‘9% hike looks high vs US, UK, but inflation eats gains’: Experts say middle class sees no real rise
Financial expert CA Nitin Kaushik said that once inflation is adjusted, real wage growth in India has remained almost stagnant for years.
- Mar 21, 2026,
- Updated Mar 21, 2026 7:36 PM IST
As appraisal season begins across India Inc., salary hikes may look healthy on paper, but experts say inflation and slow real wage growth mean the average employee may not feel much richer. According to the EY Future of Pay report, salary increments in India are projected at 9.1% in 2026, with Global Capability Centres (GCCs) expected to lead with hikes of around 10.4%. Financial services, e-commerce, and pharma are also likely to see near double-digit increases, reflecting demand for specialised skills.
However, experts caution that headline numbers do not tell the full story. Chartered accountant Nitin Kaushik said that once inflation is adjusted, real wage growth in India has remained almost stagnant for years. “On paper, a 9% hike sounds strong, but when you account for rising costs, the middle class has been running on a treadmill for nearly a decade,” he said.
India’s salary growth often looks higher than in developed economies, where annual increments may be only 4–5%. But those comparisons can be misleading because purchasing power is very different. A $70,000 salary in the US can offer a lifestyle similar to earning around ₹17–18 lakh in a large Indian city, meaning higher percentage hikes in India are starting from a much lower base.
Income growth in India
Even compared with some emerging markets, income growth in India appears slow. Average personal incomes in countries such as Brazil and Argentina are estimated to be several times higher, despite India being one of the fastest-growing major economies. Over the last decade, real wage growth in India has averaged barely 0.4% annually, showing that economic growth has not translated into proportional salary gains.
One reason, analysts say, is the large supply of workers entering the job market every year. High unemployment and intense competition reduce employees’ bargaining power, making it difficult to negotiate higher pay. When companies have many candidates willing to work for less, salary growth naturally stays limited.
Uniform annual increments
Another factor is the changing nature of jobs. EY’s report notes that companies are moving away from uniform annual increments and shifting toward skill-based pay. Roles in artificial intelligence, machine learning, cybersecurity and data science are now commanding premiums of up to 30–40%, while routine service roles are seeing much slower growth. Nearly half of large organisations are using analytics to design compensation, linking pay more closely to productivity and specialised skills.
Attrition levels have also stabilised, falling to 16.4% in 2025, although most job switches are still voluntary and driven by better offers. Financial services, IT and professional services continue to see the highest churn, while GCCs report relatively lower attrition, suggesting more stable pay structures.
Experts say the bigger issue is structural. Countries such as South Korea saw wages rise sharply when their economies shifted from low-value labour to high-value technology and manufacturing. India, by contrast, still relies heavily on service-sector jobs that are increasingly commoditised globally.
Until the economy creates more high-skill, high-productivity roles, salary hikes may continue to look strong in percentage terms but weak in real life. For many employees, a 9% raise in a high-inflation environment is less a reward and more a way to keep up with the cost of living.
As appraisal season begins across India Inc., salary hikes may look healthy on paper, but experts say inflation and slow real wage growth mean the average employee may not feel much richer. According to the EY Future of Pay report, salary increments in India are projected at 9.1% in 2026, with Global Capability Centres (GCCs) expected to lead with hikes of around 10.4%. Financial services, e-commerce, and pharma are also likely to see near double-digit increases, reflecting demand for specialised skills.
However, experts caution that headline numbers do not tell the full story. Chartered accountant Nitin Kaushik said that once inflation is adjusted, real wage growth in India has remained almost stagnant for years. “On paper, a 9% hike sounds strong, but when you account for rising costs, the middle class has been running on a treadmill for nearly a decade,” he said.
India’s salary growth often looks higher than in developed economies, where annual increments may be only 4–5%. But those comparisons can be misleading because purchasing power is very different. A $70,000 salary in the US can offer a lifestyle similar to earning around ₹17–18 lakh in a large Indian city, meaning higher percentage hikes in India are starting from a much lower base.
Income growth in India
Even compared with some emerging markets, income growth in India appears slow. Average personal incomes in countries such as Brazil and Argentina are estimated to be several times higher, despite India being one of the fastest-growing major economies. Over the last decade, real wage growth in India has averaged barely 0.4% annually, showing that economic growth has not translated into proportional salary gains.
One reason, analysts say, is the large supply of workers entering the job market every year. High unemployment and intense competition reduce employees’ bargaining power, making it difficult to negotiate higher pay. When companies have many candidates willing to work for less, salary growth naturally stays limited.
Uniform annual increments
Another factor is the changing nature of jobs. EY’s report notes that companies are moving away from uniform annual increments and shifting toward skill-based pay. Roles in artificial intelligence, machine learning, cybersecurity and data science are now commanding premiums of up to 30–40%, while routine service roles are seeing much slower growth. Nearly half of large organisations are using analytics to design compensation, linking pay more closely to productivity and specialised skills.
Attrition levels have also stabilised, falling to 16.4% in 2025, although most job switches are still voluntary and driven by better offers. Financial services, IT and professional services continue to see the highest churn, while GCCs report relatively lower attrition, suggesting more stable pay structures.
Experts say the bigger issue is structural. Countries such as South Korea saw wages rise sharply when their economies shifted from low-value labour to high-value technology and manufacturing. India, by contrast, still relies heavily on service-sector jobs that are increasingly commoditised globally.
Until the economy creates more high-skill, high-productivity roles, salary hikes may continue to look strong in percentage terms but weak in real life. For many employees, a 9% raise in a high-inflation environment is less a reward and more a way to keep up with the cost of living.