Even as the Economic Survey 2024-25 called out corporate India for wage growth flagging while profits soared in recent years, the head of India’s apex industry chamber has noted that businesses are regularly hiking salaries but recent wage trends may not be strictly comparable with the past due to an increasing ‘Servicification’ of manufacturing.
“Wage revisions have been happening regularly based on relevant industry surveys and inflation data, and it is also imperative that these revisions happen, because otherwise industry will not be able to retain talent,” Confederation of Indian Industry (CII) president Sanjiv Puri told The Hindu. On the concerns about wage growth, the ECII chief said a lot of the value chains are now using more specialised services than before.
“For instance, for utilities used by a company… traditionally, you did not have agencies that managed utilities on a turnkey basis, so you did it yourself, whereas managing a utility is not the core competency of a manufacturing setup, their core competency is to do their manufacturing. Today, you have professional agencies that come and manage your utilities. Sometimes, even OEMs [Original Equipment Manufacturers] come and manage utilities,” Mr. Puri noted.
“The service component, even in manufacturing, is going up. So that may not get captured in one’s comparisons, making them difficult,” the CII president underlined.
Mr. Puri, who is also the chairman and managing director of conglomerate ITC Limited, recalled that when he had joined the firm, even car drivers were employees of the company. “Now there are usually professional agencies that provide those services,” he remarked. At a broader level, Mr. Puri noted the key challenge for India is to accelerate job creation as well as expand the pool of skilled employable resources.
Ahead of the Survey, in December 2024, Chief Economic Adviser (CEA) V. Anantha Nageswaran had nudged industry to play its part in propping up consumption to drive domestic growth in an increasingly uncertain world economy. While corporate profitability had hit a 15-year high in 2023-24, much of the gains were diverted to reduce their leverage levels, the CEA had noted, mooting a greater balance between profitability and workers’ incomes.
“Without this parity, there will not be adequate demand in the economy for corporate products to be purchased,” Mr. Nageswaran had said, pointing to wage growth for contract workers not keeping pace with inflation.
The Economic Survey had expanded on the CEA’s observations, stating that 4,000 listed companies had clocked revenue growth of 6% in 2023-24, while their employee expenses’ growth slowed to 13% from 17% a year earlier. Corporate profit grew by 22.3%, but employment expanded by a mere 1.5%, the Survey noted.
The lagging wage growth for employees may be curbing demand and could result in an economic slowdown, the Survey had averred, stressing that sustained economic growth hinges on bolstering employment incomes, which directly fuel consumer spending, and, in turn, can spur investment in production capacity.
Published – February 22, 2025 07:56 pm IST
