Efforts to help industry, especially MSMEs to achieve scale and thereby ensuring better wages is key, since the capacity to spend is intrinsically tied to growth in income that has been tepid, particularly in urban India. Concerned over slowing wage growth, the Finance Ministry plans to hold regular meetings with Indian industry, especially medium, small and micro enterprises (MSMEs) to help the companies scale up and subsequently boost job creation, officials told Moneycontrol. “Wages is an area of concern. There are some people who are tasked with figuring it out. It is a private sector issue, but the first step is to figure out what is their incentive, what we can collectively do. The first step is to have a dialogue with them. Talking to them does not mean intervening. They are contributing to our growth in a big way. So, the need is to help them achieve scale then they can hire more,” one of the officials said. Efforts to help industry, especially MSMEs achieve scale and thereby ensure better wages is key, since the capacity to spend is intrinsically tied to income growth, which has been tepid particularly in urban India. India Ratings and Research has projected real wage growth to decline to 6.5% in FY26, down from 7% in FY25. A slower growth in wages has a direct impact on consumption.
The Economic Survey for 2024-25 had highlighted a trend of rising corporate profits and lagging wage growth. The Survey said that while corporate profits touched a 15-year high in 2023-24, growth in wages stagnated, potentially impacting demand. “We can nudge the private sector when it comes to hirings and wages, but not every issue can have a policy reaction,” a second official said, adding that the Ministry is going to focus on overall measures that could reduce bottlenecks for the industry. An inter-ministerial task force was constituted earlier this year under the oversight of the Cabinet Secretary’s Office to streamline regulatory processes and address compliance challenges faced by businesses, including MSMEs, a third official said. “The task force has led consultations with State Governments across the country. Meetings have been held in all States to understand local bottlenecks and identify actionable steps for improving compliance efficiency,” this official added. A report by global professional services firm Aon had in February projected salaries in India to rise by 9.2% in 2025, slower than 9.3% in the previous year. Increments have steadily declined from 10.6% in 2022, which was driven by post-pandemic attrition during the Great Resignation, a phenomenon post Covid when employees voluntarily resigned, the report had said. Worries over wages and hirings have intensified after India’s largest software services provider, Tata Consultancy Services (TCS) in July said that it will let go of 2% of its workforce or more than 12,000 employees, over the next year. “The idea of the meetings is to understand their scale, maybe they have the scale, so then can there be some policy, if they give us feedback, their ask. If we can reduce obstacles for them,” the first official said.
Source : https://www.moneycontrol.com/news/business/finance-ministry-plans-consultations-with-india-inc-to-boost-job-creation-amid-slowing-wage-growth-13485580.html
