Evidence has grown of an economic recovery led by profits over wages

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Subscribe to enjoy similar stories. Has the splendid economic recovery after the pandemic been dominated by profits rather than wages? The answer to this question has profound consequences for the future direction of the Indian economy. Two recent data releases from the government provide useful information on this issue.

First is the new report of the Periodic Labour Force Survey (PLFS) for 2023-24. This document provides far more detailed data on wages than the more limited information that many in financial markets track, either on rural wages or wages paid by listed companies. The problem is that PLFS data is available only once a year, while other types of wage data is available more regularly, and is thus more useful for investors and analysts.

The PLFS annual report provides data on wages of various types of workers across Indian villages and cities. Here, I have only considered the earnings of workers in rural as well as urban areas with regular wages or salaries, rather than other categories such as casual labourers or the self-employed. The earnings of these workers have generally barely kept pace with inflation over the past five years.

They have grown at 5.4% since 2018-19, which has barely kept pace with consumer price inflation. Wage growth since the end of the pandemic has been slightly better at 6.4%, but still modest when compared to average inflation over the same period. There are two other categories of workers in India—casual labourers and the self-employed.