Opinion: India’s Growth Story Rings Hollow Without Rising Wages

In the last decade, India has emerged as one of the fastest-growing large economies in the world. We boast record-breaking stock markets, a booming tech sector, and glossy global rankings. And yet, there’s a troubling contradiction at the heart of this success story: while the economy expands, wages for the vast majority of Indians remain stubbornly stagnant.

This is not just an economic puzzle; it’s a social and political time bomb. How can a nation grow so quickly, yet fail to carry its workers along? More importantly, what does this divergence reveal about the Indian model of growth?

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The Numbers Tell A Stark Story

Consider this: Between 2014 and 2024, India’s GDP grew at an average of 6–7% annually. Corporate profits soared. Unicorns mushroomed. But real wages, especially for India’s informal and low-skilled workforce — accounting for nearly 90% of all workers — barely budged. The Periodic Labour Force Survey (PLFS) data suggests that in sectors like construction, agriculture, and small-scale manufacturing, inflation-adjusted earnings have either stagnated or declined.

In urban India, the story is no better. A recent CMIE survey found that salaried jobs fell by nearly 10 million between 2019 and 2023. The jobs that replaced them were mostly informal and gig-based, less secure, less rewarding. Meanwhile, the top 1% saw their income and wealth share rise to historic highs.

This is not how development was supposed to play out. The promise was simple; growth would create jobs, jobs would lift wages, and wages would lift lives. That cycle now seems broken. Instead, we have entered a phase of ‘jobless growth’, which is fast mutating into ‘wageless growth’.

The Missing Middle

Part of the problem lies in the structure of Indian capitalism. For decades, India skipped the classic industrialisation route that powered East Asia’s rise, from farming to factories, then to services. India leapfrogged directly into services, with IT and finance taking the lead. While these sectors are highly productive, they are also highly skill-intensive and employ only a small slice of the population.

Manufacturing, the traditional engine of job creation, remains a thin layer, contributing just 15–17% of GDP and employing far fewer workers than it should. Even worse, much of India’s manufacturing is capital-intensive. The Make-in-India push may have attracted global attention, but it hasn’t turned into a labour-absorbing force.

Micro, Small, and Medium Enterprises (MSMEs), which are supposed to be the bedrock of employment, are stuck in a low productivity trap, starved of credit, technology, and skilled labour. Without a thriving middle of the economy, mid-sized firms that scale up and pay well, India’s growth pyramid rests on a fragile base.

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The Perils Of Populism Over Productivity

It’s fashionable these days to tout India’s digital transformation, and rightly so. We’ve built one of the world’s most ambitious public digital infrastructures. But no economy can digitise its way out of deep-rooted structural problems. Growth needs to be broad-based, not booster-based.

We are also seeing the rise of economic populism, free rations, subsidies, and cash handouts, which — while useful for short-term relief — cannot substitute for long-term income growth. Governments, both at the Centre and in the states, have increasingly turned to welfare schemes as the main vehicle of economic support. But if wages are not rising, we are merely treating symptoms, not the disease.

The deeper issue is India’s productivity crisis. With over half the workforce still in low-productivity sectors like agriculture and informal services, the average Indian worker produces far less value than their Chinese or Vietnamese counterparts. This, in turn, depresses wages. No amount of welfare can permanently compensate for weak productivity.

A New Enlightenment: From Growth Fetish To Human Capital

What India needs is not another round of GDP cheerleading or FDI summits. We need an ‘Indian Enlightenment’, a new consensus that places people at the centre of policy, not just macro indicators.

First, we must revolutionise education and skill development. It’s not enough to build colleges or vocational centres. We need radical reforms in quality, curriculum, and outcomes. A literate, trained, and empowered youth is India’s greatest untapped resource. Without investing in human capital, our so-called ‘demographic dividend’ could become a liability.

Second, labour market reforms must go beyond flexibility for employers. Workers need voice, security, and upward mobility. This means stronger enforcement of minimum wages, expansion of social security nets, and active skilling of workers for the 21st-century economy.

Third, India needs a productivity renaissance in its informal sector. The best way to raise wages is to raise productivity. This means easier credit for small businesses, better infrastructure in rural and semi-urban areas, and targeted incentives to move firms and workers up the value chain.

Fourth, tax and policy regimes must actively favour job creation. Today, capital is often taxed more gently than labour. Incentives for hiring, such as wage subsidies for SMEs or reduced compliance burdens for formal employers, could reverse this imbalance.

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Towards A More Inclusive Growth Story

Rising inequality and stagnant wages are not just economic issues. They distort democracy, fuel resentment, and eventually erode social cohesion. If growth is seen to benefit only a few, the political consensus around liberalisation, markets, and reforms will wither. History has shown that when wage-earners are left out of prosperity, populism and protectionism fill the vacuum.

India still has time to rewrite its story. But the clock is ticking. The next phase of our journey must be driven not just by ambition, but by inclusion; not just by scale, but by substance. The ultimate test of an economy is not how many billionaires it produces, but how many lives it transforms.

In the words of Amartya Sen, development is freedom. And freedom begins when citizens earn enough to live with dignity. That’s the real growth India should strive for. Everything else is optics.

The writer is a Bengaluru-based management professional, curator, and literary critic.

[Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal and do not reflect the opinions, beliefs, and views of ABP News Network Pvt Ltd.]

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