Salaries in India are expected to grow only 9.5% in 2017 compared to a growth of 10.2% in the previous year, according to a survey report by Aon Hewitt.
This low growth, driven by demonetisation, as well as international factors like Brexit and the new government’s polices in the U.S., would be the lowest increase in salaries since 2009, when the financial crisis hit wages in India.
However, despite this expected dip in the growth of salaries, the annual Aon Salary Increase Survey still sees India as having the highest growth in salaries among other Asian economies. In comparison, China is expected to see a 6.9% growth in salaries, Japan 2.4%, Malaysia 5.5% and Singapore 4.1%.
“For the last 15 years, India has been witnessing the highest pay increase,” Anandorup Ghose, Partner at Aon Hewitt India said during the report presentation on Wednesday. “But a drop of this nature is very significant.”
Digging deeper, the survey report found that some industries like consumer internet, life sciences, professional services, chemicals, entertainment media, automotive manufacturing, consumer products, engineering manufacturing and ITeS expected higher than average salary increases.
U.S. protectionism
However, Mr Ghose did caveat the ITeS expectation by saying that it was measured at the time Donald Trump took over office in the U.S., and that this could still change over the next few months.
The question, he said, was whether such a drop was a one-time phenomenon because of factors like demonetisation, Brexit, and the outcome of the US elections, or whether it signalled the start of a trend where salary growth in India fall below the double-digit mark.
The survey, the largest conducted by the company so far, covered 1,003 companies across 20 industries. Of the respondents, 575 were service companies and 428 were engaged in manufacturing.
Regarding the business outlook, the survey found that 67.5% of the respondents expected an improvement in business conditions in financial year 2017-18 compared with 61.9% in the previous financial year.
Demonetisation
“This has been a bad demonetisation-driven quarter, but the guiding theme is that the coming year is not going to be as bad as the quarter gone by,” Mr. Ghose added.
The report compared 2017 to 2009 and found that, where the global financial crisis, fluctuating exchange rates and the Satyam case in India had resulted in lower salary growth in 2009, demonetisation, Brexit and the changes in the U.S. government were the prime causes of the expected slowdown in 2017.
The report also highlighted the fact that the salary differential between the top performers and average performers was increasing, with top performers earning 1.8 times the average in 2016 compared with 1.6 times in 2013.
“One interesting aspect of 2016 was that not a single industry was a net attractor of talent,” Mr. Ghose said. “There usually is one industry that is the outlier. Even in 2011, 2012, and 2013, e-commerce was hiring big time. But in 2016, not a single industry was a net attractor.”
