The Economic Survey 2024-25 on Friday flagged the “disproportionate” surge in corporate profits even as wage growth for employees lagged. Chief Economic Advisor (CEA) V Anantha Nageswaran highlighted that while corporate profitability jumped to a 15-year high in FY24, employee wages failed to keep pace. “Increasing income wages is not a moral ask but in self-interest of the private sector, as it has a direct impact on aggregate demand,” Nageswaran said
Tabled by Finance Minister Nirmala Sitharaman on the first day of the Budget session of Parliament, the survey noted that large corporations, especially in non-financial sectors, significantly outperformed their smaller peers in profitability. While profits climbed 22.3 per cent in FY24, employment grew by a mere 1.5 per cent.
Among Nifty 500 companies, the profit-to-GDP ratio surged from 2.1 per cent in FY03 to 4.8 per cent in FY24, the highest since FY08.
A State Bank of India (SBI) analysis revealed that 4,000 listed companies recorded a modest 6 per cent revenue growth while at the same time, employee expenses rose only 13 per cent, down from 17 per cent in FY23, highlighting a sharp focus on cost-cutting over workforce expansion.
While the labour share of gross value added (GVA) shows a slight uptick, the disproportionate rise in corporate profits—predominantly among large firms—raises concerns about income inequality, the survey said.
A higher profit share and stagnant wage growth risk slowing the economy by curbing demand. Sustained economic growth hinges on bolstering employment incomes, which directly fuel consumer spending, spurring investment in production capacity.
To secure long-term stability, “a fair and reasonable distribution of income between capital and labour is imperative. It is essential for sustaining demand and supporting corporate revenue and profitability growth in the medium to long run.”
Looking at the trends in wags and earnings, the 2023-24 periodic labour force survey results showed that while the average monthly earnings for regular wage/salaried workers and self-employed workers grew at a CAGR of 5 per cent during the period 2018-19 to 2023-24, the daily wage of casual workers increased at a CAGR of 9 per cent during the same period.
Earnings for self employed workers showcased a dynamic trajectory, with a brief dip from 2017-18 to 2020-21, followed by a significant rebound post-pandemic. Nominal wages have shown good growth across all categories, outpacing growth in real wages.