Expert View | Mark Thompson
In terms of value for money, Indian employees are probably top of the world league table. We remain a low-paying economy by the standards of the US and many countries in Europe, and the cream of our graduate population is certainly as good as you will find anywhere. But annual pay inflation is now around 13%, and there have been cries of anguish among some who regard spiralling pay costs as a potential saboteur of the Indian economic success story.
Clearly, the relatively low cost of labour is a critical factor in the growth of some of our “sunrise” sectors, and this advantage is now being eroded. But there is really no need to press the panic button yet: At current rates, a multinational can employ three professionals in India for the price of just one in the UK and, even if current trends are maintained, we have at least 15 years before this ratio will be anything like 1:1.
Over the last five or six years, there has been a significant convergence between regional pay markets. Mumbai, for so long the highest paying region by far, is now losing its position to Bangalore. Delhi, Chennai and Kolkata are also catching up. Different sectors of the economy are converging, too, with signs that manufacturing and the state sector are revising their pay structures in response to market pressures and in an effort to reduce the attrition of talented people and attract the skills they need. These trends are due in part to the increasing willingness of employees to move between regions and to develop their careers across sectors, while refusing to compromise on remuneration.
So, if these trends continue, employees in India will continue to become better off, regardless of where they work and in which sector. Graduates will find themselves working across different sectors and living in two or three cities as they develop their careers, and a stint abroad will become more of an experience than a financial necessity.
Over the long term, therefore, India will no longer be able to rely on winning business by being the cheapest. Instead, we will have to learn to deliver quality and technical skills that are world-class through much more efficient use of human resources than we achieve today.
(Mark Thompson is the the Reward Practice Leader for Hay Group India.)