Hyper wage inflation in India especially in corporate and BPO outsourcing sector – can India ever compete with fair wages for its citizens?
Sayad Yavar Imam
Jun. 24, 2007

The employee compensation cost has increased staff a significant 30%, to Rs 88,000 crore during 2006-07, against Rs 60,000 crore during 2005-06. The employee turnover has reached such high levels that Western corporations are complaining about the quality of services from these Indian BPO companies.

Simply put it is an invisible hyper wage inflation that has grasped the country. Are these Indian really worth that pay, questions western corporate managements? It is a big debate that will grasp the attention of outsourcing proponents in New York, London and Brussels.

Tech companies dominated the list of those where staff costs were the highest. The top five companies in terms of staff cost during 2006-07 were Infosys Technologies (Rs 6,314 crore), TCS (Rs 6,187 crore), Wipro (Rs 5,768 crore), SAIL (Rs 5,087 crore) and Satyam Computer (Rs 3,706 crore). Among these, the highest increase in staff cost during 2006-07 was registered in the case of TCS (54.7%).

In reality what has happened is that American companies have jumped in India and hired all these techies for higher remuneration. Now the desi companies have to pay much more to get these techies work for them. The end game of the desi companies are in sight.

India was attractive for its low wages, infrastructure costs and low expectations from the employees. Non-strategic type work was transferred to India to save cost so that American and European corporate profits can swell. Given that charm is no longer there, what is the benefit of India any more?

Some outsourcing think tanks believe, Indian research and development staff is still cheap compared to their abilities. But sooner or later that will also become expensive.

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