Economic Survey 2024-25 India’s Economic Growth, Corporate Profit Surge, and Employment Trends

New Delhi, January 31, 2025 – The Indian government tabled the Economic Survey for 2024-25 in Parliament, offering a detailed analysis of the country’s economic trajectory, corporate performance, and labor market dynamics. With a special focus on India’s projected GDP growth, corporate profit trends, and employment challenges, the report highlights key concerns that could influence the nation’s economic future.

India’s GDP Growth Outlook for FY26

The Economic Survey projects India’s GDP to grow between 6.3% and 6.8% in the financial year 2025-26. This estimate aligns closely with the International Monetary Fund’s (IMF) forecast of 6.5%, though slightly lower than the World Bank’s projection of 6.7%.

The growth is expected to be driven by robust performance across key sectors, despite ongoing global economic challenges. The report notes that fiscal discipline, infrastructure development, and foreign direct investment (FDI) inflows will play a significant role in achieving the forecasted growth.

Corporate Profit Surge Amid Stagnant Wages

Corporate profitability has hit a 15-year peak in FY24, fueled by strong growth in sectors like financials, energy, and automobiles. According to the survey, corporate profits surged by 22.3% in FY24. However, this increase in profits has not been matched by wage growth or employment expansion.

While the profit-to-GDP ratio for Nifty 500 companies reached its highest level since FY08, at 4.8%, the survey highlighted a troubling trend. Employment growth among large corporations has been sluggish, rising by only 1.5% in FY24. The disparity between corporate profits and wage growth is a critical concern, especially as India grapples with rising income inequality.

Wage Growth and Employment Disparities

The Economic Survey highlighted the growing divergence between rising corporate profits and the stagnation in wages, particularly in entry-level positions in the IT sector. Despite India’s large corporations enjoying stable EBITDA margins of around 22%, wage growth has remained modest, raising alarms about potential negative impacts on income distribution and consumer demand.

State Bank of India (SBI) analysis cited in the survey revealed that while 4,000 listed companies recorded a modest 6% revenue growth, their employee expenses grew by only 13%. This indicates that firms are focusing more on cost-cutting measures than on expanding their workforce, which could undermine long-term economic sustainability.

The Impact of Income Inequality on Economic Growth

The survey warns that rising income inequality, exacerbated by disproportionate corporate profits, could slow down economic growth. The report notes that although the labor share of Gross Value Added (GVA) has shown a slight uptick, the dominance of profits—especially among large firms—could dampen demand, a key driver of economic activity.

India’s economy relies heavily on consumer spending, and stagnant wages coupled with rising profits may curtail household consumption. This could have a domino effect on corporate revenues and overall economic growth.

Policy Recommendations for a Balanced Growth Model

The Economic Survey stresses that sustained economic growth hinges on a fair distribution of income between capital and labor. The report recommends that the government focus on policies that foster both business growth and equitable income distribution. Specifically, initiatives to promote job creation and wage growth must be prioritized to bolster consumer spending and stimulate demand in the economy.

Corporate Sector Outlook: Profit Growth vs. Workforce Expansion

While large corporations in India have seen a significant rise in profits, the survey noted that the job market has not mirrored this positive trend. Corporations must focus on creating a more inclusive labor market to sustain long-term growth. Moreover, India’s rapidly growing digital economy, particularly in sectors like IT and e-commerce, offers substantial opportunities for job creation. However, these jobs need to be complemented by meaningful wage growth to ensure balanced economic development.

Conclusion: A Call for Inclusive Economic Growth

The Economic Survey 2024-25 raises critical concerns about the growing gap between corporate profits and wage growth, urging the need for policy interventions that foster a fairer distribution of economic gains. A focus on job creation, fair wage growth, and reducing income inequality will be essential for India to maintain its economic momentum and ensure that all citizens benefit from the country’s growth trajectory.

As India prepares for the Union Budget 2025, the need for strategies to address these pressing issues will be paramount to sustaining long-term economic stability.