Public and private sector FY22 wage bill gap widens

The gap between the private sector and public sector wage bills has widened further in fiscal 2022 to nearly a percentage point, shows an analysis of data on employee compensation.

As a percentage of nominal gross domestic product, the wage bill of the private sector was 12.7% in the year ended March 21, 2022, compared with 11.8% for the public sector, the analysis by ET has found.

A decade ago, in FY12, the public sector had a higher 12.4% share in the GDP at current prices against 9.2% for the private sector. The private sector overtook the public sector in wages in FY20, just before the pandemic.


"Private sector salaries are increasing at a faster rate than the government and the job growth is also higher," said Madan Sabnavis, chief economist at the Bank of Baroda, explaining the gap.

Subdued job growth in the government may also be a reason, he said, adding that the central government was not replacing jobs. "A lot of outsourcing is taking place," he said.

"The level of employment has witnessed this kind of tilt between private and government sectors. Also, the increase in wages is higher in the private sector compared to the government," said NR Bhanumurthy, vice-chancellor of Dr BR Ambedkar School of Economics University, Bengaluru (BASE University).

The lag in the implementation of the seventh pay commission by some states is also a reason for lower compensation by the government, he said.

According to a survey by consultancy firm AON, salaries in corporate India rose 10.6% in 2022 and are expected to rise 10.4% in 2023.

Private sector compensation increased 20.3% from FY20 to FY22, whereas growth for the public sector was 12.5%. The nominal GDP grew 16.8% in this period.