India Inc’s Wage Growth Slows to 17-Quarter Low Amid Tepid Demand in Q4 FY25

According to news reports, India’s corporate sector appears to be tightening its purse strings as demand remains lukewarm and revenue growth slows. According to data compiled by Systematix Institutional Equity, the combined salary and wage expenses of listed Indian companies rose by just 4.8% year-on-year in the January–March quarter of FY25 (Q4FY25). This marks the 5th consecutive quarter of single-digit growth in employee costs, and the lowest rate seen in at least 17 quarters.

Such conservative cost management likely stems from margin pressure and the need to preserve profitability in an environment of subdued earnings. In contrast, the same quarter last year saw a 6.1% increase in salary and wage expenditure, while Q3FY25 recorded a 5.1% rise.

₹2.46 Trillion Spent on Employee Wages in Q4FY25

The sample analysed includes 457 listed companies that had declared their Q4FY25 results at the time of the study. These companies together spent around ₹2.46 trillion on salaries and wages in the quarter, a slight increase from ₹2.45 trillion in Q4FY24 and ₹2.38 trillion in Q3FY25.

While the absolute figures indicate continued employment costs, the year-on-year percentage increase remains muted, pointing towards an overall cautious approach by employers.

Nifty50 Firms Account for Bulk of Market Value

The sample includes 25 companies from the Nifty50 index, or 26 if Bajaj Finance, a subsidiary of fellow index constituent Bajaj Finserv, is considered separately. These firms represent a significant portion of India’s equity markets, with a combined market capitalisation of approximately ₹199.5 trillion as of May 7, 2025. This figure alone comprises about 47% of the total market cap of all companies listed on the BSE on the same day.

Their wage spending patterns, therefore, serve as a broad proxy for corporate India’s approach to managing human resource costs in response to shifting economic signals.

Read More: TCS Awards 100% Variable to 70% Staff: What Employees Can Do With Their Variable Pay Hike. 

Declining Share of Wages in Net Sales

One noteworthy trend is the shrinking share of employee compensation in total net sales. In Q4FY25, this ratio dropped to 12%, down from 12.14% in the same quarter the previous year and below the five-year average of 12.6%.

This decline could suggest a strategic effort by firms to align their cost structures with evolving demand conditions and profitability targets. It may also reflect a shift towards automation, outsourcing, or other operational efficiencies that reduce the relative weight of employee expenses.

Conclusion

As companies navigate through an environment of slower revenue growth and muted demand, cost rationalisation, including restrained salary and wage growth, seems to be an emerging theme. While the broader implications for employment and income growth are yet to unfold, the latest trends point to cautious corporate sentiment and a sharper focus on efficiency.

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