgiri The Government has recently imposed a cap of 60 per cent on the spending under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) for the first half of the financial year 2025-26. Until now, the scheme has operated as a demand-driven programme with no such spending limit. The capping has been seen as a challenge for rural communities relying on it, especially during the lean agricultural season. It has also been argued that around 20 per cent of the first half's budget is usually spent on clearing pending wages of the previous year. The mandate comes at a time when data from the Ministry of Rural Development has shown a 4.5 per cent rise in households demanding work under MGNREGS between June 2024 and June 2025. In June 2024, around 26.39 million households sought work under the scheme in June 2024, which rose to 27.59 million in June this year. The year 2025 marks two decades since the implementation of MGNREGS, which aimed to provide at least 100 days of guaranteed wage employment to one member of every Indian rural household. The scheme was implemented against the backdrop of declining real agricultural wages after the 1991 economic liberalisation. MGNREGS (based on MGNREG Act, 2005) also came against the backdrop of rural development policies shaped for poverty reduction and capital formation. The scheme sustained over the years, and notably during Covid-19 lockdown absorbed a large number of returning migrant workers. However, in recent years, the scheme faced issues such as inadequate budget allocation and delayed wage disbursement. As of 2018-19, only 7.4 per cent of rural households, on average, availed of 100 days of work. In 2023-24, an average MGNREGS household worked only for 52 days. Since the pandemic, there has been a rise in the number of people demanding MGNREGS work. However, the growing gap between the demand for work and its availability underlines a larger rural distress, where finding employment since the lockdown has become difficult. Data from the Centre for Monitoring Indian Economy (CMIE) highlights key indicators of this distress: — Rural wage contraction — High rural inflation — High demand for employment under MGNREGA, and — Sluggish rural consumption. These issues are closely linked to the developments in the agriculture sector. Agriculture remains India's largest sector for employment, accounting for 46 per cent in 2023-24, while contributing only 16 per cent to the country's GDP. During the last eight years, the real Gross Value Added (GVA) of agriculture has increased by 4.9 per cent. The projected growth rate of agriculture in FY 2025 is 4.6 per cent compared to 2.7 per cent in FY 2024. Nonetheless, despite this, real wages of agricultural workers have largely remained stagnant. The projections for growth are based on a good Kharif harvest and are contingent on an equally positive Rabi (winter) harvest, which is largely dependent on climatic conditions. In India, the agricultural workforce consists of cultivators and agricultural labourers. Agricultural labourers work on land owned by others in return of wages, paid in cash or kind. Cultivators, on the other hand, own land or operate land through lease or contracts. The stagnation in real wages of agricultural workers, along with an increase in agriculture's share of employment from 42.5 per cent in 2018-19 to 46.1 per cent in 2023-24, reveals issues within the sector and the broader Indian economy. The 'buffer' or 'fallback' nature of agriculture became evident during the Covid-19 pandemic and the lockdown. Studies have found how rural households went back to agriculture in the absence of other alternatives during the lockdown. Migrant workers returning to their respective areas also took up agricultural work as a 'fallback' option. This shows that agriculture remains important for rural labour. At the same time, sustained agricultural growth and rise in farmers' income are dependent on public investment and structural reforms in the sector. According to NABARD's All India Rural Financial Inclusion Survey (2021-22), the average monthly income of agricultural households was Rs 13,661 compared to Rs 11,438 of non-agricultural households. For agricultural households, income from cultivation forms one-third of the total income and is the primary source. Agricultural households have also shown more diversification into other income sources as compared to non-agricultural households. The story of the emergence of non-farm employment among rural households is closely related to the transformation of the rural economy post-Green Revolution. India's economic growth between the 1960s and 1980s has been termed by the late economist Raj Krishna as the 'Hindu rate of growth', referring to the low economic growth that averaged around 4 per cent. During the 1960s, the growth rate of agriculture was around 1 per cent annually, which increased slightly to 2.2 per cent between 1968-69 and 1975-76. The Green Revolution of the early 1970s helped the country achieve food sufficiency in foodgrains like rice and wheat. However, the impact of this revolution was uneven, evident in: — Rising regional disparities — Neglect of rainfed areas — Neglect of nutritional crops, like millets, and non-food grains, and — Exclusion of resource-poor farmers Moreover, it also raised concerns about issues of ecological degradation and long-term environmental sustainability. Another debate around the Green Revolution in India has been around its role in the emergence of the rural non-farm sector. The mainstream view holds that Green Revolution technologies, by boosting agricultural productivity and farmers' income, create consumption linkages that generate demand for goods and services produced by