Industry Odisha Bureau, Oct 21: Geopolitical tensions, rising costs and weak festive demand are set to restrain pay. Firms may favour top performers, AI talent and one-time bonuses over broad raises.
India Inc is preparing for restrained salary increases in 2027. Rising costs and slowing hiring are squeezing compensation budgets, recruiters and consultants say. Most employers roll out increments in April or May.
Deloitte and Willis Towers Watson, or WTW, expect average increase rates to stay flat. That means pay still rises, but no faster than in 2026. Aon projects nominal hikes of 9.1%, broadly matching this year. Aon expects inflation-adjusted, or real, wage growth of 5.1%, up from 4.3%. These are forecasts, not confirmed pay decisions.
Geopolitical tensions in West Asia have pushed crude oil prices higher, lifting input costs. Inflation hit a two-year high in September. The Reserve Bank of India has also raised interest rates. Costlier borrowing and higher input costs leave less room for permanent pay rises.
Weak festive demand adds to the strain. The festive season runs from September to December, peaking around Diwali. Households are delaying big-ticket purchases as budgets tighten. Fast-moving consumer goods (FMCG), retail, e-commerce and logistics firms may feel this over coming quarters. Information technology companies also reported a muted second quarter.
The job market has also cooled since pay rises peaked in 2022. Then, post-pandemic digital adoption sparked fierce competition for talent. Aon puts attrition at about 18% in 2026, down from 21.4% in 2022. Lower turnover eases pressure to offer large retention hikes.
Nitin Razdan, human capital consulting leader at Deloitte South Asia, cites three forces. They are geopolitical cost pressure, falling attrition and more professionals returning home than leaving. Together, he says, they point to flat average increases. He also expects some firms to swap permanent hikes for one-time bonuses. Such payouts reward staff without locking in higher fixed costs.
Recruiters warn the headline projections may prove optimistic. Upasana Agarwal of ABC Consultants expects banking increments of 6–7% in FY27. That compares with 8–9% in FY26. Banks may rationalise senior and mid-level roles, especially operational and low-end tech jobs, she said.
Aon expects non-banking financial companies to lead in 2027, with 10.1% hikes. Energy follows at 9.9%, with real estate and infrastructure at 9.8%. WTW’s Jude Vijay expects steadier increments in global capability centres, manufacturing and pharmaceuticals. Ongoing investment and talent demand support those sectors, he said. Consumer products, retail, technology and energy may be more cautious.
Top performers, especially those with AI skills, should still earn stronger rewards. Aon says top performers received 2.24 times the variable pay of average peers. They also got 1.85 times the salary increases. For senior managers, variable pay can reach 40% of cost to company (CTC).
When inflation runs high, nominal raises deliver smaller real gains. Rewards will increasingly track performance and scarce skills. Companies must restrain pay without losing the talent they cannot replace.
