MUMBAI : The nice 25 percent increase in corporate profits in the September quarter amid a sharp contraction in GDP is explained by wage cuts, leading to increased inequality in India, economist Nouriel Roubini said on Thursday .
This growing inequality is “dangerous” politically and socially because only a few people in the economy benefit from it, said the professor of economics at the Stern School of Business in New York.
Roubini said profits of listed entities rose 25% in the September quarter, which means wages and incomes are “tight, if not collapsed.”
“The number of unemployed or partially unemployed is skyrocketing, profits increased when GDP fell, so income inequality increased,” he said at an event organized by NSE.
“… the rise of inequalities which is ultimately unsustainable, it is socially and politically dangerous”, he added.
He also said inflation has tied the hands of the RBI and called for stronger action on the fiscal policy front to help those affected.
“Help the poor, help migrants, help the disadvantaged, try to provide credit support and lines of credit to small businesses that are at risk of collapse,” he suggested.
India is also expected to increase its infrastructure spending to stimulate growth in the current economic climate, but thereby decrease its dependence on bank financing, he added.
The cold war between the United States and China is sure to get colder and will be played out in many areas, including technology, trade, finance, monetary issues and foreign direct investment, he said. said, adding that there is also a risk of conflict between India and China. because the problems related to the border skirmishes remain unresolved.
India must look to new partners to source essential products and reduce its dependence on China, he added.
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