Labour Market India

India is privy to a large labour pool as almost half of it population of 1.2 billion is of working
age. Naturally, this makes the structure of India’s labour market diverse, companies need to
understand this structure in order to benefit from India’s demographic dividend.
Majority of the labour in India is engaged in the unorganized or the informal sector, working
for small businesses or units that employ not more than 10 individuals. Skilled labour is not a
requirement then sourcing becomes an ease.
Although the expansion of higher education is producing a larger skilled talent pool, it still
amounts to only 10% of the overall labour available in the country making it a scarce
resource for companies hunting skilled labour.
Labour Costs:
Firms that are entering India often choose to decide after analysing comparative labour cost.
India undoubtedly offers a competitive advantage with its lower wage structure and access to
a vast and diverse labour market. The average minimum wage for a contract worker in India
is $148 while it is $234 for China.
Labour costs also tend to vary region wise in the country. Two tier and three tier cities have
much lower wages than tier one owing to lower cost of living, affordable real estate. The
difference in pay scales can go up to 25% as the city compensatory allowance and employee
conveyance allowance is much smaller portion in the tier two and three cities.
Another issue is that India is plagued by archaic labor laws which do not permit companies to
hire labour without any frills. Thus, companies prefer to invest in building technology that
replaces the need for human labor in order to bypass these outdated laws.