Rise in Profits in GVA Not Translating into Higher Wages: Report
While the real estate sector saw a small rise in the share of compensation, the construction sector experienced a significant decline. The overall decrease in wage share amidst rising profits highlights growing economic inequality.
GvaWagesEconomic InequalityEmployee CompensationConsumer DemandReal EstateMay 26, 2025
New Delhi: While there has been a sustained rise in profits in India’s gross value added (GVA), it has not translated into a consistent increase in wages. Estimates from the national accounts of statistics (NAS) reveal that the share of employee compensation in GVA dropped from 53.5% in 2019–20 to 51.85% in 2023–24, as reported by The New Indian Express.
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 decrease in wage share amidst rising 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 highlights the need for policymakers to address the imbalance between profit growth and wage distribution. Ensuring a fair share of profits is allocated to employee compensation is crucial for sustainable economic growth and social stability. The government must consider measures to enhance labor rights and promote better wage practices across various sectors.
The construction and real estate industries, in particular, play a significant role in the economy. The construction sector, despite its importance, has seen a significant decline in wage share, which could have broader economic implications. The real estate sector, on the other hand, has shown a slight improvement, but this is not enough to offset the overall negative trend.
Economists and industry experts suggest that improving labor conditions and ensuring fair wages can help boost consumer demand and drive economic growth. The CMIE's report on declining consumer sentiment further underscores the need for immediate action to address these issues.
In conclusion, the data from the NAS and CMIE highlights a concerning trend in India's economic landscape. Policymakers and industry leaders must work together to ensure that economic growth is inclusive and benefits all segments of society, particularly the working class. Only through concerted efforts can India achieve a more equitable and sustainable economic future.
Frequently Asked Questions
What is GVA and why is it important?
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 important because it helps in understanding the economic contribution of different sectors and the overall economic health of a country.
How has the share of employee compensation in GVA changed over the years?
The share of employee compensation in GVA dropped from 53.5% in 2019–20 to 51.85% in 2023–24, indicating a decline in the portion of profits allocated to wages.
Which sectors have seen the biggest drop in wage share?
The electricity, gas, and water supply sectors, followed by mining and quarrying, have seen the biggest drop in wage share.
What are the potential long-term effects of declining wage share?
Declining wage share can lead to reduced job creation, weakened consumer demand, and growing economic inequality, which can damage overall employment growth and economic stability.
What measures can be taken to address the issue of declining wage share?
Policymakers and industry leaders can enhance labor rights, promote better wage practices, and ensure a fair distribution of profits to improve wage share and boost economic growth.
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