India’s Growth Dips as Private Sector Profits Outpace Wage Growth
India’s economic growth has reduced to 5.4% for the July-September quarter, becoming a worrying point for the government and policymakers. A recent report by FICCI and Quess Corp reveals that while corporate profits have risen fourfold in the last four years, there has been barely any increase in employees’ basic wages.
This gap is gradually becoming one of the factors responsible for the lack of demand, which may hinder full economic recovery from pre-COVID economic levels.
According to the FICCI-Quess report, wage increases in six major sectors between 2019 and 2023 were relatively weak, with the engineering, manufacturing, and infrastructure sectors experiencing the lowest annual raise at 0.8%. However, the highest wage increase was recorded in the fast-moving consumer goods (FMCG) sector at 5.4%.
Nevertheless, even in this top-performing sector, wage growth has not matched the inflation rate – workers’ real incomes have shrunk, and their buying power is down.
Inflation Outpaces Wage Increases
Retail inflation rates have fluctuated between 4.8% and 6.7% over the last five years, which has meant a real wage cut for workers. This period of inflation has led to higher living costs, and wages still need to be adjusted to those higher costs, essentially cutting down on employees’ quality of life.
Chief Economic Advisor V Anantha Nageswaran presented these figures at various corporate meetings, asking India Inc. to assess their wage structures and how such wage rigidity adversely affects the economy.
The government source, reported by The Indian Express, noted that low incomes are cutting into consumer expenditures, especially in the urban areas. While consumption increased to some extent during post-COVID due to demand recovery, the continuously low wage growth in developed countries raised concerns about economic growth.
Corporate Profits vs. Wage Equity
At a recent speech at Assocham’s Bharat @100 Summit, Nageswaran highlighted the tendency in which corporate revenues skyrocket while their employees’ wages remain fixed. He insisted that the dramatic increase in profits, which exceeded 15-year highs in March 2024, requires a change in income distribution inside the companies.
By denying workers a good wage, the companies risk undermining the very consumer market that sustains them and might be directly responsible for a slowdown in demand in the economy.