small-scale, labour-intensive rural entities. This, in turn, creates backward linkages and spurs demand for agro-processing goods. Studies indicate that states like Punjab, Haryana, and West Bengal have benefitted from such growth patterns. However, there's a flipside to it – a contrasting perspective suggests that because of rising input costs and uneven distribution of the benefits of the Green Revolution, many rural households were pushed to opt for alternative non-farm sources of income. Hence, it has been argued that rural non-farm employment was often driven by distress. In fact, the nature of the emergence of the rural non-farm economy is contentious. There is, however, evidence that a large number of farmers are increasingly relying on borrowing to manage their agricultural activities as a result of rising costs of cultivation, including the cost of labour, fertilizers, and machinery. The larger question on the current rural distress indicates that despite growth in the agricultural sector, rural workers struggle to find adequate employment. While supply side policies like easing credit access, reducing direct taxes (like corporate taxes), and promoting the ease of doing business are important, they fall short of addressing the basic concerns of job creation and the quality of employment available to rural workers. MGNREGS, for instance, was implemented on the basis of a legal right to employment. But the spending cap neglects the demand-driven nature of the scheme. Moreover, public investment in agriculture needs to be scaled up, particularly in areas like irrigation, storage, and climate-resilient farming practices. Both MGNREGA and agriculture acted as 'fallback' options during the pandemic-induced lockdown, a fact that cannot be overlooked in future policy decisions. Examine the impact of the recent cap 60 per cent on MGNREGS spending on rural employment and livelihoods. What do you think could be the possible implications of spending cap on the scheme? Despite growth in agriculture, rural workers continue to face employment challenges. Discuss the structural issues underlying this paradox. MGNREGS functioned as a safety net during times of crisis, such as the COVID-19 lockdown. Comment. Discuss the role of MGNREGS and agriculture as 'fallback' options in the rural labour market. What does this indicate about the state of rural employment in India? (Ritwika Patgiri is a doctoral candidate at the Faculty of Economics, South Asian University.) Share your thoughts and ideas on UPSC Special articles with Subscribe to our UPSC newsletter and stay updated with the news cues from the past week. 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Business Standard
14-07-2025
- Business
- Business Standard
Stock Market LIVE: GIFT Nifty flat; Asia mixed; HCLTech Q1, June CPI eyed
Sensex Today | Stock Market LIVE on Monday, July 14, 2025: Around 6:31 AM, GIFT Nifty futures were trading 18 points lower at 25,205, indicating a flat to negative start for the bourses. 7:04 AM Stock Market LIVE Updates: Manufacturing dominated new projects in Q1, share at 10-quarter high Stock Market LIVE Updates: More than half of all new project announcements in the June 2025 quarter came from the manufacturing sector. Manufacturing projects worth around ₹2.3 trillion were announced in the three-month period, accounting for 54 per cent of total new projects, according to data from the Centre for Monitoring Indian Economy (CMIE). This is the highest share in 10 quarters. Such a high share has occurred less than six times since 2010. The government has been driving much of the capital expenditure (capex) in recent years through its announced investments in roads, railways, and other infrastructure projects. The value and share of manufacturing projects assumes significance because of the sector's potential for job creation and what it might mean for private capex, seen to be a major driver of economic growth. 7:03 AM Stock Market LIVE Updates: Singapore's economy grew at 4.3 per cent year-on-year (Y-o-Y) in the second quarter of 2025, accelerating from 4.1 per cent in the first three months and beating expectations. Reuters poll of economists had forecast a 3.5 per cent growth. On a quarter-on-quarter basis, Singapore's GDP grew by 1.4 per cent, a turnaround from the 0.5 per cent contraction last quarter. The GDP growth was led by the manufacturing sector, which expanded 5.5 per cent Y-o-Y, up from 4.4 per cent in the first quarter of 2025. The sector makes up about 17 per cent of the country's economy. Despite the GDP beat, Singapore's Ministry of Trade and Industry said in its release that 'there remains significant uncertainty and downside risks in the global economy in the second half of 2025 given the lack of clarity over the tariff policies of the US.' Source: CNBC 7:00 AM Stock Market LIVE Updates: Wall Street, Asian stocks slip as Trump's tariff threats rattle investors Stock Market LIVE Updates: Losses in Wall Street futures dragged Asian stocks lower on Monday as the latest round of threats in the US tariff wars kept investors on edge, though the fallout was limited by hopes this was mainly bluster by President Donald Trump. Trump on Saturday said he would impose a 30 per cent tariff on most imports from the EU and Mexico from August 1, even as they are locked in long negotiations. The European Union said it would extend a suspension of countermeasures to US tariffs until early August and continue to press for a negotiated settlement, though Germany's finance minister called for firm action if the levies went ahead. Investors have become largely inured to Trump's chaotic policy methods and stocks eased only modestly, while the dollar gained just a fraction on the euro.
