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Employment Growth Sluggish While Corporate Profits Rise: Economic Survey

Corporate profitability rose to its highest in FY24 since FY08, while the profit-to-GDP ratio among the Nifty 500 companies went up to 4.8 per cent from 2.1 per cent in FY03.

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Employment Growth Sluggish While Corporate Profits Rise: Economic Survey

REPRESENTATIVE

While India’s employment growth witnessed a marginal 1.5 per cent rise, corporate profitability was the most in the last 15 years. A strong growth in financials, energy and automobiles contributed to this, according to the Economic Survey.

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Corporate profitability rose to its highest in FY24 since FY08, while the profit-to-GDP ratio among the Nifty 500 companies went up to 4.8 per cent from 2.1 per cent in FY03. Large corporations outperformed small firms in terms of profitability, especially in non-financial sectors.

However, this surge in corporate profits has not trickled down to wage hikes, raising concerns about economic stability and income distribution.

A State Bank of India (SBI) report showed that profits posted by listed companies rose by 22.3 per cent in FY24.

Employment Growth Hit

The employment growth witnessed a minimal 1.5 per cent rise, highlighting the gap between corporate earnings and workforce expansion. The revenue growth across 4,000 listed firms remained modest at six per cent with employee expenses increasing by only 13 per cent—a steep decline from 17 per cent in FY23—pointing to cost-cutting rather than investment in workforce.

Profits Rise But Not Wages

Wage growth has slowed, more so in entry-level positions in the IT sector over the last four years, despite a stable EBITDA margin of 22 per cent. On the other hand, the labour share of Gross Value Added (GVA) increased slightly, however, the disproportionate rise in corporate profits among large companies has raised concerns about income inequality.

A continued imbalance in this can lead to serious consequences for economic momentum, warn economists. If wages do not rise with profits, it could weaken consumer demand which would limit investment in production and slow down the expansion of the economy.

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Union budget Economic Survey