Profit up four times, pvt sector told to increase hiring, wages
New Delhi, July 22
The Economic Survey 2023-24 tabled in Parliament today nudged the private sector for employment. In the last three years between FY20 and FY23, the profit before taxes of the Indian corporate sector nearly quadrupled. However, hiring and compensation (wages) growth hardly kept up with it. It further stated that it is in the interest of companies to step up hiring and worker compensation.
The survey states that hiring in the IT sector has slowed significantly in the past two years. “We do not have a full picture of overall corporate hiring in the country on a regular basis as the economic growth of 8.2 per cent in FY24 was supported by an industrial growth of 9.5 per cent,” it states.
According to the survey, the Union Government cut taxes in September 2019 to facilitate capital formation. The survey questioned: Has the corporate sector responded? Between FY19 and FY23, the cumulative growth in private sector non-financial Gross Fixed Capital Formation (GFCF) is 52 per cent in current prices. During the same period, the cumulative growth in general government (which includes states) is 64 per cent. The gap does not appear to be too wide. Non-financial GFCF means capital formation without taking into consideration depreciation.
The survey states, however, when we break it down, a different picture emerges. Private sector GFCF in machinery and equipment (ME) and intellectual property products has grown cumulatively by only 35 per cent in the four years to FY23. Meanwhile, its GFCF in ‘dwellings, other buildings and structures’ has increased by 105 per cent. This is not a healthy mix.
Second, the slow pace of investment in M&E and IP Products will delay India’s quest to raise the manufacturing share of GDP, delay the improvement in India’s manufacturing competitiveness, and create only a smaller number of higher-quality formal jobs than otherwise.
Meanwhile in FY24, among the four sub-sectors of industry, manufacturing and construction achieved close to double-digit growth, while mining & quarrying and electricity & water supply also recorded strong positive growth in FY24. This reflects the broad-based acceleration of industrial output.
