Nominal salary growth to moderate in 2013: Nomura

Estimates real salaries are likely to grow at a meager 0.7% y-o-y in 2013 from 2.2% in 2012

With flat real income growth and a worsening employment outlook, private consumption growth, particularly in urban areas, is expected to remain weak, said Nomura’s Asia Chart Alert.

The note further stated that ongoing fiscal consolidation, a sluggish investment cycle and lackluster external demand all suggest that GDP growth is unlikely to pick up quickly.

“In our view, a steady decline in corporate profitability and no clear sustained demand recovery on the horizon has forced firms to rationalise employee costs,” said Sonal Varma and Aman Mohunta of Nomura.

According to global HR consultancy firm Aon-Hewitt, nominal salary growth in India is likely to moderate to 10.3% year-on-year, down from an estimated 11.9% in 2012.

“Adjusted for inflation, we estimate that real salaries are likely to grow at a meager 0.7% y-o-y in 2013 from 2.2% in 2012,” said the Nomura note.