In 1977, H. M. Patel and the Ministry of Finance commissioned a report from the Study Group on Wages, Incomes and Prices, chaired by S. Bhoothalingam, Former Secretary, Department of Economic Affairs. Members included Dharam Narain (Chairman, Agricultural Prices Commission); Arvind Buch (Textile Labour Association); Hiten Bhaya (Director, Indian Institute of Management, Calcutta); Samuel Paul (Director, Indian Institute of Management, Ahmedabad); and G. C. Katoch (Financial Adviser, Ministry of Defence, Member-Secretary). The report noted that the increase in per capita income from 1970/71 to 1976/77 was only 3 percent. The dominant feature of the economy was the prevalence of the self-employed, unemployed, and underemployed. By March 1978, the working population was estimated at 261 million, of which 61.5 percent were self-employed. Compensation of employees formed 33 percent of the national income, while profits, dividends, and self-employment income represented 59.3 percent. Out of 24.8 million workers employed in the organized sector, about 60 percent (15 million) were in the public sector. Minimum wages were often fixed both nationally and at the state level and were set at different levels for different occupations. The report emphasized that with significant unemployment and underemployment, an a single national minimum wage would play a crucial role in generating employment. The unorganized sector served as a safety valve for surplus workers in rural areas, and policymakers needed to carefully consider this role to avoid causing adverse effects on employment.

The report recommended setting an initial target for the national minimum wage at Rs. 150 per month at 1978 prices, to be achieved within seven years. However, it suggested starting with Rs. 4 per day for unskilled work and at least Rs. 100 per month for continuous employment to maintain price stability. For the rural sector, a minimum household income of Rs. 1,800 per annum was recommended for the bottom 30 percent of the population, given the fluctuating earnings in agriculture. Supporting measures included improving returns on small land holdings and increasing employment opportunities. To reduce income inequality, the report suggested restricting the ratio of dividend payouts to profits, along with extending direct taxes to the rural rich and instituting industrial policies to limit large corporate expansions. A national pay commission was recommended to create model pay scales for the entire government sector, with a spread of four to five times the lowest wage. The report also recommended price-support policies for cash crops, organized marketing, a public distribution system for mass consumption goods, maintenance of buffer stocks, subsidies for lower-income groups, and timely imports of essential commodities. These recommendations aimed to balance economic growth and equitable income distribution while addressing the unique challenges of the Indian economic landscape.

The report received some criticism for having gone beyond its purview by recommending policies such as increased restrictions on industries’ capacity. Further, the recommendations were based on a questionnaire targeting state governments, public sector enterprises, trade unions, and employee organizations, but most state governments, universities, and larger trade union organizations did not respond, and some feedback fell outside the study’s terms of reference.

The report highlighted low economic growth rates, widespread unemployment, and income disparities, recommending a national minimum wage to enhance employment, support for rural household incomes, and targeted measures to reduce inequality, such as tax reforms and dividend caps. It also proposed initiatives like a national pay commission and price-support policies to balance economic growth with equitable income distribution.