Big pay increases tipped in India

MUMBAI // Salaries in India will return to double-digit growth next year, according to a survey by the global human resources consultant Mercer. The increase is predicted to be as high as 10.9 per cent as half of India's companies begin hiring again.

The study comes as India's economy is roaring back to life faster than analysts expected when production slumped sharply last November. Figures this week showed that industrial output rose by 10.4 per cent in August compared with the same month last year, a full percentage point above economists' consensus, and the economy's fastest rate of growth in 22 months. "Most sectors are forecasting double-digit increases for next year," said Gangapriya Chakraverti, the information product solution business leader at Mercer.

According to Manpower, another global recruitment agency, which carried out a global survey last month, India's employers are now the most optimistic of those in all the 35 countries surveyed. "India has been reporting the strongest hiring expectations globally since the third quarter of 2008," said Dr Naresh Kumar Malhan, the head of Manpower in India. "Indian employers have absorbed the layoffs conducted in the third quarter and are telling us they will begin hiring again at a conservative pace."

The shift is beginning to be seen in the offices of Mumbai. "It's changed so dramatically over the last couple of months," said Henning Von Kalm, an investment banker who came to work in India in January at the nadir of the economic crisis. "If you'd spoken to me just a few months ago, it would have been layoffs, salary freezes, hiring freezes. That was the case as recently as July. Now it's a totally different story; everyone's hiring again."

But the 8 per cent average salary rise Mercer is predicting for India this year is still far below what Indian executives expected at the start of last year, when anything less than a double-digit pay rise was unthinkable and many expected increases of 30 per cent to more than 50 per cent. "The prominent theme that we're hearing from our clients is that they're optimistic, but they're also cautious," said Mrs Chakraverti. "It's not going to get back to 2008 levels; they're not going to go the whole hog.

"Nobody wants to give up the efficiencies that they've gained in the slowdown. A lot of initiatives have been put in place in terms of productivity increases. Also, I don't think business has yet got back to the levels prior to 2008, so we're still in the recovery." From October last year until May, most Indian companies moved to trim staff costs, with 50 per cent laying off workers, most delaying salary increases, and a third imposing across-the-board pay freezes, according to Mercer.

The experience of Aparna, a stylist who works for an interior design magazine associated with one of India's major newspapers, is typical. There has been a pay freeze since she arrived in January, while the newspaper as a whole had forced through a 10 per cent to 15 per cent salary cut and laid off about 150 people. The IT sector, among the most sensitive in India to trends in the US and European economies and as a result the worst hit, has given employees no pay increase for a year, according to Mercer.

Indian companies have also sharply reduced the number of executives, many of Indian origin, lured in from the US and Europe on generous packages to fill gaps in skills. "We have heard from our clients that they are all re-looking at those numbers; there's definitely a drop in the number of expats being hired," said Mrs Chakraverti. Sudarshan Narayan, of Clark and Kent, which specialises in cross-border executive recruitment, said: "There aren't too many jobs for Indians coming back. They want higher salaries, they want the right this and that, and the roles that are being offered are much less than what they used to be doing. Since about May or June last year, for anybody who came back, I really have not been able to get them a job."

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