Three months since journeying more than 700 milesfrom his village in central India to take a job in this bustling city near the capital, New Delhi, Charan is already looking forward to a 10 percent pay rise. He isn’t an engineer or programmer. He hauls bricks and sand at a local construction site for less than $100 a month.
India’s biggest cities face a worsening shortage of migrant manual laborers like 26-year-old Charan, who goes by only one name. While India has long suffered from a dearth of workers with vocational skills like plumbers and electricians, efforts to alleviate poverty in poor, rural areas have helped stifle what was once a flood of cheap, unskilled labor from India’s poorest states.
Struggling to cope with soaring food prices, this dwindling supply of migrant workers are demanding – and increasingly getting – rapid increases in pay and benefits.
“After paying for food we are left with almost nothing. We need a wage hike,” said Charan, who sends a part of whatever he and his wife, who works at the same site, manage to save to their parents back home in Chhattisgarh state.
If their employer refuses to give them an adequate raise, they are confident they’ll find better-paying jobs at one of the hundreds of other sites dotted around Gurgaon.
Such gains by migrants and the rural poor don’t come without a cost to the rest of the country.
More than pressuring corporate profits, these rapid blue-collar wage increases threaten efforts to quell inflation by India’s new central bank chief, Raghuram Rajan, the former International Monetary Fund economist who took over as governor at the Reserve Bank of India (RBI) in September. Rajan has made price stability a policy priority, calling it a prerequisite for reviving economic growth that has slipped to 5 percent a year, the lowest in a decade.
Despite little evidence that interest rates can control food prices, Rajan has raised rates twice since taking over to prevent food-price inflation from spilling over into the wider economy. He has warned of another hike next month if prices don’t cool significantly.
“India has become a high-cost economy,” said Devendra Kumar Pant, chief economist at India Ratings & Research. “Persistently high inflation is a recipe for disaster.”
Take onions, which figure in almost every Indian meal. Prices for onions shot up 190 percent to $1.60 a kilogram in the past year, making them more expensive in India than in the United States, where incomes are roughly 35 times higher. That helped push vegetable prices up 95 percent in the past year and pushed India’s headline inflation rate in November to 7.5 percent, a 14-month high.
And while vegetable prices are expected to start easing next month following a bumper harvest, subsidized government purchases of grains and rising farming costs mean overall food inflation is not likely to slow down much.