StatsGuru: Decoding the recent slowdown in India's factory wage growth

Wages have long been a sticking point in India’s labour market. The Economic Survey for 2024-25 also flagged weak earnings growth across sectors. Factory wages, once seen as a marker of stable, formal employment, tell a story of strong gains in the first decade since 2004-05, followed by a slight slowdown. Taken together, the data suggests that falling real wage growth reflects not just cyclical shocks but deeper shifts in manufacturing productivity, growth, and formalisation.

 

Nominal factory wages rose sharply through the first decade (2004-05 to 2013-14), peaking in FY11 before settling into lower, steadier growth in later years. 

 

On the other hand, inflationary pressures (based on consumer price index for industrial workers) were higher in the early phase of the period under review. 

 

Real annual wage growth averaged 6.7 per cent from FY05 to FY14, compared with just 4.8 per cent in the following decade. 

   

The difference is tied to manufacturing performance. Productivity per worker and employment growth were far stronger before FY14, supporting wage momentum. 

   

Manufacturing gross value added (GVA) expanded faster in that decade too; while growth has again picked up recently, even the strong numbers of FY22 and FY24 fall short of the earlier trend – 2004-05 to 2013-14. 

   

Structural changes have compounded the drag. The share of formal manufacturing in GDP has almost halved since 2010–11, shrinking the pool of stable, higher-quality jobs and weighing on wage prospects.