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INFLATION.

MUMBAI -- Even as corporate India prepares to dole out salary increments in the range of 12-13% across different levels and industries, the actual hike for employees could be far less thanks to rising inflation. Japanese financial services firm, Nomura, said in a report that despite a substantial average hike in compensation across Asia, inflation could eat into purchasing power and hurt consumption in some countries. However, India, along with China and Malaysia, should support consumption demand despite rising inflation.

While India will see a real increase in salaries of 3.5%, China is likely to see a wage hike of 4.1% for this year. "What really matters is the actual increase when adjusted for inflation. Using our inflation forecasts, real salaries will increase by less this year in all countries but India," said Sonal Varma, India economist, Nomura. The report takes the annual average salary hike figures from HR consultancy firm Aon Hewitt.

Experts said with inflation shooting up in countries like India, in the recent past it is being seen as one of the factors while determining hikes along with multiple other parameters. "Employers look at various data points while drawing up annual increases. What is more important is that the business outlook needs to look up for healthy compensations to be given to employees. Inflation will become a big issue only if it starts to swell up attrition," said K Sudarshan, managing partner, EMA Partners, an executive search firm.

Recruitment services firm ABC Consultants which projects an average hike of about 13-14% across Indian companies for this year feels, by and large, the hikes this year will be pretty good even if seen in the light of high inflation. "We have to keep in mind that these are average hikes so you will have a good performer receiving as much as 25-30%. Considering we have just come out of a rough patch, companies would not want to increase their fixed costs on account of inflation," said Shiv Agarwal, CEO, ABC Consultants.

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Publication:Pakistan & Gulf Economist
Geographic Code:9INDI
Date:Apr 3, 2011
Words:334
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