Indian employees expect the lowest salary hike in a decade barring 2009. Widening CAD & sluggish growth are great risks: Fitch Ratings
India Inc. to give an average salary hike of 10.3 per cent in 2013
NEW DELHI: India Inc employees can expect a dismal average salary hike of just 10.3 per cent in 2013, the lowest salary hike in a decade barring 2009, according to the annual salary increase survey of HR consulting firm Aon Hewitt. Reflecting the growth expectations of 5 per cent, India Inc. has projected an average salary increase of 10.3 per cent for 2013, according to the survey.
The survey is based on responses from 518 organisations across 20 industries. Financial services, technology, outsourcing have seen the greatest volatility and remain cautious in 2013. Consumer and industrial sectors which so far have been resilient, also reported conservative increase projections in the survey.
Sandeep Chaudhary, Partner - Talent & Rewards at Aon Hewitt India said in a statement "In sync with the economic outlook,10.3 per cent increase is among the lowest the country has seen in a decade (barring the subprime crisis year). Though business sentiment is strengthening on account of inflation reaching a three year low and stock markets rising upwards, the cautious streak is evident in the projected salary increase numbers".
With shrinking salary budgets, organisations are creating sharp differentiation in salary increases between their key talent and the rest of the workforce according to the survey. This year, key talent (Hi-Potentials, Hi-Performers & Critical Talent) is projected to get an average increase of 14.1 per cent.
Chaudhary added, "Cost consciousness and performance orientation are the key themes this year. Organizations are looking at compensation and productivity together and hence closely evaluating the return on compensation spent".
Among sectors, the pharmaceutical industry in India, with a 3-year CAGR of 12.4 per cent and projected CAGR of 15.3 per cent is a front runner in salary increase amongst all sectors with 13.5 per cent projections for 2013. Backed by growth in allied sectors such as medical devices, medical technology and medical tourism the overall healthcare and life sciences sector also reported the highest salary increase average at 13.1 per cent
Riding on the back of increasing demand and changing consumer preferences, the FMCG sector has been topping the charts on salary increases for the last 5 years. The projections for this year stand at 12.3 per cent.
Automotive sector in India took a hit in FY2012 in terms of growth given the ever rising fuel costs, production cuts and temporary plant shutdowns. However, the salary increase projections for 2013 at 11 per cent are above the India Inc. average. Lowered from actual increase of 12.8 per cent in 2012.
Driven by macroeconomic and sector-specific challenges such as delays in clearances, lack of funds and projects getting postponed, the infrastructure sector is projecting relatively lower salary increase at 6.1 per cent.
The financial industry is still far from a full recovery. For 2013 the financial industry average salary increase projection stands at 8 per cent with securities closing in at 6.6 per cent, banking at 8 per cent, and life insurance at 8.7 per cent.
The telecom industry, challenged by myriad business and regulatory issues continues to lag the Salary Increase space with projections for 2013 at 9.6 per cent.
Hi-Tech industry posted an average salary increase of 10.5 per cent. Margin compression, a cautious outlook in terms of the global economic state and large bench strength have led to IT service organisations projecting a conservative salary increase of 9.6 per cent.
On the other hand, IT product organisations, fuelled by growth opportunities in the domestic market and greater penetration in Tier 2 cities posted relatively higher salary increase of 11.2 per cent. ITeS projects an average increase of 10.1 per cent in 2013.
The survey is based on responses from 518 organisations across 20 industries. Financial services, technology, outsourcing have seen the greatest volatility and remain cautious in 2013. Consumer and industrial sectors which so far have been resilient, also reported conservative increase projections in the survey.
Sandeep Chaudhary, Partner - Talent & Rewards at Aon Hewitt India said in a statement "In sync with the economic outlook,10.3 per cent increase is among the lowest the country has seen in a decade (barring the subprime crisis year). Though business sentiment is strengthening on account of inflation reaching a three year low and stock markets rising upwards, the cautious streak is evident in the projected salary increase numbers".
With shrinking salary budgets, organisations are creating sharp differentiation in salary increases between their key talent and the rest of the workforce according to the survey. This year, key talent (Hi-Potentials, Hi-Performers & Critical Talent) is projected to get an average increase of 14.1 per cent.
Chaudhary added, "Cost consciousness and performance orientation are the key themes this year. Organizations are looking at compensation and productivity together and hence closely evaluating the return on compensation spent".
Among sectors, the pharmaceutical industry in India, with a 3-year CAGR of 12.4 per cent and projected CAGR of 15.3 per cent is a front runner in salary increase amongst all sectors with 13.5 per cent projections for 2013. Backed by growth in allied sectors such as medical devices, medical technology and medical tourism the overall healthcare and life sciences sector also reported the highest salary increase average at 13.1 per cent
Riding on the back of increasing demand and changing consumer preferences, the FMCG sector has been topping the charts on salary increases for the last 5 years. The projections for this year stand at 12.3 per cent.
Automotive sector in India took a hit in FY2012 in terms of growth given the ever rising fuel costs, production cuts and temporary plant shutdowns. However, the salary increase projections for 2013 at 11 per cent are above the India Inc. average. Lowered from actual increase of 12.8 per cent in 2012.
