June 10, 2023

Economic Slowdown Leads To Salary Slowdown In India

By Ashwini Agarwal
First publised on 2020-02-18 21:07:13

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Another pointed indicator has emerged to prove that the green shoots that were appearing in the economy have not really taken root, despite all measures taken by the government. Salaries, across the full organized sector in India, are set to grow at their slowest rate in a decade in 2019. The average growth in salaries is estimated at 9.1%, down from 9.3% in 2018. This shows that businesses are more worried about falling orders and diminishing profits than about losing talented workers.

Salaries are raised as much to retain staff and attract talent as to compensate for inflation. Salaries in India normally grow at the highest rate in the Asia-Pacific region and it still is the leader but since 2015, the growth has gone down each year except 2018. But the last two years have seen successive dips as the economy entered a slowdown. Indian salaries grow faster mainly because companies seek to reward good employees in order to retain them (seeking new employees is a costly affair) as talented, skilled (for the particular niche) and efficient workers are hard to get.

But this year, worried about growth, companies have let salaries stagnate as they are aware that competitors are in the same boat and will not be able to offer more to snare their employees. Hence, while financial institutions are upping salaries by just 8.5 percent, the automobile sector, facing the worst slowdown in several years, is worse at just 8.3 percent. In contrast, startups are offering growth of more than 10 percent which is above-average. But this is because startups have to attract talent in a different way as they are not established companies and job security is not guaranteed. E-commerce and professional services firms are also expected to offer above-average hikes.

The companies will get away with these small increases because there is a palpable fear in the job market. Few new jobs are being added and retrenchment is rampant. Hence, people are more worried about keeping their jobs than about raises. It is becoming difficult for many to pay those EMIs as well as keep the kitchen running in these times of galloping food inflation. But people are finding other ways of making ends meet rather than risk losing their jobs by pressing for a raise. They know it will be difficult to get a new job if the present one goes. 

Figures sourced from the survey published by Aon plc