Corporate salaries to go up by 10.4% in India, while attrition and unemployment remain high

India has often been described as a land of contradictions, and it rings true when entrepreneur Anand Mahindra expresses the need to address ‘jobless growth’. What that assertion implies is the reality that India is an emerging economy with an unemployment rate of 7 to 8 per cent according to CMIE. The gap widens further with reports of India Inc planning a 10.4 per cent salary hike in 2023, while overall job creation remains subdued.

More profits, higher salaries, but less jobs

The prediction from Aon Plc’s survey comes right after the revelation that corporate India gave employees a 10.6 per cent raise in 2022, which is higher than most developed countries. This could be attributed to a 28 per cent increase in India Inc’s overall profits, with the strong performance in the quarter ending in March. But amidst the euphoria, the employment rate in India went down from 10.6 per cent to 10.4 per cent in FY22, and that can explain the rising salaries.

Prioritising between saving cash and talent

If we look at another contradiction, while 90 crore Indians eligible to work are not even looking for jobs in the absence of the right opportunity, the attrition rate has climbed to 20.3 per cent, with more Indians quitting corporate jobs. This impact of the global ‘great resignation’ phenomenon in India has increased pressure to retain talent, triggering the rise in salaries. India is ahead in raising salaries because pay hikes depend on supply and demand of talent, while in most developed nations it’s all about inflation.

But when the World Bank warns of a long and painful recession, it can’t be ruled out as a decisive factor. Firms in most developed countries are gearing up for the global downturn, and reducing wage bills as well as costs to retain employees is a part of their strategy. But rating agency S&P feels that India wouldn’t be as affected by recession as bigger economies, because it isn’t that connected with the global economy.

Corporate workers thrive, but will the rest survive?

Hence despite a recession on the horizon, India’s corporations can afford to go for salary hikes to ensure sustained growth throughout the slowdown. Hence corporate employees are on track to make more, while a periodic labour force survey by the government shows that the number of underpaid workers in India went up to 38.2 per cent in FY22.

To add to the contrasts, while India’s overall unemployment remains a concern, the country led in terms of job creation in the renewable energy sector, with 863,000 green jobs in 2020-21.