 "Corporate profit record high, salaries stagnant: Ficci report says mismatch impeding India’s GDP growth")
A report by the Federation of Indian Chambers of Commerce and Industry (Ficci) and Quess Corp Ltd has raised concerns at some levels in the central government amid declining rate of economic growth. The report talks about a record high profit by the private sector, with stagnation in salaries of the workers — one of the reasons for sluggish private consumption, a key driver of economic growth.
India’s gross domestic product (GDP) growth of 5.4 per cent in the second quarter (July-September) of financial year 2024-25 has raised concerns among policymakers. Against this backdrop, the Ficci-Quess report revealed that the private sector recorded four times growth in profit during 2019-23. But there was low single-digit income growth in the corporate sector, resulting in dwindling demand.
The report said the compounded annual wage growth rate across six sectors ranged between 0.8 per cent for the engineering, manufacturing, process and infrastructure (EMPI) companies and 5.4 per cent for fast-moving consumer goods (FMCG) industries.
It also said that workers, including those in formal sectors, witnessed a meagre or negative growth in real incomes, calculated as growth in salary adjusted towards price rise or inflation.
In the five years from 2019 to 24, annual retail inflation maintained its upward march with 4.8 per cent, 6.2 per cent, 5.5 per cent, 6.7 per cent and 5.4 per cent, respectively.
Findings from Ficci-Quess survey
The Ficci-Quess survey findings are not available in the public domain. The Indian Express, which got access to it, reported that the survey showed the compounded annual growth rate (CAGR) for wages during 2019-23 was the lowest for the EMPI sector at 0.8 per cent and the highest for the FMCG sector at 5.4 per cent.
For BFSI (banking, financial services, insurance), wages grew at 2.8 per cent and for the retail sector, the growth was 3.7 per cent during the same period. Wages grew at four per cent in the IT sector, while for logistics, the growth was 4.2 per cent.
Impact Shorts
More ShortsIn absolute terms, the average wage was the lowest for the FMCG sector at Rs 19,023 in 2023, and highest for the IT sector at Rs 49,076 in 2023.
The survey calculated the average gross wage on the basis of the cumulative salary of all employees across different job roles in a particular sector and dividing it by the total number of employees.
It also noted that the wage growth is indicative and not definitive because the salary varies based on job roles, with some job roles getting higher wages than the rest.
The Indian Express quoted sources in the government as saying that one of the key reasons for subdued consumption, especially in urban areas, was weak income levels.
“Post-Covid, consumption rose with pent-up demand, but the slower wage growth has brought to the fore concerns about a full economic recovery to the pre-Covid phase,” the report cited a source in the government as saying.
On December 5, while addressing Assocham’s Bharat @100 Summit, Chief Economic Advisor V Anantha Nageswaran emphasised that there has to be a better balance between the share of income going to capital in terms of profits and the share of income going to workers as wages.
“Without that, there will not be adequate demand in the economy for corporates’ own products to be purchased. In other words, not paying workers, or not hiring workers enough, will end up being actually self-destructive or harmful for the corporate sector itself,” Nageswaran had said.
He suggested that India Inc should examine the issue to address it appropriately for the overall economic growth of the country.
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