Indian salaries to rise 12%; fastest in Asia

Indian salaries are set to rise by 12 per cent this year, the largest jump among Asian nations for the 10th year in a row, according to a survey released Tuesday by human resource consultancy Aon Hewitt.

Rising salaries broadly reflect India's economic growth and its resilience in the face of global economic headwinds, which Aon Hewitt says will likely shave just 0.3 to 2 percentage points off last year's pace of wage growth.

The rise also points to a troubling paradox of plenty in this nation of 1.2 billion.

India is teeming with young jobseekers, yet salaries continue to spiral upward because so few Indians are actually employable, said Sandeep Chaudhary, practice leader for compensation consulting at Aon Hewitt.

He said just 15 per cent of the working age population is employable in the private sector- a skills deficit that the government is trying to address through programs like the National Skill Development Corporation, a public-private partnership focused on worker training.

"If they were to come into the private sector, you'll see salary increases become more muted,'' he said.

In the meantime, skilled workers have plenty of opportunity. Staff turnover in India is nearly 20 per cent, with the highest attrition rates in finance, information technology and retail, according to Aon Hewitt.

Despite their rise, Indian salaries are still among the lowest in the region, he said. "We've always operated at a lower cost base,'' Chaudhary said. "The quantum of compensation in India its far less than what gets paid in Southeast Asia, Singapore and China.''

Chaudhary said Indian manufacturers have been able to handle rising salaries because they largely serve a domestic market, unlike China's export-driven companies.

"In manufacturing, 80 per cent in India is for domestic consumption,'' he said. "These kind of increasing wage costs are going to be difficult for organizations to justify if they convert that to export, where the entire focus is on cost arbitrage.''

So far, Indian growth has been fast enough to support double digit salary increases, which have managed to outpace India's high inflation, according to the survey.

India's projected wage increases outpace China's 9.5 per cent rise and the Philippines' 6.9 per cent increase.

Salaries are anticipated to grow fastest, at 13.3 per cent, in the pharmaceutical sector, as India's generics manufacturers take advantage of patent expirations. Telecoms and financial companies have projected the slowest salary increases, at 11 per cent and 10 per cent, due to regulatory hurdles, policy issues and the global slowdown, Aon Hewitt found.

Aon Hewitt, the human resource consulting and outsourcing division of Aon Corporation, surveyed 550 organizations across 19 industries to come up with its forecasts.