Mint
06-07-2025
- Business
- Mint
India Inc sits on ₹5 trillion cash pile as firms hold back on capex amid uncertainty
Amid a patchy demand recovery and lingering global uncertainty, India Inc. continued to hoard cash in the last fiscal year, choosing financial buffers over fresh investments. Despite rising profits and healthy balance sheets, companies showed little urgency to deploy capital, preferring to return more to shareholders instead. A Mint analysis of cash holdings of 285 BSE-listed firms, excluding banking, financial services and insurance companies, showed a 12% year-on-year rise to ₹5.09 trillion in FY25. Yet, new project announcements fell 5% in the same period, following a 3% contraction in FY24, according to the Centre for Monitoring Indian Economy's (CMIE) project-tracking database. Companies are now sitting on cash and cash equivalents amounting to nearly 12% of their total assets. The rising number of firms with high cash ratios also points to subdued confidence in future business prospects. Between FY24 and FY25, more companies positioned themselves defensively, holding 25-50% of their assets in highly liquid form, the analysis showed. With no broad-based demand revival since the pandemic, there's little incentive to reinvest profits. Rather, in the absence of sustained revenue growth, many firms have relied on cost optimization and price hikes to maintain profitability. Still, flush with cash, many companies rewarded shareholders handsomely. A separate Mint analysis of 496 BSE 500 companies showed dividend payouts rose 11% on year in FY25 to ₹4.9 trillion—the highest in at least a decade, outpacing net profit growth of 9.5%. That suggests India Inc currently prefers sharing profits with investors over committing to long-term expansion. Recovery ahead? The big question now is when that investment impulse might return. Many experts believe a pickup in investments may hinge on global clarity—particularly a long-awaited US-India trade deal. President Donald Trump's reciprocal tariff pause ends on 9 July, and firms appear to be holding off until there's more certainty on that front. Asit Bhandarkar, senior equity fund manager at JM Financial Asset Management, notes that a lot of projects are in 'blue-print" mode and would be led by both organic and inorganic expansion plans. "The rising number of performing credit deals also indicate that money is being raised to improve existing capacities as well," he said. On a more optimistic note, Pankaj Pandey, head of retail research at ICICI Securities, expects a sharper rebound in corporate investments in FY26, especially after private capex outpaced government spending last year. He expects energy, utilities, metals, automobile and industrial goods sectors to lead the capex cycle this year. Adding to that, Raghav Narsalay, research lead and partner at PwC, pointed out that many firms now aspire to become global value chain leaders. 'So everyone wants to deploy cash wisely, even though money is getting cheaper to borrow." Alternate avenues Beyond dividends, some of India Inc.'s war chest may also be channelled into product innovation and service enhancements. In order to drive topline growth from here on they are gearing up to expand their customer outreach, said Narsalay. 'Companies are now looking to innovate products, reinvent their business models and overall offer better value propositions to lure back customers. They are more willing to experiment with technology rather than buy lands or machinery immediately," he added. Meanwhile, with fortified balance sheets and relatively low leverage, firms have ample room to borrow for acquisitions. Total debt level rose just 5% in FY25, following a slight contraction in FY24, the analysis showed. 'Since raw material prices are not at peak levels and there is not much stress in balance sheets, they can also borrow for inorganic expansions," noted Pandey from ICICI Securities. Strong cash flows and high profitability, coupled with cooling valuations and improved liquidity, have triggered a wave of consolidation in several industries. Cement, cables, paints and healthcare have seen a particular pickup in acquisition activity, said JM Financial's Bhandarkar.
