Average pay hikes in India to drop to below 10%: study

With the Indian economy hit by internal and external factors - demonetisation, Brexit and the policies of the new US government - for the first time in a decade barring 2009, growth has fallen to single-digits this year.

A research report brought out by human resource (HR) consultancy firm Aon Hewitt – 21st Annual India Salary Increase Survey shows that the average salary rise in the current year would drop to 9.5 per cent from 10.2 per cent last year primarily due to the external factors.

However, the growth could fall to 6 per cent, if the average rate of increment were to be adjusted against the average consumer price index (CPI).

The worst-case scenario is if Aon's forecast of average salary increase is adjusted with Reserve Bank of India's (RBI) inflation analysis number of 8.3 per cent. In this case an employee's real pay hike would fall to only 1.2 per cent.

According to Anandorup Ghose, partner, Aon Hewitt India, the trend could be taken as "graying of salary increases in India" as it came of age, he was not sure though whether it was just a "blip" due to demonetisation and other factors.

"The macro question remains if this (single-digit salary rise) represents a blip or a trend," he said.

The India Salary Increase Survey by Aon Hewitt is considered to be an indicator of the coming performance appraisal season for white-collar employees, across both services and manufacturing sectors.

The survey said the top performers would be rewarded with a pay hike nearly 1.8 times higher than the average increment, but the number of top performers is declining.

While 39.5 per cent of employees were seen as key to companies in 2004-2009, the proportion fell to 31.1 per cent in 2014-16.

Almost all sectors - from consumer internet to life sciences - had seen a drop in the pay hike that would be offered in 2017, as against last year, with the metals sector being the exception, which is expected to improve on the increment its employees received in 2016.