Reserve Bank India’s governor Raghuram Rajan has rejected the common notion that the National Rural Employment Guarantee Act is behind the massive spurt in wages in the country’s rural.

“There is clearly a lot of sense that this has increased rural wages tremendously. I would argue that clean, trustworthy studies say that the effect was may be 10 per cent,” Rajan stated.
Other factors such as increase in minimum support price of food items, better realisations for food commodities in the international markets, migration of labour to the construction industry, combined with  withdrawal of female labourers from the workforce, have caused the spike in wages, he elaborated.

Stressing further, the governor said, “Women instead of working in fields or working as agricultural labourers at the younger end have gone to schools and at the older end moved back into households. That is not an entirely bad development; in fact that reflects the greater wealth in rural areas.”

Following the rural jobs scheme, rural wages have almost doubled on an average and more than doubled in certain states. The RBI governor, who is an advocate of control fiscal imbalances, however, defends the welfare programme.