Indian salaries expected to rise only 8.2% this year

New Delhi: Salaries in India will slow this year as an economic slowdown triggered by a global recession cuts demand for skilled people, Hewitt Associates Inc. said.

Indian wages will increase an average 8.2 per cent this year after six successive annual increases of more than 10 per cent, Hewitt Associates said in a release in New Delhi yesterday.

This follows an increase of 13.3 per cent last year, 15.1 per cent in 2007, 14.4 per cent in 2006 and 14.1 per cent in 2005, the Lincolnshire, Illinois-based human resource consultant said.

Indian exporters have shed 1 million jobs, the Commerce Ministry said last month, more than 15 times a December estimate. This comes as contractions in the US and Europe, the country's biggest markets, damp overseas demand. India's industrial production fell the most in almost 16 years in December and may prompt local companies to curtail costs.

"The downturn has hit all economies across the globe and those that had dependent economic ties with the US are the ones most affected," Sandeep Chaudhary, leader of Hewitt's performance and rewards consulting practice in India, said in the release.

"Expectedly, salary-increase projections have dipped from the previous year."

Hewitt said it surveyed 480 companies in India between December 2008 and January 2009.

Economic expansion in India may slow to 7.1 per cent in the year to March 31, the weakest pace since 2003, according to the central bank. The bank expects inflation, now at 3.92 per cent, to ease to less than 3 per cent by March 31 on falling commodity prices.

"With inflation well below 5.5 percent, an average increase of 8.2 per cent can be considered significantly healthy," Chaudhary said.

Hewitt said that less than 16 per cent of companies in India are considering retrenchment. More than 60 per cent of companies are still hiring and nine out of ten companies are still giving promotions, Hewitt said.

Salaries at pharmaceutical companies are projected to increase by 13 per cent, the fastest among all industries. Retail pay increases will be the slowest at 5.3 per cent, according to the report.

Hewitt also said that salary increase projections may drop further in the coming months.