India has been among the world’s fastest-growing economies over the past decade, averaging around six percent annual GDP growth. Yet the gains from this growth have not reached all. While reports suggest that many have been lifted out of extreme poverty, economic inclusion—fulfillment of basic needs and access to opportunities that enable productive, empowered lives—remains elusive for a large share of the population. This is evident in India’s per capita income, which is among the lowest in Asia. As of 2025, it stands at approximately USD 2,700 (approximately INR 2.6 lakhs per annum).
Wage trends in India further illustrate a more accurate picture of economic exclusion: earnings have stagnated in real terms (that is, when adjusted for inflation), barely covering essential household needs, let alone enabling upward economic mobility. In fact, rising costs of essential goods, such as food, education, and fuel, have further eroded purchasing power. Combined with extreme income inequality, these trends have deepened the economic exclusion of a majority of India’s working population. The scale of disparity is starkly illustrated by Oxfam’s estimate that it would take a minimum wage worker in rural India 941 years to earn what a top executive at a leading Indian garment company makes in one year.
Exclusion and rising inequality have fueled major worker mobilisations across sectors, especially in the informal economy that employs over 90 percent of India’s workforce. In April 2026, thousands of factory workers in Noida, employed in small auto-parts and garment units, protested for higher pay and better protections. Many of them earn a meagre INR 11,000–13,000 per month and live in cramped housing. February 2026 saw nationwide protests by gig workers across Delhi, Maharashtra, and Karnataka demanding fair pay and social security. In Assam, anganwadi workers protested against minimal wage revisions, with monthly payments of INR 8,500 for workers and INR 4,000 for helpers remaining far below what is needed for a decent standard of living.
In this context, the article explores current wage trends in the country and shows how existing reforms, while a step in the right direction towards addressing wage inadequacies, still fall short of reaching the majority of workers in the informal sector. It then makes the case for scaling income support measures as a practical route to economic inclusion.
The wage gap challenge
Workers’ demands for higher wages and better social protection, especially in the informal sector, emphasise a persistent gap between what workers earn and what they need to secure a decent standard of living.
The Global Living Wage Coalition (GLWC) defines a living wage as “remuneration received for a standard work week by a worker in a particular place sufficient to afford a decent standard of living for the worker and her or his family. Elements of a decent standard of living include food, water, housing, education, health care, transport, clothing, and other essential needs, including provision for unexpected events.”
To assess the adequacy of current wage levels, we compared prevailing nominal wages for FY 2023–24 (which is the latest available data) to the living wage estimates computed by the GLWC using the Anker Methodology. It focused on five regions in India (Figure 1), selected to ensure both geographic and occupational diversity.
Based on our analysis of the five selected regions, current nominal wages (FY 2023-24) fall significantly short of living wage benchmarks, with gaps ranging from 29 percent to 57 percent (Figure 1). For instance, in Chhindwara, a predominantly agrarian district in Madhya Pradesh, the estimated living wage is INR 14,304 per month, while average monthly earnings for agricultural workers in the state are INR 6,170, only about 40 percent of the required level. Similar disparities can be observed in other regions of the country.
Furthermore, wage benchmarks, such as the minimum wage itself, do not align with living wage estimates.Take, for instance, the case of rural Assam, where the primary occupation is agriculture. The latest minimum wage for unskilled workers in the state is INR 10,544, which falls about 30 percent short of the living wage estimate for that region. This highlights the gap that many individuals face in reaching a decent standard of living, leaving them unable to meet their essential needs, let alone invest in opportunities that could improve their long-term economic well-being.
These challenges are further compounded by the stagnation of real wages in the informal sector. Analysis of Labour Bureau data shows that, while nominal rural wages have increased by an average of five percent annually over the last decade, real wages (that is, wages that have been adjusted for inflation to represent the actual purchasing power of earned wages) have largely remained stagnant, growing by only 0.1–0.6 percent annually between 2015–16 and 2023–24.1
Similar trends are observed in urban areas, where real wages grew by approximately 0.8 percent per year. Further, disaggregated analysis shows that this stagnation is widespread across occupations, sectors, and genders.
Importantly, some occupations have experienced negative real wage growth. For instance, real wages in non-agricultural occupations, such as weaving, plumbing, and electric works, declined by 0.29–0.44 percent annually. Women’s real wages grew slightly faster at 0.6 percent compared to 0.1 percent for men. Part of this difference may also be attributed to the lower base wages that women typically earn compared to men, indicating how existing gender disparities could be exacerbating the impact of wage stagnation.
Wages remain too low to ensure a decent standard of living, while stagnant real wage growth compounds this problem.
Overall, these trends raise critical concerns about the stagnating (and in some cases, eroding) purchasing power of workers, increasing their likelihood of being consumption constrained. For instance, reports suggest that households are increasingly relying on debt to meet consumption expenditure due to stagnating wages. Additionally, in the face of health, climate, and other shocks, such households tend to resort to costly coping strategies such as selling productive assets, reducing food consumption, or withdrawing children from school. Being consumption-constrained in this way potentially crowds out productive investments, such as those in livelihoods, education, and skill-building, fueling intergenerational economic vulnerability.
