NEW DELHI: New estimates from the National Accounts of Statistics (NAS) show a slight increase in workers’ compensation as a share of Gross Value Added (GVA), but a sharper and more sustained rise in profits over the past five years.
GVA is calculated by adding compensation to employees, consumption of fixed capital, and operating surplus/mixed income, and then subtracting production taxes and adding subsidies. Among these, the operating surplus—essentially business profits—has grown significantly across most key sectors, including agriculture, mining, electricity, transport, and financial services.
This rise in profits, however, has not translated into a consistent rise in wages. Nationally, the share of employee compensation in GVA dropped from 53.5% in 2019–20 to 51.85% in 2023–24. While compensation remained around one-third of GVA overall, it actually fell between 2022–23 and 2023–24. The biggest drop in wage share was seen in the electricity, gas, and water supply sector, followed by mining and quarrying. On the other hand, the real estate sector saw a small rise in compensation share, but the construction sector experienced a notable decline.
This trend points to a shrinking wage bill alongside rising profits—raising concerns over growing inequality and weakening consumer demand. Economists often caution that such patterns, while possibly beneficial for short-term investment and inflation control, can reduce job creation and hurt overall employment growth.
Adding to these concerns, the Centre for Monitoring Indian Economy (CMIE), an independent data agency, recently reported a dip in consumer sentiment, suggesting a potential slowdown in demand.