According to sources, the Finance Ministry is set to initiate regular consultations with Indian industry, with a special focus on MSMEs, to address concerns over slowing wage growth and its impact on consumption and job creation.
"Wages are an area of concern. While it is a private sector issue, the first step is to understand their incentives and challenges. Talking to them does not mean intervening, but rather helping them scale up so they can hire more," a senior official said.
Wage Growth Slows Despite Record Corporate Profits
The move comes at a time when wage growth has been trailing corporate profitability. According to the Economic Survey 2024-25, corporate profits touched a 15-year high in FY24, but wage growth stagnated, particularly in urban India, raising worries over demand and consumption.
India Ratings and Research projects real wage growth to slow to 6.5% in FY26, compared with 7% in FY25. Global consultancy Aon had earlier projected that Indian salaries would grow 9.2% in 2025, a marginal dip from 9.3% in 2024, continuing a downward trend from the post-pandemic surge in 2022.
Policy Nudges and Task Force Interventions
Officials clarified that while the government cannot directly dictate wages, it can "nudge" the private sector through dialogues and remove regulatory bottlenecks. An inter-ministerial task force under the Cabinet Secretary has already been engaging with state governments to streamline compliance processes and reduce operational hurdles for MSMEs.
"The idea of these meetings is to assess their scale, understand their feedback and consider whether policy support can help. If we can reduce obstacles for them, they will be better positioned to expand and hire more," another official noted.
Rising Concerns After Job Cuts in IT
The issue of stagnant wages and hiring cuts has gained sharper focus after India's largest IT services firm, Tata Consultancy Services (TCS), announced plans in July 2025 to reduce its workforce by 2%, over 12,000 employees, in the coming year.
Experts warn that slower wage growth could weigh on consumption demand, which is closely tied to income levels. "Boosting the ability of MSMEs to scale up and contribute more actively to job creation is crucial for sustaining growth momentum," an economist said.
With regular consultations, the Finance Ministry aims to balance industry needs with the broader goal of ensuring equitable wage growth and stronger consumption in the economy.
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