India Inc’s profits outpace wages as companies bet on capital

By: Team India Tracker

Rising profits bolster corporate balance sheets, yet stagnant wages risk choking household consumption—the economy’s main growth engine.

Corporate India is rewarding shareholders more than workers. Companies profits rose faster than wages in FY24 as companies poured more money into capital than payroll, according to the latest Annual Survey of Industries (ASI)—a split already highlighted in the Economic Survey 2024–25. Average profits per factory climbed 7 per cent in FY24 to Rs 4.13 crore, while the average wage per worker grew 5.5 per cent to Rs 2,16,000, the same sluggish pace as the year before. That modest wage growth contrasts sharply with corporate profitability, which surged to a 15-year high, according to report in the Business Standard.

The numbers confirm what policymakers had flagged: the corporate sector has staged a robust recovery from Covid-19 pandemic, but workers’ incomes are lagging.

Profits surge, wages lag

The divergence is stark when viewed across the post-pandemic years. Corporate profits expanded 28.7 per cent in FY21 and a massive 55.1 per cent in FY22, while wages barely moved, rising just 0.8 per cent and 9.9 per cent, respectively. FY23 was the lone exception, when profits crept up 1.34 per cent and wages grew at 5.5 per cent. The FY24 data show that profits have again pulled ahead.

The Economic Survey had already sounded the alarm, noting that corporate earnings were climbing to multi-year peaks even as wage gains remained tepid. The ASI data now cements that picture.

Capital over labour

Behind the numbers lies a clear corporate choice. Companies are doubling down on capital investments—new plants, machinery, and equipment—rather than wage hikes. The total fixed capital of industry jumped 12.2 per cent in FY24 to Rs 46.24 lakh crore, up from Rs 41.22 lakh crore the previous year. Invested capital rose 10.8 per cent, reaching Rs 68.01 lakh crore.

But the impact on workers is less encouraging. Fixed capital per person engaged rose only 5.9 per cent to Rs 23.6 lakh, suggesting limited per-worker benefits from the investment drive. Meanwhile, productivity indicators slipped. Output per worker fell 0.35 per cent to Rs 98.8 lakh, down from Rs 99.1 lakh in FY23—the first decline since FY20. Similarly, output per person engaged shrank 0.11 per cent, also its first fall since FY20.

Executives argue this capital intensity is essential for scaling up and improving productivity. But economists caution that if rising profits are not matched by rising wages, the imbalance could weigh on domestic consumption and widen inequality. Shareholders may benefit in the short term, but a weak wage cycle risks undermining India’s long-term growth story.

Where Workers Gained

Wage growth has not been uniformly weak. Workers in some states beat the national average of 5.5 per cent. Arunachal Pradesh led with a 23.3 per cent jump, followed by Goa (9.53 per cent), Telangana (9.1 per cent), Tripura (8.67 per cent), Punjab (8.5 per cent) and Karnataka (7.3 per cent). These regional outliers suggest that state-level labour demand, industrial policies and sectoral strengths still play a decisive role in determining wage outcomes.

Still, for most workers across the country, pay has grown far more slowly than corporate earnings, reinforcing concerns that India Inc.’s growth is leaving labour behind.

Implications for growth

The split between profits and wages carries serious economic consequences. On the positive side, stronger corporate balance sheets improve the ability to invest, repay debt, and expand globally. But at the same time, stagnant wages risk stifling household consumption—the single biggest driver of the GDP.

If the imbalance persists, India could end up with a growth model that dazzles investors but feels hollow on the shop floor.

The bigger picture

India Inc.’s pivot toward capital-heavy growth underscores a structural shift. Companies are betting that automation, digitisation, and capacity expansion will deliver stronger margins than incremental wage hikes. That may work in the short term, especially as global investors reward profitability.

But over the long run, the economic resilience depends on a stronger wage cycle. Rising household incomes are essential to sustain demand, support startups, and keep the demographic dividend from turning into a liability.