Wage bill of listed pvt. companies up 17% at Rs 11.5 trn in FY23: Report

The aggregate wage bill of the listed private corporates expanded by 17 per cent to hit Rs 11.5 trillion in fiscal 2022-23 (FY23) driven by non-bank finance companies (NBFC), private bank, information technology (IT), consumer discretionary, industrial and auto sectors, suggests a recent report by ICICI Securities.

In FY22, the aggregate wage bill, or 'compensation of employees' (CoE), of the entire private corporate space in the economy grew 21 per cent YoY to reach Rs 30 trillion, the report said. This overtook the public sector wage bill (around Rs 28 trillion) for the first time as per the National Accounts Statistics. CHECK HERE

"The rising trajectory of private corporate wage bill appears structural, having grown from around 9 per cent of GDP in FY12 to around 13 per cent in FY22 as the formalisation effect takes effect. This has resulted in a 10-year CAGR of 14 per cent as against nominal GDP growth of 10 per cent. A developed economy like the US has a private sector CoE to GDP ratio of nearly 45 per cent versus around 13 per cent for India – thus indicating significant runway ahead," wrote Vinod Karki and Niraj Karnani of ICICI Securities in a recent report.

Private corporate wage bill growth over the past decade, according to ICICI Securities, was driven by the twin effect of robust wage growth for existing employees (8-10 per cent as per salary surveys) and new additions to the formal workforce. The rapid expansion of the formal workforce, Karki and Karnani wrote, is corroborated by EPFO data (14 million net additions over the past 12 months) and rising personal income tax collections.

That said, the key near-term risk to private corporate wage bill expansion, the ICICI Securities report said, lies in the significant weight of IT services in private corporate sector wage bill in India (around 42 per cent for the listed space) in an environment of slowing IT and tech start-up hiring, as well as slow wage increase in the near term.

"Informal job demand in urban India appears strong due to the cyclical recovery in investment rate, real estate, construction, leisure, hospitality, etc., which can potentially generate more informal jobs. Public sector wage bill is likely to track nominal GDP growth and should maintain its share at nearly 10-12 per cent of GDP as it has done over the past decade. We do not see the aggregate public sector wage bill outpacing nominal GDP growth going by the slow hiring trend," the report said.