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Indian Wages Nearly 3,000% Lesser Than US

India has its demographic dividends in place to draw foreign companies into the country, according to a report by global consultancy Deloitte.

The absolute wage levels in India are low, which is a large cost advantage for foreign firms that want to locate production outside their country of origin, it says.

According to the US Bureau of Labor Statistics, average hourly compensation costs for all employees in Indian manufacturing was $1.25 or around Rs 75 in 2009 compared to $34.11 or around Rs 2,100 in the US. ($1=Rs 61.50). That is a stark 30 times or nearly 3,000 per cent less than US wages. India has the cheapest hourly wages among emerging nations behind China, Mexico and Brazil.

India also is home to world's largest employable graduate population - 5.34 million students graduated in 2013-14. Around 25 percent of the workforce consists of domain experts such as doctors, lawyers, statisticians, chartered accountants, and mathematicians, the study shows.

"A qualified, culturally diverse, and English-speaking workforce is also a big advantage for foreign companies looking to expand into India," Deloitte said.

However, despite these strengths India lags far behind China in attracting foreign direct investment or FDI. In August, China received seven times more FDI at $7.2 billion compared to India's $1.27 billion.

The new government has announced big steps to attract foreign investment in the country. The "Make in India" campaign is aimed to convert India into a manufacturing hub by improving the ease of doing business. There are also plans to amend labour laws to make India more business friendly. Finally, the government says it will implement a common goods and services tax in 2016.

But most of these big bang reforms have remained on paper so far. What the government has done so far is to abolish ministerial groups, making individual ministries more empowered. Long pending energy reforms like diesel deregulation and gas price hike have come through.

While foreign investors may have welcomed India's efforts to raise FDI in insurance and defense, they are still waiting for greater clarity on key issues, the report states.

"Easing of FDI limits by itself will not translate into more investment if hindrances to project clearances remain. Investors are cautious, waiting for greater clarity on key issues, such as retrospective taxes and public finances, which the government has pledged to address," it said.

Retrospective taxation has attracted much criticism from domestic and overseas investors like Vodafone and Shell, who were embroiled in long-running tax cases.

Fiscal deficit, on the other hand, touched 82.6 per cent of budget estimates for 2014-15 to cross Rs 4.38 lakh crore at the end of September.

Source: NDTV

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