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Indian labour market has competitive advantage over China

March 12, 2014 17:30 IST

Indian flagIndia has more affordable labour than China, where the pay is more than double of what is being offered locally, a Towers Watson report says.

According to the global professional services company, the sharp fall in the value of the rupee against the US dollar in 2013 contributed to reducing labour costs in India.

It contrasts with China where the renminbi appreciated against the dollar.

Labour costs at top management level are lower in India.

At senior level, average executive pay in China is $215,000 per annum and in India $94,000. "The large influx of Indian returnees following the global financial crisis helped India to get more CEO talent," Clare Muhiudeen, Managing Director, Talent & Rewards Asia Pacific, Towers Watson, said.

But with higher rates of inflation in India than in China, that gap is expected to narrow in the coming years.

"We expect average salary increase in India to be higher than China's 8.5 per cent, Muhiudeen said, adding, "India clearly has more affordable labour than China and that's the way it'll be for the foreseeable future."

Moreover, China's labour force is expected to fall for the second year running to 795 million in 2014 from 798 million in 2013. While in India, work force is set to reach 492 million this year, up from 487 million in 2013.

"The net addition to the working population is reflected in India's abundant entry level talent.

"In people-intensive sectors like technology and retail, the entry level wages are stagnant. Adjusted for inflation, they may actually be reducing every year," Subeer Bakshi, Talent & Rewards India Director, Towers Watson, said.

The Asia Pacific section of Towers Watson's 2013/2014 Global 50 Remuneration Planning Report shows a widening disparity in pay levels particularly between the middle management and CEO in 13 of the Asia Pacific's key developed and developing economies.

At the lower end of the job level Asia Pacific's developed economies predictably have the highest pay levels, Australia entry pay level is eight to 11 times more than China, the Philippines and Indonesia, and 15 times that of Vietnam.

Australia also pays discernibly higher than Japan, Singapore and Hong Kong through to middle management, after which the gap narrows, the report said.

In terms of C-suite level remuneration, Singapore is the standout.

Pay levels there at senior management outstrip those of Japan and, more so, Hong Kong. Indeed, across the board, remuneration levels in Singapore exceed those of Hong Kong by 14 per cent at senior executive level to 34 per cent for top management.

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