New Delhi: One question that always engulfs a salaried worker in India is the impact of an impending Union Budget on hiring by firms and on salary hikes.
With the rapidly changing policy environment, companies need to proactively readjust their talent strategy. Also with the Union Budget 2012-13 on the anvil, the industry is already speculating about some key policies overhaul and its possible impact on the talent dynamics.
Following are some of the likely announcements that the government is contemplating under respective sectors. Also mentioned is the corresponding projected talent impact.
IT Sector
The industry is hoping for the implementation of GST and withdrawal of the MRP-based assessment of IT products. This might result in phasing out of Excise Duty, VAT and Service Tax and will help in unifying the markets in terms of local taxation, thus bringing down cost of goods and services. The companies may be tempted to pass on a part benefit to the employees, in term of higher-than-projected salary hikes, to retain the top talent. However, with growing economic uncertainty in the European markets, Indian IT companies shall continue to hire cautiously in 2012.
Automobile Sector
The government is under tremendous pressure to increase the Excise Duty on diesel passenger vehicles. In addition, the government is also under tremendous pressure to reduce subsidy on diesel and make a correction in the diesel prices. This, coupled with another round of fuel price hike, is likely to adversely impact the consumer buying behaviour. Many companies may resort to immediate cost cutting to maintain their market competitiveness. This is likely to impact the salary hikes for professionals in the automobile sector and they may expect to see single digit salary hikes this year.
Real Estate Sector
The government may consider increasing the limit for financing small homes to Rs 25 lakh and the cost of house to Rs 30 lakh (currently at Rs 15 lakh and Rs 25 lakh respectively) for being eligible for the 1 per cent interest subsidy. This is likely to stimulate the demand for affordable housing. Real estate companies may have to readjust their market strategy and may contemplate volume hiring at junior and middle management levels. However no major change is expected in terms of employee compensation.
Textile Sector
The ministry of textiles has sought more funds in the Union Budget for the modernisation and technology upgrade through the restructured "Technology Up-gradation Fund Scheme (TUFS)". This will lend much-needed impetus to the ailing Indian textile industry. The transition of the industry shall be accompanied with the change in the overall talent composition (percentage of high skilled employees is likely to increase in phases).
Ganesh Shermon is Partner-Advisory, KPMG
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