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Higher profit share, stagnant wage growth slowing economy: Survey

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(Source – The Hindu, International Edition – Page No. – 6)

Topic: GS3 – Indian Economy
Context
  • The Economic Survey highlights the need for balanced corporate profit growth and wage increases to sustain economic growth.

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

    • 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.

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