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Better pay and jobs keeps Indian workers at home

Posted by vmsalama on September 19, 2008

By Vivian Salama

The National | September 18. 2008 9:20PM UAE

MUMBAI // Higher salaries and increasing market maturity in India are making it increasingly difficult for companies in the GCC to lure skilled labour.
Developments and expansion in the retail, IT and construction sectors are creating more jobs, making it a viable option for many workers to either remain in India or return home from overseas.

“People are attracted back here on the basis of attractive salaries and packages,” said Nicola Evoli, an international sales strategist for Grottini Retail Environments. “There is a demand for a certain calibre of employees in India and, until recently, those positions were given to American, British and Australian consultants. However, more and more you see Indians filling these positions.”

According to the Confederation of Indian Industry (CII), India will require at least 30 million additional skilled workers in sectors such as health care, banking and financial services, retail, the motor vehicle industry and construction by 2015. These sectors employ about 40 million skilled workers. Construction is expected to create between 13 million and 15 million jobs in the next seven years, up 39 per cent from the 33 million it employed last year, according to the CII.

Consequently, the country was expected to have one of the highest pay increases in the world at 14.1 per cent, nearly 10 per cent above the local inflation rate, a Mercer report released earlier this year revealed. Higher salaries and greater employment prospects are making India an appealing alternative to those who once opted to leave the country because of limited prospects.

About six million Indian nationals live in the GCC and account for as much as 50 per cent of the expatriate workforce in some Gulf countries.

“There are several factors in the market that could reduce flows of Indian labour to the UAE,” said Venu Rajamony, the consul general of India in Dubai. “The demand for workers is high and salaries have gone up in India, whereas in the GCC, the cost of living is really going up.”

According to a recent survey released by Bayt.com, nearly three quarters of residents in the UAE say their salaries have not kept pace with the soaring cost of living. The report, released last month, found consumer confidence had taken a hit under inflation and soaring living costs.

However, there is evidence that the region’s governments are working to combat this growing concern.

A Hay Group Compensation and Benefits report, also released last week, revealed that aggressive salary increases, particularly for professional and supervisory jobs in the UAE, were occurring.

Based on information from more than 264 employers throughout the UAE, the average basic salary increase was eight per cent. Some analysts say this is not enough to keep up with the region’s skyrocketing cost of living.

“Inflation will have an impact on attracting new people to the GCC,” said Mary Nicola, an economist with Standard Chartered Bank in Dubai. “Now that the cost of living is more expensive, businesses when trying to set up shop and attract new talent have to fork over more money.”

Certainly, India is not sheltered from the soaring inflation rates taking hold of economies around the world. The country’s inflation rate in recent weeks was quoted at 12.63 per cent, however, the prime minister of India Manmohan Singh said this week he expected that rate to ease slightly to 12.1 per cent later this year.

The Gulf does offer one significant advantage that some analysts believe could hinder India’s efforts to woo labour back to its domestic industries. The government of India imposes an income tax on individuals, companies, firms, co-operative societies and trusts, whereas the Gulf remains tax free. 

“Here in India, there are very high salaries on top-ranking jobs, miserable salaries in the low-ranking jobs, and in between you have not too many attractive positions to attract employment back from overseas markets, especially from the Gulf where the salaries are tax free,” Dr Evoli said. “Just as Dubai is getting very expensive, Mumbai is also getting very expensive, so it is a bit complicated to say that India will remain a better option for employment.”

Some analysts believe that despite the expansion of India’s economy and the development of several industries, the country, with a population of more than 1.1 billion people, cannot keep up with the demand for employment.

“This country needs 20 million jobs every year, but we produce only 10 to 11 million jobs,” said Ireena Vittal, a partner with the consultancy firm McKinsey in Mumbai. “Even if these industries grow to twice their size, I think some people will still opt for employment in the Gulf.”


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