India Inc witnessed a notable 14.3% surge in the total salary bill, reaching approximately Rs 9.4 trillion in FY23, marking the most rapid increase in a decade. Additionally, the average salary in the organised sector experienced an impressive rise of nearly 10%, hitting an eight-year peak and surpassing the country's retail inflation rate significantly.
A study conducted by Jefferies, analysing 7.5 million employees across 1,800 listed entities, highlighted that the significant surge was primarily driven by substantial salary increments within the IT sector. When excluding IT sector salaries, the growth in pay scales decreases to 6.8%, aligning with the 10-year average.
After accounting for the recruitment of junior staff and retirees, the estimated rise in salaries per employee escalates to an impressive 15.6%, marking an eight-year peak in the upward trajectory.
In figures, there was a notable 4% increase in the number of employees, reaching 7.5 million. This follows a 7% increase in FY22, a period during which the economy hadn't fully rebounded from the pandemic's impact. Analysts at Jefferies conducted a study that highlighted the slowdown in hiring within the IT sector, which was effectively balanced by increased recruitment in the BFSI (banking, financial services, and insurance) sector.
Employment in BFSI saw an 8% surge, while the IT sector experienced a 6% increase. Notably, these two sectors were responsible for approximately 85% of the new jobs generated throughout the year. Intriguingly, the analysis also indicated a consistent reduction in employment within state-owned enterprises during FY23.
The surge in income and employment is anticipated to fuel consumer demand in the upcoming quarters, as noted by economists. The June quarter witnessed a noteworthy 6% year-on-year growth in private consumption, a significant improvement from the 2.8% seen in the March quarter.
This surge can be attributed not only to easing inflation but also to augmented salaries. The growth in Consumer Price Index (CPI) inflation slowed to 6.83% year-on-year in August from a 15-month high of 7.44% in July.
Most of the employment growth has been powered by the services sector, while the impact of increased capital expenditure is yet to be fully realized. For example, at Larsen & Toubro (L&T), the number of contract workers in FY23 remained at 0.27 million, below the peak witnessed in FY15.
As the investment cycle gains momentum, there is an expected rise in demand for labour, particularly at the lower end, further stimulating consumption demand. Jefferies analysts anticipate the creation of approximately 7.5 million jobs in the construction sector over the next five years.