Salary Hike in Single Digit: A few days ago, when the figures for the second quarter (July to September) of the current financial year were released, the concern about this is clearly visible among the policy makers. Why should there not be concern, the GDP figure has fallen to a two-year low of 5.4 percent. In the corporate sector, profits have increased fourfold in the last four years. Despite this, single digit income growth is worrying for GDP. The main reason for the fall in GDP is said to be a fall in demand. The report was prepared for the government by industry chamber FICCI and Ques Corp Ltd on the basis of discussions between selected officials of the Corporate and Economic Ministry.

There will be a salary hike in single digit between 2019 and 2023

Based on this report, it is clear that between 2019 and 2023, the compounded annual wage growth in six sectors was between 0.8 to 5.4 percent. These sectors are engineering, manufacturing, process and infrastructure (EMPI) companies and fast-moving consumer goods (FMCG) etc. Not only this, the condition of workers in the formal sector was even worse. Here negative growth was recorded in their real income. Negative growth does not mean that their salary has become less than before. This simply means that after adjusting the inflation numbers, the salary growth has been negative. In the five years from 2019-20 to 2023-24, the retail inflation rate has increased by 4.8 percent, 6.2 percent, 5.5 percent, 6.7 percent and 5.4 percent.

'Industry needs to look within'
Chief Economic Advisor (CEA) V Anantha Nageswaran mentioned the FICCI-QUES report in his address during some corporate gathering. He suggested that the Indian industry needs to look within itself and think about it. Government sources say that the reduction in income, especially in urban areas, has become the main reason for the decline in consumption. This is the reason why the GDP growth rate has come down. Consumption increased with the boom in demand after Covid, but the slow pace of salary growth has brought forward concerns about the economic recovery before Covid.

Listed companies are earning more profit
V Anantha Nageswaran said that listed companies are earning more profit. But they are paying less money to the employees in that ratio. Nageswaran asked the private corporate sector to employ more and more people and create a balance between capital intensive and labor intensive. He said that if we talk about the profit of listed companies, it has reached a 15-year high in 2023-24 as a percentage of GDP. But during this period, the wage cost increase rate of companies has declined.

Increasing income boosts both consumption and savings.
CEA had said in a program that a part of the income of the corporate sector goes into their profit and the other goes as salary to the employees. Without maintaining a balance between these two, there will not be enough demand to buy the products of the companies. Continuously increasing income boosts both consumption and savings and leads to economic expansion. Nageshwaran said, 'In other words, not paying employees well or not hiring enough employees can be dangerous for small industries.'

Profit of Nifty 500 companies reached 4.8% of GDP.
CEA also said, the most important reason for long term growth and consumption is employment income growth and increase in spending capacity. According to Motilal Oswal's report, the profit of Nifty 500 companies reached 4.8% of GDP in the last financial year, which is the highest after the 5.2% growth in the boom year of 2007-08 (before the global financial crisis). CEA admitted that companies have used a part of their profit for deleveraging and their balance sheet has become strong. But he also said that now is the time for capital formation and employment growth for them.

Wages decreased for the first time after the Covid pandemic
Wages in the country have decreased for the first time in the last quarter after the pandemic. According to a Bloomberg report, this has put a brake on the fast pace of the economy. In fact, consumer spending and corporate profits are declining. According to data from Elara Securities, the inflation adjusted employment cost for listed non-financial companies has decreased by 0.5% between July and September compared to a year ago. Data from Motilal Oswal Financial Services also makes it clear that there is a continuous slowdown in wage growth and inflation is rising. This points to financial stress for the urban middle class of the country.

Falling wage growth is the main reason for the decline in urban consumption. 
According to a Bloomberg report, major IT service export companies Tata Consultancy Services Limited (TCS), Infosys Limited, Wipro Limited and HCL Technologies Limited have recorded a year-on-year increase of 3.3% in employee costs in the three months of July to September. This is much lower than about 8% in the same period of 2023. Private Consumption Expenditure accounts for about 60% of GDP. It has increased by 6%, which is less than 7.4% in the first quarter. Falling wage growth is one of the reasons behind the urban consumption slowdown.

Consumers are cutting down on everything from soaps to cars
. Some of the country's biggest companies, from Maruti Suzuki Ltd. to Hindustan Unilever Ltd., have recently reported weak earnings. They said that the spending of the urban middle class has reduced. Companies paying less salary to employees leads to a decrease in demand. This only affects the profits of the companies. "Consumer spending flows like blood in any economy," Nikhil Gupta and Tanisha Ladha, analysts at Motilal Oswal Financial Services Ltd., wrote in a report last month. "The main factor for weak consumer finances in India is the slowdown in income growth."