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India Inc's weak wage growth to be drag on economic recovery: IndRa

09 Sep 2021 Evaluate

India Ratings and Research (IndRa) in its latest report has said that India Inc resorted to salary cuts to protect their profits in the June quarter, as revenues came under pressure due to the second pandemic wave that affected nearly the entire country. The weak wage growth will prove to be a drag on the overall economic recovery in the medium term as it will affect household consumption.

It said an environment of pandemic-led uncertainty and elevated inflation could impact the level of spending and hence the overall demand. It mentioned the analysis is based on a study of the standalone financials of 2,036 non-financial corporates. The entire sample set has been divided into eight buckets according to the size of the annual revenue in FY19.

It said while the resilience of corporates is encouraging, the adverse effect of pressure on employee cost is a cause for concern. This could be a result of job loss or salary cut or both. Half of the 2,036 companies have reported negative growth in labour costs in Q1FY22 compared to the preceding Q4FY21. It added while there is some seasonality in employee costs, it is also true that the June quarter is always a better quarter than the March quarter owing to the disbursement of various performance-based payments linked to the previous fiscal.

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