Higher profit share, stagnant wage growth slowing economy: Survey
(Source – The Hindu, International Edition – Page No. – 6)
Topic: GS3 – Indian Economy |
Context |
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Growth in Corporate Profits vs. Wage Growth
- The Economic Survey highlights that corporate profits must grow in tandem with wages to boost the economy.
- Disparities between profits and wages risk curbing demand, which can slow economic growth.
Concerns About Income Inequality
- A slight rise in the labour share of GVA (Gross Value Added) is noted, but large corporate profits are a growing concern.
- High corporate profits and stagnant wages can decrease consumer spending, limiting economic demand.
Economic Growth and Employment Incomes
- Sustained growth depends on increasing employment incomes to drive consumer spending and investment in production.
- A fair distribution of income between capital and labour is essential for long-term stability.
Profit Growth and Employment
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- Corporate profitability reached a 15-year peak in FY 2023-24, largely driven by the financial, energy, and automobile sectors.
- Profits rose by 22.3%, but employment grew only by 1.5%.
- Wage growth has slowed, with employee expenses rising just 13% in FY24.
Improved Labour Market Indicators
- Post-pandemic recovery and formalisation have improved labour market indicators in India.
- Unemployment has decreased, and labour force participation has increased.
- Sectors like the digital economy and renewable energy offer potential for job creation.