
Stagnant wages amid fast economic growth: We need an Indian Enlightenment

Summary
- India must raise not just its economy’s output but also the quality of its people’s lives. This may require a paradigm shift, an enlightenment rooted in dignity, fairness and shared prosperity. Let’s not risk a middle-income trap.
India’s economic growth story has been impressive. Gross domestic product (GDP) is expanding, corporate profits are looking up and the country is asserting itself as a global economic powerhouse. But beneath our headline-grabbing figures lies a troubling reality: stagnant wages, biting inflation, insufficient jobs and growing inequality.
For millions of Indians, GDP growth has not translated into better livelihoods, creating the paradox of a booming economy that fails to uplift a significant portion of its population.
Wage stagnation amid rising inflation: The disparity between India’s economic growth and stagnant wages is stark. Consider the IT sector, once a beacon of upward mobility. According to The Times of India, the salary for an entry-level software engineer has inched up from ₹3.2 lakh in 2011 to just ₹3.75 lakh in 2024—barely keeping pace with inflation.
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Meanwhile, CEO compensation in the same sector has quadrupled over the same period. This trend is alarming, especially in an industry that once championed egalitarianism. Chief economic advisor V. Anantha Nageswaran warns that low wages could stifle India’s long-term potential by weakening consumer demand and the quality of life for millions.
The rise of ‘employed poverty,’ where workers hold jobs but struggle to survive on inadequate wages, is a growing concern, as highlighted by Manish Sabharwal, vice-chairman of Teamlease Services.
The stark truth is that while the Indian economy grows in GDP terms, millions of workers remain trapped in low-wage, insecure jobs that fail to offer economic mobility or stability This wage stagnation is already impacting middle-class consumption.
The former CEO of Nestlé India had said, “There used to be a middle segment—the middle-class—where most of us FMCG companies used to operate in. That seems to be shrinking."
Retail pioneer Kishore Biyani categorizes the Indian population into three groups: India 1 (about 120 million people who can afford domestic help), India 2 (about 300 million domestic helpers, drivers and delivery workers), and India 3 (nearly a billion people earning less than $3 a day).
Alarmingly, India 2, the bridge between the affluent and impoverished, is under severe stress and barely growing. This is not the template for a ‘Viksit Bharat.’
The paradox of growth without prosperity: This raises a critical question: why are wages stagnant despite robust economic growth? While structural labour market issues play a role, at its core lies a societal reluctance to pay workers a living wage. Corporate profits soar, but worker compensation lags, reflecting a broader cultural disconnect between economic growth and human dignity.
Economic historians like Nobel laureate Edmund Phelps and Joel Mokyr have argued that transformative growth in Western economies stemmed not just from material advancements, but from cultural shifts. At some point, these societies embraced values like human dignity, individual rights and intellectual engagement.
There was a fundamental shift in how they viewed growth as not just about accumulating wealth, but about raising the quality of life for all people. In India, this shift remains incomplete and millions of workers, domestic as well as commercial, live in a constant state of economic insecurity.
The case for an Indian Enlightenment: Edmund Phelps, in his book Mass Flourishing, argues that true prosperity lies in fostering human potential and creating opportunities for everyone.
Growth becomes sustainable and inclusive only when workers earn dignified wages, access meaningful work and participate in the economy as empowered consumers. For India, this means moving beyond GDP metrics and embracing a vision where economic progress uplifts all sections of society.
Historically, we have seen examples of this philosophy in action. Over a century ago, Henry Ford shocked US industry by doubling his workers’ wages and reducing their workday to eight hours. This bold move not only boosted productivity, but also helped create a middle class capable of buying Ford cars, showing the mutual benefit of investing in workers.
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Eventually, other companies followed, leading to the rise of the great American middle class. This illustrates a key enlightenment principle that prosperity flourishes when systems are designed for mutual benefit rather than exploitation.
Three decades ago, Indian IT giants like Infosys adopted similar practices that valued employees, upholding their dignity while also creating a robust consuming class and stimulating innovation. However, today’s trajectory of India’s IT and other industries reflects a drift away from these ideals.
Institutional reforms and cultural shifts: To address wage stagnation, we need both targeted policy interventions and a cultural shift. Policies such as minimum wage legislation, labour rights protection and investments in skill development are essential. But true change demands an ‘enlightenment of the mind.’
India 1, the top bracket, must move beyond exploitative practices and recognize that every worker aspires to dignity and advancement. Economic growth isn’t a zero-sum game; profits and wages can rise together when businesses invest in their workforce.
Strengthening social safety nets and fostering mutual benefit will ensure that prosperity is inclusive. And this change cannot just be outsourced to corporate CEOs and the government; it must start with each of us.
We must start paying a living wage to the people who serve us, from our cooks and drivers to security guards and others. We must be the change that we wish to see in the world.
Inclusive growth is a must: If India is to achieve its vision of Viksit Bharat (a developed India) and a $10 trillion economy, we must prioritize human dignity, social mobility and inclusive growth.
This means creating an economy where rising corporate profits are accompanied by real improvements in workers’ lives. Without this shift, the promise of GDP growth will be undermined by deepening inequality and stagnation.
As we stand at this crossroads, India has the opportunity to rewrite its growth story. By embracing an economic model that uplifts all sections of society, the nation can ensure that its progress is not just measured in GDP figures, but also by the quality of people’s lives. An Indian Enlightenment—rooted in dignity, fairness and shared prosperity—is the need of the hour.
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Without it, the promise of economic growth risks leaving millions behind and India stagnating in a middle-income trap.
The author is chairman of the Global Energy Alliance and former chairman of Microsoft India.