Indian salary survey is further proof that the economic rebound is sustaining

A recent survey by Deloitte Touche Tohmatsu India says employees are likely to get increments of 7.3 per this year. And one in five staffers will get double-digit pay hikes. This augurs well for the country as this can help push consumption demand and maintain the recent uptrend in growth.

Here’s more proof that not only is the Indian economy on the mend, but it is also actually bouncing back rapidly to good health.

The 2021 Workforce & Increment Trends Survey by consulting firm Deloitte Touche Tohmatsu India says employees can look forward to average increments of 7.3 per cent this year, a 66 per cent jump over the figure of 4.4 per cent in 2020.

Increase in increments

In even better news for the economy and for individual employees, as many as 92 per cent of the 400 organisations (across seven sectors and 25 sub-sectors) surveyed said they propose to increase pay packets this year, compared to only 60 per cent last year.

One in five companies, in fact, plan to go a step further and hand out double-digit pay hikes, compared to one in less than eight last year. And five out of six companies that had cut salaries last year have already restored employee pay to their previous levels or propose to do so. About a quarter of companies covered in the sample had introduced pay cuts in the wake of the Covid-19 pandemic.

If the companies that do not plan to increase the pay of their employees is left out of the survey, then the average pay kike rises to 8 per cent – almost at part with the average increment of 8.6 per cent in 2019.

Real growth in pay after a year

In real terms, i.e., after adjusting for inflation, average salaries will rise 3.2 per cent in 2021, compared to -3.2 per cent last year.

These figures point to a much faster than expected economic rebound that has been taken note of by all major global and Indian agencies, including the World Bank, the IMF, S&P’s, the Reserve Bank of India and dozens of brokerages and fund houses.

They could also signal the beginning of a virtuous cycle of growth, pay hikes, consumption, demand, increased sales and rising profitability feeding more of the same in an upward spiral.

Anecdotal evidence, data supports survey findings

These findings are supported by anecdotal evidence and data from other sources and sectors. Sectors like construction, steel and automobiles, which have backward and forward linkages to more than 250 other sectors are also showing strong quarter on quarter as well as year on year growth.

Steel makers have increased prices by more than 60 per cent from less than $490 per tonne to $800 per tonne between July 2020 and January 2021. Likewise, passenger car sales are booming, with long waiting periods for deliveries of the more popular models.

And given the $75-billion booster dose in the coming year’s Budget, the infrastructure sector – and, by extension, the construction sector, to which it is closely linked – is also expected to pick up pace as the new fiscal year enters its second quarter.

Modi pushes ministers to front load capex

With Prime Minister Narendra Modi holding meetings with all ministries to front load the huge annual capex budget for 2021-22, the increase in consumption demand and the rising growth trajectories are likely to be sustained.

The uptrend in economic activity has been captured by the IHS Markit Manufacturing Purchasing Managers' Index (PMI) continued on its northward journey, rising to 57.7 in January from 56.4 the previous month. This was the strongest improvement since last October and marked the sixth successive month of production growth. A reading of more than 50 indicates growth in the economy.

Then, the IHS Business Resumption Index, which tracks the level of normalcy in the economy, came in at 98, signalling that the Indian economy is on the verge of shaking off its Covid-induced stupor and getting back to a higher growth path.

A study of 3,087 companies by the ET Intelligence Group showed a 68.7 per cent rise in net profits in the October-December quarter, the strongest showing in nine quarters.

If this trend holds, and there is every reason to believe it will, employees may have more cause for cheer as the new fiscal year sets in and progresses. And this could bring further happy tidings for the Indian economy.