Driven by macroeconomic and sector-specific challenges such as delays in clearances, lack of funds and projects getting postponed, the infrastructure sector is projecting relatively lower salary increase at 6.1 per cent.
The financial industry is still far from a full recovery. For 2013 the financial industry average salary increase projection stands at 8 per cent with securities closing in at 6.6 per cent, banking at 8 per cent, and life insurance at 8.7 per cent.
The telecom industry, challenged by myriad business and regulatory issues continues to lag the Salary Increase space with projections for 2013 at 9.6 per cent.
Hi-Tech industry posted an average salary increase of 10.5 per cent. Margin compression, a cautious outlook in terms of the global economic state and large bench strength have led to IT service organisations projecting a conservative salary increase of 9.6 per cent.
On the other hand, IT product organisations, fuelled by growth opportunities in the domestic market and greater penetration in Tier 2 cities posted relatively higher salary increase of 11.2 per cent. ITeS projects an average increase of 10.1 per cent in 2013.
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Widening CAD & sluggish growth are still risks for India: Art Woo, Fitch Ratings
ET Now: Has the possibility of India downgrade reduced post reform steps taken by the government?
Art Woo: Yes, the reform steps are certainly encouraging. But at the same time the economy has turned out to be a little weaker than we had initially expected. Growth is above 5% and we have seen the current account deficit (CAD) widen, which has been a negative development. So there has been a balance of both encouraging and less-ncouraging developments. We still stick to our previous assessment of the negative outlook.
ET Now: Do you still expect India's long-term growth prospects to deteriorate despite positive noises on fuel and rail price hikes opening up some of the sectors?
Art Woo: It is a good question, but it is also very difficult to answer right now. There have been some measures introduced in terms of helping the reform process as you mentioned in terms of FDI being increased for some sectors such as retail, power, aviation and insurance, and those certainly will help particularly in terms of bringing money in, but it is also difficult to say whether India's growth prospects could improve or not in the longer term. More measures may need to be introduced to help improve the competitiveness of the economy. So very early days, yet.
ET Now: Does India's target to contain fiscal deficit at 5.3% in the current fiscal look achievable to you?
Art Woo: It is working increasingly achievable. We have got data for the first nine months of the year and it shows that basically for the first time in the fiscal year 2013, the budget deficit has risen to 80% of the four-year target. So there is certainly some more work to do. A lot will depend on what the government is able to achieve in terms of divestment up to the end of March and in terms of subsidies. So there is a bit of flexibility to decide what they want to do and perhaps third aspect has to do with the expenditures because the government has made some efforts to cut down on expenditures heavily and whether they have carried that momentum into the final three months of the year.
ET Now: As we go into this year's budget, we are staring at current account deficit at all-time high. Does this pose any risk?
Art Woo: The current account deficit position in India has deteriorated this year despite the slowdown in the economy. So it has been a bit of a surprise. The deficit for the July-September quarter rose to over 5% on GDP. It is quite a bit of a concern. We will have to wait and see what happens in terms of general commodity prices and oil prices to see whether there is any improvement made there and how the global economy picks up to see if there could be a pickup in terms of exports of both manufactured goods and services.
Art Woo: Yes, the reform steps are certainly encouraging. But at the same time the economy has turned out to be a little weaker than we had initially expected. Growth is above 5% and we have seen the current account deficit (CAD) widen, which has been a negative development. So there has been a balance of both encouraging and less-ncouraging developments. We still stick to our previous assessment of the negative outlook.
ET Now: Do you still expect India's long-term growth prospects to deteriorate despite positive noises on fuel and rail price hikes opening up some of the sectors?
Art Woo: It is a good question, but it is also very difficult to answer right now. There have been some measures introduced in terms of helping the reform process as you mentioned in terms of FDI being increased for some sectors such as retail, power, aviation and insurance, and those certainly will help particularly in terms of bringing money in, but it is also difficult to say whether India's growth prospects could improve or not in the longer term. More measures may need to be introduced to help improve the competitiveness of the economy. So very early days, yet.
ET Now: Does India's target to contain fiscal deficit at 5.3% in the current fiscal look achievable to you?
Art Woo: It is working increasingly achievable. We have got data for the first nine months of the year and it shows that basically for the first time in the fiscal year 2013, the budget deficit has risen to 80% of the four-year target. So there is certainly some more work to do. A lot will depend on what the government is able to achieve in terms of divestment up to the end of March and in terms of subsidies. So there is a bit of flexibility to decide what they want to do and perhaps third aspect has to do with the expenditures because the government has made some efforts to cut down on expenditures heavily and whether they have carried that momentum into the final three months of the year.
ET Now: As we go into this year's budget, we are staring at current account deficit at all-time high. Does this pose any risk?
Art Woo: The current account deficit position in India has deteriorated this year despite the slowdown in the economy. So it has been a bit of a surprise. The deficit for the July-September quarter rose to over 5% on GDP. It is quite a bit of a concern. We will have to wait and see what happens in terms of general commodity prices and oil prices to see whether there is any improvement made there and how the global economy picks up to see if there could be a pickup in terms of exports of both manufactured goods and services.
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