Jairam Ramesh Criticises Govt's Tax Cuts, PLI Schemes For Aiding Monopolies

Congress leader Jairam Ramesh has taken aim at the government’s economic policies, alleging they have disproportionately favoured large corporations while neglecting workers and the middle class. Drawing on recent data, Ramesh pointed out the stark contrast between soaring corporate profits and stagnant wage growth across sectors.

“Private sector profit is at a 15-year high, growing fourfold in the last four years. Yet, salaries remain stagnant, with annual growth rates ranging between 0.8% and 5.4%,” he said. Ramesh blamed the 2019 corporate tax cuts and Production-Linked Incentives (PLI) for enriching monopolies without stimulating investment or job creation. “The government’s strategy of cutting corporate taxes, giving generous handouts, and raising the tax burden on the salaried middle class has failed to revive the economy,” he asserted.

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Ramesh’s remarks align with findings from a report by FICCI and Quess Corp, accessed by The Indian Express. The report reveals wage growth across key sectors such as engineering and manufacturing averaged a meagre 0.8% annually between 2019 and 2023. Fast-moving consumer goods (FMCG) saw a slightly higher growth rate of 5.4%. However, real income growth, adjusted for inflation, has been negligible or negative over the same period. Retail inflation, which averaged over 5% annually during this time, has significantly eroded workers’ purchasing power.

Chief Economic Advisor V Anantha Nageswaran has echoed concerns about this imbalance, suggesting India Inc must introspect. “There has to be a better balance between profits and wages. Without adequate demand, corporations’ own products will struggle to find buyers,” he said. Nageswaran highlighted the sharp rise in corporate profitability, which reached 4.8% of GDP in March 2024—the highest in 15 years—while employee compensation as a share of revenue has declined.

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The issue has triggered internal discussions within the government and corporate boardrooms. Sources suggest that weak income growth has dampened consumption, particularly in urban areas. While pent-up demand post-Covid initially boosted consumption, slow wage growth has hindered a full economic recovery.

Experts have called for targeted policies to address these challenges. Soumya Kanti Ghosh, Group Chief Economic Advisor at SBI and a member of the 16th Finance Commission, identified underemployment and declining labour productivity as key issues. “India’s economy faces an underemployment problem. Slow wage growth has led to low-quality jobs, which undermines broad-based consumption,” he explained.

Meanwhile, industry leaders have pointed to structural challenges. Naushad Forbes, Co-chairman of Forbes Marshall, emphasised the need for workforce formalisation and employment generation in sectors like textiles and tourism. “The informal sector is where wage growth is truly stagnant. We need policies that encourage job creation and formalisation,” he said.

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Jairam Ramesh concluded by urging a policy shift to stimulate demand and address economic disparities. “What we need are tax cuts for the salaried middle class and income support for the poor to revive the economy. Corporate handouts and tax cuts alone cannot achieve this,” he stated.