India:

India’s diverse economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services. Services are the major source of economic growth, accounting for more than half of India’s output with less than one third of its labor force. Slightly more than half of the work force is in agriculture, leading the United Progressive Alliance (UPA) government to articulate a rural economic development program that includes creating basic infrastructure to improve the lives of the rural poor and boost economic performance. The government has reduced controls on foreign trade and investment. Higher limits on foreign direct investment were permitted in a few key sectors, such as telecommunications. However, tariff spikes in sensitive categories, including agriculture, and incremental progress on economic reforms still hinder foreign access to India’s vast and growing market.

Privatization of government-owned industries remains stalled and continues to generate political debate; populist pressure from within the UPA government had restrained needed initiatives. The economy has posted an average growth rate of more than 7% in the decade since 1997, reducing poverty by about 10 percentage points. India achieved 8.5% GDP growth in 2006, 9.0% in 2007, and 7.3% in 2008, significantly expanding manufactures through late 2008. India also is capitalizing on its large numbers of well-educated people skilled in the English language to become a major exporter of software services and software workers. Strong growth combined with easy consumer credit, a real estate boom, and fast-rising commodity prices fueled inflation concerns from mid-2006 to August 2008. Rising tax revenues from better tax administration and economic expansion helped New Delhi make progress in reducing its fiscal deficit for three straight years before skyrocketing global commodity prices more than doubled the cost of government energy and fertilizer subsidies. The ballooning subsidies, amidst slowing growth, brought the return of a large fiscal deficit in 2008. In the long run, the huge and growing population is the fundamental social, economic, and environmental problem.

Labor Market Overview:

In raw numbers, India’s employable workers are highly abundant. Out of the population of 1.1 billion people, about 400 million do not work in agriculture. This large population is matched by a large educational network of over 10,000 colleges. India has over 25 million college graduates, and 7.5 million of those are in science and engineering. It turns out 2.5 million new graduates each year. However, this does not mean that skilled labor is readily available. A 2007 McKinsey survey found only 25% of India-trained engineers and 15% of finance and accounting degree holders are considered qualified to work for multinational companies.

Experienced managerial and technical personnel are in high demand as a result. Salaries are rising sharply every year, and job-hopping and poaching are common. Salaries are still significantly less than in the US overall, though in some industries, such as IT, salaries for top positions can be in the range of US salaries.

Compensation Levels

Salaries in India vary widely by education, experience, language ability, and industry. As shown in the charts below, an entry-level IT hire may earn as little as US$2,000 annually, while an engineer freshly graduated from a reputable university will easily make US$14,000. In the most job-hungry sectors, salaries for particularly experienced staff have actually risen to equal or, in some cases, surpass American levels. IT managers with 15 years’ experience, for example, command about US$220,000. In general, though, pay for functional heads is generally about a quarter of American levels.

Pay levels continued to rise quickly in 2007. According to the Financial Express, in the period of April-September 2007, India’s top 500 enterprises paid an average of 22% more in compensation to all their employees than a year before. Another survey, by Hewitt Associates, found that executive salaries rose by 15% in 2007.