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ILO says higher wages can improve India’s economic growth

Even though countries such as India and China have been projected as doing quite well when compared to other developed economies, the latest International Monetary Fund report has warned of a global slowdown of economic growth to 3.1 per cent.

Sandra Polaski, International Labour Organisation’s (ILO) Deputy Direction General (Policy) said that increasing wages through state intervention will help India protect its workers and also shield its economy from the ripple effects of slow growth globally, in this global context.

Polaski said that a few successful economies such as China’s growth during the last 15 years has been due to a hike in wages under government control, and providing social protection systems. However, she said, in India this is not the case and wages have been falling. She suggested that India should follow China’s example of boosting domestic demand by raising wages at home and not banking on export-led growth. She added that this is particularly so, as the export-led growth has become unsustainable as demand for goods is falling in rich countries since the global financial crisis.

Polaski also said that this would help India grow and warned that in the absence of such measures, the country’s growth prospects could slowdown in the long run. The Narendra Modi government’s labour reform policies, where measures are being taken to make it easy to hire and fire workers, with a focus on foreign investors likely to invest in the country under the ‘Make in India’ programme, said Polaski, would not guarantee better Foreign Direct Investment (FDI).