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The good news first: Contrary to fears that Indian companies would retrench workers on a massive scale to cut back on wages, the actual cutback in the overall corporate wage bill has been fairly modest in the first half of this fiscal year (Apr-Sep 2020).


The nominal wage bill of listed firms declined by about 3% compared to the year-ago period. The drop in the real wage bill (inflation-adjusted wage bill) was sharper because of higher inflation this year.

As a proportion of net sales, wages actually rose during the lockdown. The data for the top 3000 listed firms show that these companies cut back on raw materials as sales collapsed during the lockdown. The cutback in wages was moderate. But sales declined sharply. So the ratio of wages to sales went up.



It was the dramatic pull-back in purchases of raw materials and finished goods that helped corporate India protect profit margins, not wage cuts.

Yet, the aggregate picture hides much of the real drama that the corporate sector witnessed in the first six months of the pandemic. The resilience in salaries and wages is largely because of the resilience of the top 10% firms or the top decile of listed firms. These firms saw a marginal dip in the wage bill in the June quarter and a marginal rise in the September quarter.

The rest of the corporate universe saw sharp declines in their wage bills in both June and September quarters. For the smallest set of firms, the decline in wage bill was sharper in the second quarter of the ongoing fiscal year than it was in the first quarter (June-ended quarter).


Small firms were not reckless or merciless. They were simply hammered by the pandemic, with sales collapsing precipitously. Despite brutal job cuts in these firms, the wages to sales ratio in these firms went up more than in the case of the bigger firms.

Getting staff back and rebuilding teams from scratch is a tough ask, said Mahesh Vyas, who heads CMIE. That is why big companies tried to retain most of their staff. Since they were able to maintain profit margins, they succeeded in doing so, said Vyas.

“Smaller companies saw their businesses collapsing, their profits fell, and as they became unable to pay the wages, they had to cut down their staff," said Vyas.

An industry-wise analysis shows a similar divide. The construction and real estate sector, which grind to a halt during the lockdown saw the sharpest decline in wages in both the June and September quarters. Manufacturing wages fell sharply compared to the year-ago period in the June quarter but the contraction in the September quarter was marginal, as manufacturing activity picked up pace to cater to the festive season demand during the unlock phase. Services firms were relatively more resilient, and seem to have been able to protect their workers.

The gap between big and small firms within the universe of listed firms has been widened by the pandemic. But it has also widened the gap between listed firms and small unlisted businesses. Data from household surveys conducted by CMIE shows that the share of workers having a salaried job has shrunk significantly in the September quarter.


During the June quarter, which bore the brunt of the lockdown, the share of salaried workers in the workforce went up slightly. Wage labourers and small traders were the worst hit during this period, and they seem to have joined the ranks of agriculturists. But by September quarter, the ranks of the small traders and wage labourers had swelled as some of them returned from farm work by then. Some of the salaried might also have joined the ranks of small traders and wage labourers in the September quarter as the fall in salaried jobs deepened during this quarter.

With barely two out of ten workers in some kind of a salaried job, India has always had a very skewed workforce. The pandemic seems to have sharpened the divide. While big firms have been able to protect jobs and wages, smaller firms and businesses appear to have seen massive retrenchments. This means that on average, the better-educated high-earning professional working for a top company has been relatively protected during the pandemic. Many of those working for smaller outfits have been robbed of their livelihood and may not find it easy to get their jobs back. The impact has also been unequal across genders, with women workers losing work disproportionately, according to an earlier analysis of the survey data.

The hope generated by the imminent deployment of vaccines, which could bring an end to the pandemic, has enthused investors and big businesses. But for many small firms and individuals formerly employed by them, this could be a very long winter.

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