Chennai: A drop in inflation and better monsoon rainfall is expected to support 6.5 per cent growth in real wages in FY25. The real wage growth in FY24 should have been around 3.5 per cent, according to India Ratings (Ind Ra).
The support to real wage growth is expected to emanate from a drop in inflation and improved employment conditions given an above-normal southwest monsoon rainfall for 2024, finds Ind Ra. It estimates that private final consumption expenditure (PFCE) demand is expected to grow 7 per cent in FY25.
The average real wage growth during FY20-FY21 was negative 0.7 per cent. PFCE in the same period moved in tandem. Due to the negative base, the real wage growth in FY23 stood at 8.9 per cent and 12.6 per cent in FY22.
For FY24, the overall real wage growth in the economy would have been around 3.5 per cent. The real rural wage growth of agricultural activities stood at 0.1 per cent in FY24. The urban minimum real wage growth was above 4 per cent in 1HFY24 but drifted down to 0.7 per cent in 2HFY24.
The wage growth of the non-financial private corporations moderated to 3.6 per cent in 3QFY24 after clocking over 6 per cent growth for 10 quarters, and stood at about 6 per cent in 4QFY24.
