 "Factory workers wage growth")
Corporate profits rose faster than wages in 2023-24 as companies chose to deploy more resources into capital than labour, according to the latest Annual Survey of Industries (ASI), confirming a divergence that was also flagged in the Economic Survey 2024-25.
While corporate profits per factory rose 7 per cent to ₹41.3 million in FY24, the average wages paid per worker increased 5.5 per cent to ₹2,16,000, the same pace of growth recorded in the previous year, as per the ASI 2023-24 (FY24). “Corporate profitability soared to a 15-year peak in FY24. While profits surged, wages lagged,” the Economic Survey had noted.
Earlier, corporate profits had grown 28.7 per cent in FY21, followed by 55.1 per cent in FY22, while wages paid per worker only increased by 0.8 per cent and 9.9 per cent in those two years, respectively. FY23 had marked an exception to this post-pandemic trend when profits rose 1.34 per cent, while wages grew 5.5 per cent.
However, workers in some States witnessed better wage hikes than the 5.5 per cent national average, led by Arunachal Pradesh (23.3 per cent), and followed by Goa (9.53 per cent), Telangana (9.1 per cent), Tripura (8.67 per cent), Punjab (8.5 per cent) and Karnataka (7.3 per cent).
The total fixed capital of the industry increased 12.2 per cent to ₹46.24 trillion in FY24 from ₹41.22 trillion in the preceding financial year. Invested capital grew 10.8 per cent to ₹68.01 trillion in FY24 from ₹61.39 trillion in FY23. Moreover, the fixed capital per person engaged grew a mere 5.9 per cent to ₹2.36 million in FY24 from ₹2.23 million in FY23. Output per worker declined for the first time since 2019-20, dipping 0.35 per cent to ₹9.88 million in FY24 from ₹9.91 million in FY23. Output per person engaged, shrank 0.11 per cent, also marking its first decrease since FY20.
Madan Sabnavis, chief economist at Bank of Baroda, said the lower pace of wage growth is a reflection of post-pandemic realities as salary increments haven’t been high. “That is something which is getting reflected now. Especially if we look at the Micro, Small and Medium Enterprises (MSMEs) sector, where people were out of work, compensation to employees did not grow as adequately,” he noted.
On the dip in worker productivity levels, Sabnavis reckoned it stemmed from job creation being concentrated in low-productivity sectors like agriculture, construction, and logistics. “Since output is measured by value added, productivity is less because of the nature of jobs being created,” he added.
Madras School of Economics director N R Bhanumurthy said the dip in productivity is also symptomatic of the servicification of manufacturing processes in recent times. “Some of the jobs that have been created in the industry are actually shown in the service sector. Activities which were earlier in industry — like accounting services, security, transport — are now outsourced and show up under services. So, industry doesn’t show much employment, but at the macro level, unemployment is still low,” he suggested.