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Business Standard
04-07-2025
- Business
- Business Standard
Win some, lose some: the surprising post-pandemic changes in wage growth
The more educated have had slower growth but they are the highest paid in the country Sachin P Mampatta Mumbai Listen to This Article Wages in India are slowly picking up from their pandemic dip but remain in single-digit territory. Wages have grown at 8.7 per cent on an annualised basis since 2018-19, shows data from the Centre for Monitoring Indian Economy (CMIE) based on its Consumer Pyramids Household Survey. This is lower than the 12 per cent growth in 2018-19 and 31 per cent growth seen in 2017-18, though recovery from demonetisation and associated disruptions may have played a role in the latter figure. The latest growth figure is despite a nearly 19 per cent year-on-year growth in 2024-25, the fastest in seven
Mint
02-07-2025
- Business
- Mint
June turns quieter as animal spirits fade
Indian companies began 2025-26 on a subdued note, with investment appetite for new projects sinking to one of the lowest in nearly five years. While the June quarter is often a quieter period, new government capital expenditure (capex) announcements were the lowest this year in at least a decade. According to data from the Centre for Monitoring Indian Economy's (CMIE) project-tracking database, new projects worth ₹4.1 trillion were announced across the country during the first quarter of the current fiscal. This marks one of the lowest investment proposals since the first three quarters of 2020-21 (amid pandemic lockdowns) and the first quarter of 2024-25 (during general elections). Also Read: GVA data haze: Has India been overcounting the output of its informal sector? 'There is usually a seasonal dip observed in project announcements in the June quarter after the ramp-up in March. But this year the decline was unusually sharp," said Aditi Nayar, chief economist at Icra Ltd. A sharp decline in government projects, accounting for only 13% of overall new investments, primarily drove the slowdown in the recently concluded June quarter. Government investments totalled a mere ₹0.5 trillion, marking the lowest for a June quarter in at least a decade. This figure was even lower than public sector projects announced during April-June 2020, when the country had undergone an unprecedented lockdown due to the Covid-19 pandemic. According to Icra's Nayar, the notable decline in Q1FY26's new projects should be read carefully, as it follows the unusual spike in Q4FY25 of worth ₹6.8 trillion, which was more than double the year-ago levels and also exceeded the amounts seen in the rest of 2024-25 together. Also Read: Public capex is doing the heavy lifting, and the figures aim at a decade's high 'The chunking up of such announcements in Q4FY25 is likely to have led to the lull in Q1FY26," she added. Private sector investments, at ₹3.5 trillion, though accounting for the bulk of new project announcements in Q1FY26, still hit a four-quarter low. Among the 10 largest new project announcements in the June quarter—which collectively represented approximately 67% of total investments—only one was government-funded: the Chandrapura Ultra Supercritical Power Plant Expansion Project worth ₹0.2 trillion in Giridih, Jharkhand. Vedanta's Dhenkalan Aluminium Smelter Project led new investments in Q1FY26 at ₹1.3 trillion, followed by InterGlobe's purchase of 30 more Airbus A350-900 aircraft valued at ₹0.4 trillion. Sector-wise analysis reveals that manufacturing primarily dominated new investments in the quarter, accounting for more than half of all announcements, yet investments in this segment remained at a near two-year low. Also Read: Sixteenth Finance Commission likely to keep states' tax share unchanged amid Centre's defence, capex needs Despite the subdued pace of new investment announcements in Q1FY26, project completions showed relative strength, with projects worth ₹2 trillion completed during the quarter, marginally lower than projects worth ₹2.4 trillion completed in the previous quarter.
