Rehiring pushes wage bill up in 17 sectors in Q1: RBI report

Salaries are in the news. They are not making headlines but also giving news of sex, violence and crime – the eternal staple of mankind – a run for their money. People have been lapping up news about how young drivers of India’s startups are taking home strings of zeroes, on the right of a digit of course, in their pay cheque.

Salaries lost are also making it to frontpages of newspapers. Siddhartha Lal, who had been the MD of Eicher Motors since May 2006 had to step down after shareholders shot down a proposal for a 10% salary hike against a 1% median salary hike for the employees. Since Q1 of FY21, salaries lost – for the far less fortunate kind compared to Mr Lal – has been the fodder for policymakers and the media alike.

Beyond these remarkable instances, Employees Provident Fund Organisation reported 12.8 lakh net new subscribers in June 2021 which was 5 lakh more than the additions in May.

Turnaround

While in 2020 the first round of the pandemic made a severe dent in people’s salaries, the second one was less unkind. Companies had a spectacular turnaround in fortunes in the last quarter of FY21 with zooming profits. The goddess of profits continued to smile on them even in the first quarter of FY22.

In its report on the state of the economy published earlier this week, Reserve Bank has analysed that salaries and wage have risen across 16 sectors of the economy in the quarter ended June 2021 which marked the second savage wave of the Covid-19 pandemic.

The rise is mainly due to resumption of hiring. Annual increments also played a part in the growth of the wage bill.

The rate of increase was between 37.7% in the textiles and 1.8% in transport services which is the lowest.

Job losses

“Expenses on wages and salaries jumped way above the increases posted in the five preceding quarters, indicative of stepped-up rehiring. Listed companies in two sectors, viz., information technology (IT) and auto and ancillaries, constituted the highest proportion of total wages and salaries paid by all listed non-financial companies,” said RBI in its state of the economy report on August 17.

The highest rate of rise in wage bill took place in the textiles sector. After the wage bill suffered contractions of 29.8%, 19.2%, 8.8% and remained unchanged (0%) in the quarters ending June 2020, September 2020, December 2020 and March 2021, new employments pushed the wage bill up by 37.7% in the April-June 2021 quarter.

The lowest growth in wage bill took place in transport services – 1.8%. This marked a turnaround after four quarters of contractions measured at 25.5%, 23.6%, 17.4% and 12.1% in Q1, Q2, Q3 and Q4 of FY21 respectively.

Labour-intensive textile

After textile, the second in growth of wage bill charts comes the auto and auto ancillary sector. In Q1 of FY22, this sector recorded a hike of 25.5% in wages and salaries. The figures for the four quarters of FY21 were (-)21.1%, (-)7.2%, 4.7% and 6.2%. This sector began hiring as soon as consumers came back to the market buying vehicles following the urgent need for personal transportation needs.

The two sectors to record more than 20% rise are metals and mining and consumer durables. While metals and mining wage bill rose by 22.6% in Q1 of FY21 – (-)2.3%, 0.9%, 14.6%, 25.3% in the four quarters of FY21 – that in consumer durables went up by 21.5% in Q1 of FY22. The salary bill of FY21 in the consumer durables sector contracted by 13.1% in Q1, 9.1% in Q2, 3.6% in Q3 and rose by 4.1% in Q4.

Famous five

Information technology, communication services, power, pharmaceuticals and FMCG were the only five sectors that did not witness any contraction in the wage bill in all the quarters of FY21.

The growth rates of IT salary bill were 7.3%, 5.5%, 6.8%, 8.6% in the four quarters respectively. In Q1 of FY22 (April-June), the wage bill again rose by 16.4% indicating the buoyancy in this sector as more and more industries globally hired their services to reorient their business during the pandemic.

One of the sectors to profit from the pandemic was pharmaceuticals. The amount it paid to employees rose by 8.8% in April-June 2021 on the back of growth rates of 9.4%, 7.8%, 9.6% and 4.1% in the four quarters of FY21.

Power, FMCG, communication

The rate of growth of FMCG wage bill was 2.6%, 6.5%, 9.4% and 11.5% in the four quarters of the last financial year. In the April-June quarter of FY22, it went up by 10.6%.

Though consumption suffered in the power sector during the pandemic, the wage bill did not contract. The figures for this sector in Q1, Q2, Q3 and Q4 of the wage bill in power stood at 7.6%, 16.4%, 10.9%, and 3.6% respectively. In Q1 of the current financial year, the wage bill rose by 11.6%.

Communication services industry also paid consistently rising wage bills that went up by 11.3, 4.6%, 13.1% and 7.3% in the four quarters of FY21. Salaries and wages rose by 7.4% in Q1 of FY22.

Tourism too

The only other sector besides transport services to record a dip in wage bills in all the four quarters of the last financial year was hotels and tourism. Both were devastated by the pandemic as people were forced to stay indoors.

Tourism and hotels recorded dips of 34.5%, 40.2%, 38.1% and 35.1% in the four quarters of FY21. But this year in the first quarter, it began hiring again and its wage bill rose 4.3%.

RBI has categorised other sectors as “others”. In this bundle wages rose by 13.9% in the April-June quarter.

Revitalisation indicator

RBI has interpreted the corporate indicators as a sign of revitalisation of the economy. Analysing numbers from 1,427 listed non-financial companies that declared their earnings results “so far”, RBI found that during the quarter ending June 2021, net sales of these companies surged by 57% year-on-year compared to a decline of 34% in April-June 2020 when the first wave ravaged the country.

These 1,427 companies accounted for 86.8% of the market capitalisation of all listed non-financial companies in the country.

“The year-on-year jump in net sales this year is admittedly suffused with base effects because of the large fall in the corresponding quarter last year; however, even on a sequential basis (quarter-on-quarter) that skirts base effects, net sales of these companies declined around 9 per cent, an appreciable improvement over the plunge a year ago,” stated RBI.