Salaries should rise to spur consumption

The Economic Survey on Friday cautioned private firms against underpaying employees and asked them to strike a balance between capital and labour in their own interest because fairer income distribution would boost consumption, accelerate growth and help businesses thrive.

- Rajeev Jayaswal

Private sector plays "a very big role" in a large economy, said chief economic adviser V Anantha Nageswaran, the architect of the survey. Pointing at "huge disparity" between growth in corporate profits and growth in wages, he said: "This has been highlighted by several private sector themselves in the last few months," he said underscoring corporate profitability at 15-year high in March 2024.

"In some sense, raising wage and salary growth for workers is also a source for aggregate demand for businesses...," he said. In order to bring home his point of view, he cited an example. "Some of you may have heard that in 1960 when Henry Ford raised the minimum wages of his car workers, he said - otherwise, there will not be enough people to buy the cars Ford Motors produces," he said.