Government Raises Alarm Over Wage Growth Lag

The Indian government has recently expressed concerns over the sluggish wage growth that is trailing behind the surge in corporate profitability. Last fiscal year, corporate profits soared to a 15-year high, primarily driven by large corporations. The Economic Survey emphasized the need for a more equitable distribution of profits to stimulate economic growth and consumption.

Impact on Economic Growth and Consumption

The survey highlighted that a higher profit share coupled with stagnant wage growth could potentially decelerate the economy by suppressing demand. It underscored the importance of bolstering employment incomes to sustain economic growth, as these directly fuel consumer spending and, in turn, spur investment in production capacity.

Private Sector's Response

The private sector, represented by ITC CMD and CII president Sanjiv Puri, countered the government's stance by stating that wages cannot be indexed to profitability. Puri argued that while profitability influences wage adjustments, the reverse does not hold true. This debate underscores the complex dynamics between wage growth, profitability, and economic stability.