In my opinion, Indian banking industry has been seeing annual wage inflation in the range of 12 to 15 per cent over the last two years. Most of the experts feel that it’s unsustainable as any economy, which has to sustain a wage CAGR of 6-7 per cent, slips into recession within 15 to 20 years.
But all this doesn’t really matter for India Inc as for the fifth consecutive year; Indian companies are all set to report double-digit salary increases. According to my estimates, the salary increases this year are likely to be 15 to 25 per cent more as compared to 2007. It is worth mentioning in this regard that China will take the second spot behind India with projected raises of around 8.5 per cent.
Generally speaking, a salary of $100,000 (around Rs 40 lakh) may seem low when one compares it with Western standards. But on the basis of buying power parity, a $100,000 salary in India is quite identical to $225,000 in the West. I have no doubt in my mind that the traditional gap between salary hikes provided by locally-owned and multinational companies has closed with Indian private sector companies are almost ready to increase salaries by 15.5 per cent this year compared with 14.9 per cent offered by multinationals. According to one report, ICICI Bank gave an average salary raise of 10 per cent in the last financial year.
In 2007, real estate including infrastructure, energy, retail, telecom and banking & finance were the top five sectors in terms of growth in average pay packets. Talking about real estate and infrastructure sector, the average pay hike was staggering 25.2% in 2007. This year too it will remain the same.