India Sets World Record for Double-digit Wage Hikes

The most generous pay hike of 14.4% would go to engineering workers, narrowly followed by the fast-growing automotive industry at 14%, new survey says.

At the fastest pace in the world, Indian corporate salaries are set to grow by 12.9% this year and will keep rising at this level for up to five years, a consultancy forecast on March 8.

The projected Indian salary increases dwarf expected average wage rises of 2%-4% in the developed world, where economic recovery is still fragile, global human resource consultancy Aon Hewitt said.

"India tops the global league," said Nitin Sethi, India wage specialist at the firm which surveyed 531 companies to compile the data. "Indian companies have been doing pretty well with growth picking up, and there is an extra pool of cash."

He said there was optimism because of the forecast strong expansion of the Indian economy, set to grow at about 9% this year, which was resulting in a "war for talent."

The findings came as another survey by leading Indian recruitment portal Naukri.com showed corporate India's hiring activity up 11% in February from the same month a year ago and at its highest level since July 2008.

Indian wage growth slipped to an average 6.6% in 2009, the survey said, but quickly moved up the following year to 11.7% as India shed the effects of the global economic downturn.

"We expect Indian salaries to grow by 12% to 15% over the next four to five years for sure," Sethi said.

The most generous Indian pay hike of 14.4% would go to engineering workers benefiting from India's thrust on infrastructure, narrowly followed by the fast-growing automotive industry at 14%, the Aon Hewitt survey said. The survey covers just an elite group of tax-paying workers.

The forecasts for wage increases are likely to worry the Indian central bank and policymakers, however, with inflation already running stubbornly above eight percent on an annual basis. Sethi said that traditionally Indian wage increases were directly linked with the pace of economic activity and demand for talent, but this year expectations of inflation would play a role in determining salary increases.

Even with these increases, Indian corporate employees would remain competitive globally because their remuneration is still far less than in the West. Sethi noted that the starting pay of an Indian engineering graduate was around 450,000 rupees (US$10,000) a year, far below the rate in the developed world. As well as having to pay more, companies in India contend with high attrition rates, with one in five employees switching jobs every year as workers jump jobs in a quest for the best pay packages.

The forecasts for wage increases are likely to worry the Indian central bank and policymakers, however, with inflation already running stubbornly above eight percent on an annual basis. Sethi said that traditionally Indian wage increases were directly linked with the pace of economic activity and demand for talent, but this year expectations of inflation would play a role in determining salary increases.

Some 77% of Indians, numbering about 836 million, live on less than half a dollar a day, untouched by India's boom, according to a report by the National Commission for Enterprises.

Companies operating in both India and China have expressed deep concern about a shortage of qualified staff amid a failure of education to keep pace with rapid changes in the type of skills required.

Chinese wages will grow by about 9% this year, while salaries will rise by 4.2% in Australia, by 3.5% in Hong Kong, by 2.7% in Japan and by 7% in the Philippines.

Copyright Agence France-Presse, 2011

See Also

China Export Hub Hikes Minimum Wages by 19%

Foxconn Gives China Workers Dramatic Wage Hike

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