The Economic Survey highlights that sharp disparities between corporate profits and wages pose a risk to economic growth by curbing demand.
It stresses that sustained economic growth requires bolstering employment incomes, which drives consumer spending and investment in production capacity.
A fair distribution of income between capital and labor is necessary for long-term economic stability and supporting corporate revenue and profitability growth.
Corporate profitability hit a 15-year peak in FY 2023-24, driven by sectors like financials, energy, and automobiles, but wages have lagged behind.
The profit-to-GDP ratio for Nifty 500 companies increased from 2.1% in FY03 to 4.8% in FY24, highlighting a surge in profits, particularly among large firms.
While corporate profits grew 22.3% in FY24, employment grew only 1.5%, indicating a focus on cost-cutting rather than workforce expansion.
Employee expenses rose by just 13% in FY24, down from 17% in FY23, reflecting a slowdown in wage growth despite stable corporate profitability.
The labor market has improved post-pandemic, with a significant drop in unemployment and higher labor force participation.
The digital economy and renewable energy sectors offer vast potential for creating high-quality jobs, aligning with the vision for a developed India.
The Survey advocates for labor regulations that support business growth, create jobs, and drive economic development.
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