Indian Economy News

India Inc wages and salaries grew 12.6% in Q1; hints of a hiring uptick

India Inc’s wages and salaries grew 12.6% in Q1, the fastest in four years

After a lull of nearly three years, corporate India seems to be back on a hiring spree. The combined salary and wages bill for listed companies was up 12.6 per cent year-on-year (YoY) during the April-June quarter, growing at the fastest pace in nearly four years. In comparison, the salary bill was up 8.7 per cent last financial year, and 10 per cent in 2016-17.

The buoyancy in salary and wages is, however, muted compared to other cost heads and overall growth in these companies’ top line. For example, the companies’ combined revenues grew 16.3 per cent during the first quarter of 2018-19, while their raw material costs were up 20.7 per cent and overall operating (or variable) costs rose 16.7 per cent (see the adjoining chart).

For a second year in a row, salary and wages will trail the surge in corporate top line and operating costs. Salary and wages accounted for 9.9 per cent of companies’ revenue during the first quarter of FY19, down from 10.2 per cent in FY18 and 10.3 per cent in FY17.

The analysis is based on the annual profit and loss numbers of a constant sample of 2,230 listed companies whose finances are available since FY12. The latest data is for the April-June 2018 quarter. The changes in companies' salary bill can be used as proxy for the changes in the corporate hiring and the general job market in the absence of employee or headcount data.

A sectoral break-up of the numbers suggests that growth is being largely led by information technology services, metal and mining, pharmaceuticals, consumption-related sectors such as non-banking retail lenders, and automobiles and auto ancillaries. “The growth recovery is being led by private consumption and export-related sectors such as IT services and metals and mining companies, and fresh hiring has resumed in these sectors after a two-year lull. The dynamism is missing in investment related sectors as private sector capex remains in the slow lane,” says G Chokkalingam, founder & MD, Equinomics Research & Advisory.

He expects the trend to continue in the foreseeable future unless the consumption led-growth recipe is spoiled by any sharp deterioration in India’s external economic environment.

Non-bank retail lenders such as Bajaj Finance, Housing Development Finance Corporation (HDFC), Indiabulls Housing, Shriram Transport Finance and Dewan Housing topped the chart with 27.6 per cent YoY growth in the industry's salary and wages during the June quarter this year, growing at the fastest pace in at least six years. It is followed by automobiles at 18 per cent salary growth and auto ancillaries at 18.6 per cent growth.

In comparison, the combined salary and wage bill for capital goods makers was up just 5.4 per cent during the first quarter, down from 8.5 per cent growth in the last fiscal year. Similarly, power generation and transmission companies reported a slowdown in hiring and salary growth during the first quarter of current fiscal compared to last fiscal.

There was, however, an uptick in the construction and infrastructure space with companies reporting 16 per cent YoY growth in wages in the June 2018 quarter against 9.6 per cent growth a year ago. Analysts attribute this to a pick-up in highway construction in the last few quarters forcing companies to scale up and hire more hands to complete projects.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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