To summarise, our analysis highlights two interlinked challenges: wages remain too low to ensure a decent standard of living, while stagnant real wage growth compounds this problem by keeping several households consumption-constrained, and limiting their ability to invest in long-term economic mobility.
Do policies respond to these challenges?
Past and recent reforms signal policy recognition of these challenges. The Minimum Wages Act of 1948 mandated that minimum wages should be revised at least every five years, and that revisions be linked to the Consumer Price Index (CPI). More recently, the latest update to the Code on Wages introduced a binding national floor wage (yet to be announced) below which minimum wages cannot be set, and expanded social security coverage to gig, platform, and unorganised sector workers previously excluded from its purview.
However, delays in revising minimum wages and poor administrative enforcement remain significant constraints. Reports indicate that the minimum wage revision rules based on the 1948 Act are poorly followed across states. For example, the Uttar Pradesh government revised the minimum wage after 12 years following protests by workers in Noida in April 2026.
An additional enforcement challenge stems from the country’s large informal workforce, which makes compliance harder to monitor. Evidence indicates that one in four casual workers is paid below the minimum wage, with Chhattisgarh reporting more than 70 per cent earning below the minimum wage.
The way forward
Achieving economic inclusion requires adequate wages,labour protections, and social protection measures that provide financial security to vulnerable households.
Currently, the guidelines for setting a floor wage are vague, stating that the central government will decide it based on “minimum living standards including food, clothing, housing, and other appropriate factors.”
It is first essential for the Union Government,through the Ministry of Labour and Employment, to undertake a deeper evaluation of wage adequacy across states and ensure that wage benchmarks reflect actual living costs across regions. This is particularly important against the backdrop of the Government of India’s promise of a National Floor Wage (states cannot set minimum wages below this level). Such benchmarks should represent empirically grounded methodologies, such as the Anker methodology, to ensure that wages support upward socioeconomic mobility rather than merely keeping pace with inflation and maintaining workers at subsistence levels.
Currently, the guidelines for setting a floor wage are vague, stating that the central government will decide the floor wage based on “minimum living standards including food, clothing, housing, and other appropriate factors.” Once such an empirically grounded floor wage is established, state governments then have the responsibility for both setting and enforcing wages that align with this minimum standard. Additionally, the Union government should also consider state- and industry-specific factors when determining minimum wages and their revision schedule across all industries within their borders.
State governments, which are responsible for enforcing the labour codes, must ensure the timely roll-out of rules under the updated codes, supported by strong inspection regimes that are closely monitored for their frequency and quality, so that statutory protections actually reach workers in the informal sector, where compliance is hardest. Some states have already shown this is achievable. While Meghalaya has released draft rules, Arunachal Pradesh, Bihar and Gujarat are among the few states to have notified final rules under all four labour codes. Gujarat has also mandated that employers maintain electronic registers and make them available for inspection through the state’s online portal.
Additionally, other social protection measures are required to ensure economic security for vulnerable groups. Cash transfer schemes are one such policy that have become increasingly common in the country over the past few years, with approximately 18 states currently implementing such schemes, improving households’ propensity to consume—reflected in the decreasing inequality in consumption expenditure. Most current schemes, such as the Mukhyamantri Majhi Ladki Bahin Yojana in Maharashtra and Gruha Lakshmi in Karnataka, are smaller, more frequent consumption support transfers (INR 1,500 and 2,000 monthly, respectively) that help households meet immediate consumption needs—recent evidence from the Economic Advisory Council to the Prime Minister (EAC-PM) on Maharashtra estimated a 46 percent increase in spending compared to before the introduction of the Mukhyamantri Majhi Ladki Bahin Yojana.
In contrast, schemes like the Sikkim Aama Sashaktikaran Yojana and the Subhadra Scheme in Odisha provide larger, less frequent payments that could enable productive investments supporting economic mobility. A study by IIM Sambalpur on Odisha’s Subhadra Yojana noted that about 80 percent of the funds were used for productive investments that included investments in livelihoods, education, and skilling. Cash support measures could therefore help address binding liquidity challenges that workers in the informal sector face due to low and unpredictable wages (caused by seasonality or cyclicality) and the limited reach of wage reforms. While many states are already implementing these measures and should continue to provide such support, there is potential to extend these efforts to all states to ensure that informal workers nationwide have access to basic financial stability.
A combination of empirically grounded reforms, their effective enforcement, and social protection measures is therefore required to move workers beyond subsistence, enabling them to meet basic needs, invest in their futures, and participate meaningfully in the economy, making economic inclusion a reality, not just an aspiration.
Shambhu Ghatak contributed to this article.
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Footnotes
- Real wage growth has been calculated using rural wage data from the Labour Bureau, employing semi-log regression analysis.
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Know more
- Understand how budgetary allocations have failed to address income and employment insecurity for women and informal workers.
- Read about the gaps in India’s poverty decline estimates, and what must be counted instead.
- Learn how existing metrics lead to an underestimation of inequality in India.
