Despite the rapid economic revival, the decline in salary growth is a big concern. This reduces demand and also reduces capacity utilization. A report by India Ratings raised apprehensions related to this.
Down Wage Growth: Despite the rapid economic revival, the decline in wage growth is a big concern. This reduces demand and also reduces capacity utilization. A report by India Ratings raised apprehensions related to this. In the report released by the agency, it was said that the nominal wage growth of households having 44-45 percent share in Gross Value Added (GVA) has come down from 8.2 percent in the financial years 2011-12 to 2015-16 from 2016-17 to 2020-21. 5.7 percent during the year. This means that the actual wage increase was only about one percent.
Indicating a decline in the purchasing power of households,
The overall economy grew at 13.5 per cent in the first quarter of the current financial year, much higher than was estimated. According to the report, the recent trend of increase in wages at the rural and urban levels also indicates a decline in the purchasing power of households. At the nominal level, the increments in urban and rural areas were 2.8 per cent and 5.5 per cent, respectively, on an annual basis. But adjusted for inflation in real terms, it shows a contraction of 3.7 per cent and 1.6 per cent respectively in June 2022.
Growth has been hit hard by the pandemic,Â
The report says, adding that much of consumption demand is driven by domestic sector wage growth. Therefore, for a sustainable and sustainable recovery in private final consumption expenditure and overall GDP growth in FY 2022-23, a reform in wage growth is going to be critical. The annual growth rate does not paint a true picture of economic revival because of the massive damage to growth caused by the pandemic.
The growth rate during 2019-20 was 6.2 percent due
to the low base of the financial years 2020-21 and 2021-22. In such a situation, a better way to assess the improvement in GDP or GVA is to compare the pre-pandemic period as the basis. Looking at this, the GDP shows a compound growth rate of only 1.3 percent during the financial year 2018-19 to 2022-23, while the growth rate during the year 2016-17 to 2019-20 was 6.2 percent.
Rating agency analyst Paras Jasrai says that among all the sectors, the annual growth rate of the service sector fell to one percent during the Covid period, compared to 7.1 percent in the earlier period. Although sectors such as industry are seeing an increase in economic activity, that too remains fairly uneven.
