Moving from the US to India: Expectations of salary

Here is an article that appeared in Economic Times by Deepa Venkatraghvan today :NRIs moving from the US to India: How much salary to expect?

Here is the full article..there are a couple of my quotes :)!

Madhuri Dixit to return to India, bag, baggage and doc in tow'

That story probably made news only because of its star power. The fact that NRIs from the US are moving back to India is no shocking development. NRIs have, in the last few years, been relocating to India in large numbers, in search of better personal and professional lives. And if you are an NRI considering that move, there is one important thing that you must understand very well: the salary you will get in India.

Kris Lakshmikanth, Founder CEO of The Head Hunters India Pvt Ltd. says, "When it comes to compensation, we find that NRIs have inflated expectations. They mainly go by hearsay; their friend or friend's friend who returned to India has told them a tall story about Indian salaries. They want to go by that yard stick."

USD will not convert to INR

The first thing to remember is that you will not make the rupee equivalent of your US salary in India. The cost of living in India is significantly lower than that in the US. This also means a lower labour cost in India. These factors will determine your India salary. Seema Nair, Co-Leader India HR Operations of Cisco Indiaexplains, "The salary in India (for Cisco employees moving from US to India) is related to local labour market wage rates with a potential premium for critical skill sets."

Achyut Menon, head of Options Executive Search Pvt Ltd also adds, "In the nineties, people who were posted to India got expat salaries. But those days are over. In the last 10 years, India has become an attractive market for global companies who are not just looking to set up offshore centers here, but also to capitalize on the growing, educated and highly aspirational middle class consumer segment. Added to that is the availability of skilled labour within India itself. Companies no longer need to pay expat salaries." Benchmark: What then should be the broad benchmark? Both Lakshmikanth and Menon say that while there cannot be a standard formula, the Big Mac Index is a good guideline to calculate salaries. The Big Mac index published by The Economist, is based on the theory of purchasing-power parity (PPP), according to which exchange rates should adjust to equalise the price of a basket of goods and services around the world. The basket in this case being a McDonald's Big Mac.

Now according to the last available index dated July 2011, a Big Mac costing USD 4.07 in the US costs USD 1.89 in dollar terms in India (Rs 85 converted at an exchange rate of Rs 45). It means that the Big Mac costs 54% less in India; the cost of living is 54% lower in India. Read another way, this means that the rupee is undervalued by 54% to the dollar and that on the basis of PPP, one dollar would actually be worth Rs 21 instead of Rs 45.

So if you are drawing a salary of USD 100,000 in the US, you can expect to draw Rs 21 lakh in India, give or take. At an exchange rate of Rs 45, that would translate to an Indian salary of USD 46,666 or 46% of the US salary.

"Senior management can expect anywhere between 40% and 70% of their last drawn US salary when they move to India," Menon explains, adding, "At the 70% end would be people who have moved to India to set up a development/ engineering center or to head the global company's India start-up."

Best career move

Having set that broad benchmark, the salary would also vary between industries and functions. You would need to choose your profile and company carefully to maximise your salary.

"Manufacturing would pay less than technology. Within technology, we find that delivery of software is something which Indian companies have become masters in. They don't need to employ people from overseas. In fact, such people from the US are paid less than the person who stayed back in India because those returning from the US have handled fewer people teams as compared to peers in India," Lakshmikanth points out.

Similarly, domestic Indian companies do not usually recruit NRIs for strategic positions if the NRIs are not familiar with the dynamics of the Indian market and work place.

As an NRI moving back to India, Menon says it would be best to join a company in the US which has plans to start-up/ expand in India. "A lot of US companies across sectors like engineering, legal, analytics, financial services, pharmaceuticals are setting up operations in India. These companies are happy to send an Indian to India who also has experience of their other markets. The employee benefits because he can grow with the company's operations in India. In the beginning, the company will set up a 30-40 staff office and expand going forward. As a member of the start-up, the employee grows as the company grows, making it a win-win for both" he explains.

Parting shot

"At the end of the day, come back to India for the same reasons you went abroad: for personal and professional growth and happiness. Come with a long term view in mind and you won't regret it," Menon advices.

I can already see some instant feedback in the comments section at the end of the main article. Am open to having your observations here too!!