If your salary hike this year was nowhere close to what you were hoping for, don’t let it leave you feeling left out: You are hardly the only one to be left high and dry.
With sales numbers falling all around, private sector salary growth in the country in 2018-19 was the worst in 10 years (since 2009-10), a Hindustan Times analysis of CMIE’s Prowess Database found.
This, along with relevant data from critical sectors, serves to provide a clear peek into the state of the Indian economy and the hands that run it: the worker.
Double whammy or triple?
Combined with rising unemployment, the fall in salary growth makes for a double whammy for the country’s jobs scene. The Periodic Labour Force Survey (PLFS) 2017-18 has found that the all-India unemployment rate is now 6.1%, which is an all-time high — highest among male workers since 1977-78, and highest for the female since 1983.
In fact, it could be a triple whammy of sorts when one takes into account the fact that hiring is becoming more and more lukewarm by the day, a Care Ratings survey has revealed.
With banks, insurance companies, carmakers and logistics & infrastructure players hiring less and less, India’s jobs scene — with unemployment at a 45-year high — is looking increasingly gloomy with hiring activity slowing across most sectors.
According to PLFS, the 2017-18 number of the unemployed at 28.5 million is more than double that of 2011-12 when the number stood at 10.8 million. The number used to be around 10 million during the period between 1999-2000 and 2011-12.
During the time between 2011-12 and 2017-18, 18 million people were added to the labour force even as just 0.5 million net jobs were created, which is being cited as one of the main reasons why joblessness in India is now this acute.
(No) Pay hike is telling a story
According to CMIE, the overall tepid business environment was the main culprit behind sinking growth in corporate India’s pay hikes. Numbers from the database — which lists data on salary and sales for the 10 years ending 2018-19 of as many as 4,953 companies — showed that sales of these companies slumped for four fiscals at a stretch beginning 2012-13.
2016-17 witnessed a bit of a recovery and so did 2017-18, but it turned out to be temporary. As the recovery failed to take firm root, it may have prompted the decision to cut salary bills as companies small and big doubled down on cost cutting to keep their finances stable, the data suggests.
In 2018-19, the percentage share of salaries in total sales revenue falling for the first time in seven years. Sales revenue during the year also fell significantly — after adjusting for inflation the 2018-19 numbers came in at 3 per cent, down a good 1.5 per cent from the previous year’s levels.
Rising joblessness could also be one of the reasons behind companies cutting down on their wage bills, analysts say. With job scarcity at 45-year high — as PLFS has found — employers are probably taking advantage of decreasing bargaining power of workers to delay salary hikes.
Consequences for the broader economy
In the 4,953 companies in the CMIE database, growth in sales revenue and nominal wage for 2018-19 stood at 9% and 6%, respectively. When adjusted for inflation, these two numbers translate to 3% and 0.53% for growth in sales and salary levels.
This slump could have serious consequences for the Indian economy. Combined, the 4,953 companies in the CMIE database paid Rs 10.26 lakh crore worth of salaries in 2018. That roughly translates to almost 13 per cent of India’s total private consumption (according to 2018-19 data).
It has the potential to trigger a vicious cycle as bad as any in recent memory — scarce jobs and de-growth in sales and salary could spell trouble for demand, which in turn could put a lid on future growth in sales, salary and job generation.
Has such a cycle already begun? It isn’t certain yet — but red flags have been up for a while after the economy found itself in a five-year trough in the March quarter.