Profit Rise in GVA Not Matching Wage Increases: Report
Despite a sustained increase in profits within India's Gross Value Added (GVA), the wage share has seen a decline, raising concerns about economic inequality and consumer demand.
GvaWagesEconomic InequalityConsumer DemandJob CreationReal EstateMay 26, 2025
Whereas compensation remained around one-third of the overall GVA, it decreased between 2022-23 and 2023-24. The electricity, gas, and water supply sectors saw the biggest drop in wage share, followed by mining and quarrying. While the real estate sector did register a small rise in the share of compensation, the construction sector saw a sharp decline.
The fact that the wage share has decreased when there has been a rise in profits raises serious questions about growing inequality and weakening consumer demand. In the long run, economists caution that such a situation can reduce job creation and damage overall employment growth.
The Centre for Monitoring Indian Economy (CMIE) has also reported a dip in consumer sentiment, which suggests a potential slowdown in demand. This trend is particularly concerning as it could exacerbate economic disparities and hinder the country's growth trajectory. The CMIE’s findings highlight the need for policymakers to address these issues to ensure a more equitable distribution of economic benefits.
Moreover, the decline in wage share in key sectors like electricity, gas, and water supply, as well as mining and quarrying, indicates that these industries are not sharing their increased profits with their workforce. This can lead to a decrease in consumer spending, as employees have less disposable income, which in turn can affect the overall economic health of the country.
Economists argue that a sustainable economic model requires a balance between profit growth and fair wage distribution. The current trend of rising profits without a corresponding increase in wages can lead to a vicious cycle of reduced consumption and slower economic growth. Policymakers and business leaders must work together to find solutions that benefit both companies and their employees.
In conclusion, the data from the NAS and CMIE highlight the need for a more equitable distribution of economic gains. Addressing the issue of declining wage shares is crucial for maintaining consumer demand and ensuring sustainable economic growth in India.
Frequently Asked Questions
What is Gross Value Added (GVA)?
Gross Value Added (GVA) is a measure of the value of goods and services produced in an area, industry, or sector of an economy. It is calculated by subtracting the value of intermediate consumption from the value of output.
Why is the decline in wage share concerning?
The decline in wage share is concerning because it indicates that employees are not benefiting from the economic growth and rising profits. This can lead to increased economic inequality, reduced consumer demand, and slower job creation.
Which sectors have seen the biggest drop in wage share?
The sectors that have seen the biggest drop in wage share are electricity, gas, and water supply, followed by mining and quarrying.
What are the potential long-term effects of declining wage shares?
The potential long-term effects of declining wage shares include reduced consumer spending, slower economic growth, and increased economic inequality. These factors can hinder job creation and overall employment growth.
What is the Centre for Monitoring Indian Economy (CMIE)?
The Centre for Monitoring Indian Economy (CMIE) is a research organization that provides data and analysis on various economic indicators in India, including consumer sentiment, employment, and economic growth.
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