Snack makers lament because Indian workers can no longer afford to spend 5 rupees (7 cents) on biscuits. The purchasing power has dried up to the point that laborers and blue-collar workers have to think twice about cheap munchies — the situation is that desperate. The culprit behind this is a long-term issue: deep-rooted wage suppression.
Britannia Industries Ltd., the No. 1 Indian biscuit maker, recently sounded alarm bells over the sharp deceleration in its domestic sales volumes. Rival Parle Products Pvt. chimed in and said jobs were at risk for as many as 10,000 of its workers.
A Parle executive blamed India’s 2017 goods and services tax, or GST. While the consumption tax may indeed have been an additional burden in an economy slowing under a disastrous November 2016 currency ban, the funk has its roots in insufficient wages. In recent years, only about a third of the economy’s income has gone to labor, with providers of debt and equity capital taking the rest, according to India Ratings and Research Pvt., a unit of Fitch Ratings. Raising that 33.2% labor share to the developing-country average of 37.4% would put an extra $100 billion of annual spending power in the hands of Indian households.
More details of this saddening news over at Bloomberg.
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(Image Credit: Avarind Sivaraj/ Wikimedia Commons)