Sun, Dec 29, 2013 - Page 14 News List

Food prices: a bricks-and-mortar problem for Indian economy

Faced with rising food prices, the dwindling supply of Indian workers are demanding rapid increases in pay and benefits, threatening government efforts to quell inflation

By Rajesh Kumar Sing and Aditi Shah  /  Reuters, GURGAON, India

Improved law and order and greater focus on development have helped boost growth in poorer states such as northeastern Bihar, whose economy has been growing by about 11 percent a year since 2006.

With jobs and wages rising so fast at home, big cities offer less of a lure to rural workers. Bihar estimates that immigration of unskilled workers last year dropped by two-fifths. That is shutting down an important source of workers for industries that have come to rely on them, particularly the construction sector that accounts for 8 percent of India’s GDP.

“Wages in states like Bihar are more or less comparable to those in Delhi,” said Ram Kumar, a contractor who supplies workers to different construction projects around Gurgaon. “But the cost of living is much cheaper than Delhi. So there’s not much to gain from coming to big cities.”

Wages for blue-collar workers are growing by an estimated 15 percent a year, according to government data, faster than the 6 percent average inflation rate, but barely above the 13 percent average annual increase in food prices.

Construction workers have managed to do better, with wages rising at an average of 18 percent annually since 2009, according to data from India’s Construction Industry Development Council, a joint government-private sector body.

“Inflation is leading to the need to increase wages,” said Kumar Gera, chairman at Gera Developments, a real-estate developer in western India.

“When workers come and tell you they can’t afford essential food items with what they are earning, you have to raise wages,” Gera said.

To retain workers, some companies provide canteens with free food, clinics and even schools, in addition to on-site housing.

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