Why India’s labourers can’t afford to buy a packet of biscuits for Rs 5

Trouble is, the distribution of the Indian economic pie is more lopsided than the aggregate numbers suggest

Economy News: When snack makers start to lament that Indians can’t afford to spend 5 rupees (7 cents) on biscuits, it’s time to stop arguing over how much of the nation’s slowdown is cyclical and what part is structural.

Considering its glaring income, wealth and consumption inequalities, India is a surprisingly calm society. However, when purchasing power dries up to the extent that rural laborers and urban blue-collar workers have to think twice about cheap munchies, then the situation is desperate. The culprit is deep-rooted wage suppression, a long-term issue that needs attention.

Britannia Industries Ltd., the No. 1 Indian biscuit maker, recently sounded alarm bells over the sharp deceleration in its domestic sales volumes. Rival Parle Products Pvt. chimed in and said jobs were at risk for as many as 10,000 of its workers.

A Parle executive blamed India’s 2017 goods and services tax, or GST. While the consumption tax may indeed have been an additional burden in an economy slowing under a disastrous November 2016 currency ban, the funk has its roots in insufficient wages. In recent years, only about a third of the economy’s income has gone to labor, with providers of debt and equity capital taking the rest, according to India Ratings and Research Pvt., a unit of Fitch Ratings…

Read More: Indian Economy