Managing salary and inflation in 2025: Why earning alone won’t save you
In 2025, shrinking salary hikes and rising inflation are squeezing household budgets in Indian metros. Financial experts stress that smart investing, not just earning, is the key to long-term wealth.
- Aug 27, 2025,
- Updated Aug 27, 2025 8:27 PM IST
Are you fully dependent on your salary in 2025? If so, it may be time to rethink your strategy. Salary hikes are shrinking, inflation is surging, and the cost of living in Indian metros continues to climb higher than ever. For many, it feels like a race where every step forward is offset by rising expenses.
Cost of Living: The Metro Reality
Living in cities like Mumbai, Bangalore, or Delhi is not cheap. Monthly expenses for just rent, food, transport, and mobile bills now average:
Mumbai: Rs 30,000–Rs 60,000
Bangalore: Rs 20,000–Rs 40,000
Delhi, Pune, Chennai: Rs 15,000–Rs 40,000
“Your salary may go up, but so does your city’s appetite to burn it,” says CA Nitin Kaushik. Add EMIs, school fees, and healthcare costs, and the financial burden multiplies. A modest hike often isn’t enough to cover lifestyle inflation.
Salary hikes in 2025
According to Mercer’s survey of over 1,500 companies, the average salary hike in 2025 is projected at 9.4%. The top-performing sectors are auto, engineering, and manufacturing, with hikes near 10%. Meanwhile, IT, pharma, and construction are lagging.
Switching jobs continues to offer the biggest boost, with average jumps of 15–17%. However, Kaushik cautions, “Even double-digit job-switch hikes may not offset rising healthcare and education costs, which are inflating much faster.”
Performance-linked pay on the rise
Another trend is linking pay to performance. Around 5% of companies are moving away from guaranteed hikes, instead tying increments to KPIs and variable pay. Kaushik explains, “If you’re not meeting targets, you could be stuck with a 2–4% increment—well below inflation.”
The silent wealth killer
Inflation is eating into purchasing power daily. Healthcare inflation is growing nearly three times faster than salaries, while education costs are rising at 12% annually. Housing EMIs remain elevated, linked to the repo rate.
“A 9% hike doesn’t save you from 12% lifestyle inflation,” notes Kaushik. “People underestimate how inflation silently erodes their future.”
Fixed deposits
Fixed deposits still attract savers, but they fail to beat inflation. Post-tax FD returns average just 5.5%, while education inflation runs at 12% and medical costs at 10–14%.
“FDs are not wealth creation—they’re wealth erosion in slow motion,” warns Kaushik. He advises using FDs for short-term parking, not long-term goals.
Smarter moves in 2025
To outpace inflation, professionals must think beyond salary.
Chasing growth? Pick companies with strong headcount growth and above-market hikes.
Seeking stability? Look for employers with attrition rates below 12%.
Beyond salary: Invest in SIPs, mutual funds, and stocks. Diversify into inflation-beating assets, build passive income streams, and track net worth regularly.
Final word
“You can’t rely on salary hikes to create wealth anymore,” Kaushik emphasizes. “If your lifestyle grows with your income and your income can’t beat inflation, you’re just running faster on a treadmill.”
In 2025, earning is not enough—you need to invest, hedge, and grow.
Are you fully dependent on your salary in 2025? If so, it may be time to rethink your strategy. Salary hikes are shrinking, inflation is surging, and the cost of living in Indian metros continues to climb higher than ever. For many, it feels like a race where every step forward is offset by rising expenses.
Cost of Living: The Metro Reality
Living in cities like Mumbai, Bangalore, or Delhi is not cheap. Monthly expenses for just rent, food, transport, and mobile bills now average:
Mumbai: Rs 30,000–Rs 60,000
Bangalore: Rs 20,000–Rs 40,000
Delhi, Pune, Chennai: Rs 15,000–Rs 40,000
“Your salary may go up, but so does your city’s appetite to burn it,” says CA Nitin Kaushik. Add EMIs, school fees, and healthcare costs, and the financial burden multiplies. A modest hike often isn’t enough to cover lifestyle inflation.
Salary hikes in 2025
According to Mercer’s survey of over 1,500 companies, the average salary hike in 2025 is projected at 9.4%. The top-performing sectors are auto, engineering, and manufacturing, with hikes near 10%. Meanwhile, IT, pharma, and construction are lagging.
Switching jobs continues to offer the biggest boost, with average jumps of 15–17%. However, Kaushik cautions, “Even double-digit job-switch hikes may not offset rising healthcare and education costs, which are inflating much faster.”
Performance-linked pay on the rise
Another trend is linking pay to performance. Around 5% of companies are moving away from guaranteed hikes, instead tying increments to KPIs and variable pay. Kaushik explains, “If you’re not meeting targets, you could be stuck with a 2–4% increment—well below inflation.”
The silent wealth killer
Inflation is eating into purchasing power daily. Healthcare inflation is growing nearly three times faster than salaries, while education costs are rising at 12% annually. Housing EMIs remain elevated, linked to the repo rate.
“A 9% hike doesn’t save you from 12% lifestyle inflation,” notes Kaushik. “People underestimate how inflation silently erodes their future.”
Fixed deposits
Fixed deposits still attract savers, but they fail to beat inflation. Post-tax FD returns average just 5.5%, while education inflation runs at 12% and medical costs at 10–14%.
“FDs are not wealth creation—they’re wealth erosion in slow motion,” warns Kaushik. He advises using FDs for short-term parking, not long-term goals.
Smarter moves in 2025
To outpace inflation, professionals must think beyond salary.
Chasing growth? Pick companies with strong headcount growth and above-market hikes.
Seeking stability? Look for employers with attrition rates below 12%.
Beyond salary: Invest in SIPs, mutual funds, and stocks. Diversify into inflation-beating assets, build passive income streams, and track net worth regularly.
Final word
“You can’t rely on salary hikes to create wealth anymore,” Kaushik emphasizes. “If your lifestyle grows with your income and your income can’t beat inflation, you’re just running faster on a treadmill.”
In 2025, earning is not enough—you need to invest, hedge, and grow.