The handsome 25 per cent rise in corporate profits in the September quarter amid a sharp contraction in GDP was on the back of wage squeezes, leading to rise in inequalities in India, economist Nouriel Roubini said on Thursday.
This rising inequality is "dangerous" politically and socially because only a few people in the economy are benefitting, the economics professor at New York's Stern School of Business said. Roubini said earnings of listed entities have risen 25 per cent in the September quarter, which means that wages and income are getting "squeezed, if not collapsed".
"The number of unemployed or partially unemployed people is spiking, profits have been rising when GDP has been falling, so income inequality is rising," he said at an event organised by NSE. "... the rise of inequality that is eventually unsustainable, it is socially and politically dangerous," he added.
He also said inflation has tied the hands of the RBI, and advocated stronger action from the fiscal policy front to help those affected. "Help the poor, help the migrant, help the disadvantaged, try to provide credit support and credit lines to small enterprises that are at risk of collapsing," he suggested.
India should also up its spending on infrastructure to boost growth at the current juncture but decrease its reliance on bank funding as it does so, he added. The cold war between US and China is bound to get more colder and will play out in many fields, including technology, trade, finance, monetary issues and foreign direct investment, he said, adding there is also a risk of conflict between India and China as the issues over which the border skirmishes happened are still unresolved. India needs to look at newer partners to source goods which are essential for it and decrease its reliance on China, he added.