Joblessness may be easing in India as the economy gradually reopens from the world’s biggest lockdown, but wage growth remains subdued — dashing hopes of a recovery in the consumption-driven economy.
Wage bills of companies increased by just 2.9 per cent in the three months to June from a year ago — the slowest growth in 18 years, according to a separate analysis of 1,560 listed companies by Mumbai-based private research firm Centre for Monitoring Indian Economy Pvt.
CMIE estimates the jobless rate fell to 7.4 per cent in July from a record 23.5 per cent in April, the height of coronavirus-related curbs. Slowing wage growth risks squeezing private spending in Asia’s third-largest economy, where consumption accounts for about 60 per cent of gross domestic product. India’s GDP will shrink 4.5 per cent this year as a result of the pandemic, according to the International Monetary Fund.
“If you look at the manufacturing sector, wages declined by 7 per cent. So that’s a deep gash,” Mahesh Vyas, managing director of CMIE, said by phone. He doesn’t see wage growth going back to pre-Covid levels in the “foreseeable future” as “the economy is facing a serious problem of contraction of income.”
The lockdown’s damage to the economy will be reflected in quarterly GDP data due Aug. 31. Economists in a Bloomberg survey predict a 19.5 per cent contraction in the three months through June.
“Given the structure of labor markets, we believe that most of the pre-pandemic jobs will return, but the wage outlook is likely to be dimmer compared to the pre-pandemic world,” HSBC Holdings Plc analysts, led by Pranjul Bhandari in Mumbai, said in a report last month.