economic survey: Corporate profits nearly quadrupled, but employee salaries didn’t: Economic Survey urges firms to raise compensation

The Indian corporate sector has reported significant financial growth in recent years, yet this prosperity has not translated into proportional increases in job creation or employee compensation, according to the Economic Survey for 2023-24.

Financial Performance vs. Hiring Trends

The Economic Survey highlights that the corporate sector’s profits have surged, with over 33,000 companies showing a near quadrupling of profit before taxes from FY20 to FY23. However, hiring and compensation growth have not matched this financial boom. The survey stresses that it is in the best interest of companies to increase hiring and worker compensation.

Role of State Governments in Economic Growth

The survey emphasizes that many factors affecting economic growth, job creation, and productivity fall under the jurisdiction of state governments. It calls for a collaborative effort between the Centre, states, and the private sector to meet the rising aspirations of Indians and achieve the goal of Viksit Bharat by 2047.

Impact of Economic Shocks on Employment

Economic shocks, such as bad debts and the Covid-19 pandemic, rather than structural issues, have shaped the country’s employment scenario. The Annual Survey of Unincorporated Enterprises for 2022-23 reveals a decrease in overall employment in these enterprises from 11.1 crore in 2015-16 to 10.96 crore. The manufacturing sector saw a reduction of 54 lakh workers, but this was offset by job growth in trade and services, limiting the overall job loss to around 16.45 lakh.

Meanwhile, the compensation gap between chief executive officers and median employees in India’s leading companies has grown since the pre-pandemic period, according to an Economic Times study of 35 top-listed companies by sector or market capitalization.

Companies such as Hindustan Unilever, Indian Hotels Co, EIH Ltd, Infosys, Larsen & Toubro, Sun Pharma, Titan, Tata Steel, JSW Steel, Wipro, Dr. Reddy’s Laboratories, Dabur, Voltas, and Mphasis have reported an increase in the CEO-to-median employee pay ratio in 2023-24 compared to 2019-20, as revealed in their latest annual reports.Most companies have seen an increase of 20-60% in this ratio, with a few, including ITC, Bajaj Electricals, Mahindra & Mahindra, and Whirlpool India, experiencing a near doubling of the gap.