Why India’s Chief Economic Advisor Is Vouching For Salary Growth? Know Here

India's Chief Economic Advisor (CEA), Dr. V Anantha Nageswaran, has raised alarms over the sluggish pace of private consumption, warning that the disparity between corporate profits and workers' income could undermine economic recovery. Speaking at an event organized by Assocham on Thursday, he called for a better balance between corporate profitability and workers' wage growth.

Corporate Profitability at a 15-Year High
Dr. Nageswaran highlighted that while corporate profitability reached a 15-year peak in FY24, much of these profits were used to reduce corporate debt rather than boost workers' pay. He stressed that without a fair distribution of profits, workers' income growth may not keep pace with inflation, further hindering consumption growth.

Post-Covid Shift to Contractual Labor
The CEA pointed to the shift toward contractual labor post-Covid, noting that while such contracts offer benefits like provident funds and health insurance, wages for contract employees have not kept up with inflation. He suggested that this trend may limit overall consumption capacity and economic growth.

Slowing Private Consumption
Dr. Nageswaran’s comments come as India’s second-quarter GDP growth for FY24 fell to a two-year low of 5.4 per cent, driven largely by slowdowns in private consumption and capital expenditure. Private consumption grew by only 6 per cent, down from 7.4 per cent in the previous quarter, raising concerns about the strength of consumer demand.

FMCG Sector Struggles 
Businesses in the FMCG sector have also raised concerns over slow consumption growth. High inflation and stagnant wages have reduced demand for products, posing challenges to business recovery and economic growth.