The Union Cabinet on Wednesday cleared the 7th Pay Commission recommendations. The report had suggested a 15 percent hike in base salaries of government employees. The average hike will be around 23-24 percent. The report was finalized by the Empowered Committee of Secretaries.
The 15 percent hike will be the lowest in 70 years. The 6th Pay Commission had recommended a 20 percent hike, which was doubled at the time of implementation in 2008.
The impact of Pay Commission will be 72 percent on the Finance Budget and 28 percent on the Railway Budget. The annual outgo on back of this is expected to be Rs 1.02 lakh crore.
Some additional provisions have been made for the defence personnel.
The Central Pay Commission is set up at regular intervals (usually every 10 years) by the government to review the existing pay structures for government employees.
As many as 48 lakh central government employees and 55 lakh pensioners will be befitted thanks to this pay hike.
Recommendations by the panel:
The 7th CPC has recommended an overall hike of 23.6 percent, of which 15 percent will be in basic pay, 63 percent in allowances and 24 percent in pension.
The recommended date of implementation for CPC was January 1, 2016 and hence, the employees will get arrears dating back to the start of this year.
The report also suggests capping maximum pay at Rs 2.25-2.50 lakh and minimum pay will be around Rs 18,000 per month. The current minimum pay stands at Rs 7,000 a month.
After the hike minimum entry level pay is expected to be Rs 23,500 and maximum at Rs 3.25 lakh.
On the whole, the CPC’s impact will be around Rs 90,000 crore to Rs 1 lakh crore on the government's coffers. Of this, Rs 73,650 crore will be borne by the general budget and the rest by the railways. The impact of the 7th CPC is expected to be lower than that ofthe 6th CPC.
The panel has also suggested replacing the existing system of pay bands and grade pay with new pay matrix to ensure more transparency in the system.
What it means for the economy
The Pay Commission will help boost consumption demand in the economy. Economic Affairs Secretary Shaktikanta Das said that the Pay Commission will put more money in hands of the people. The housing and consumer durable segments are the ones that will benefit the most, Das said.
However, while growth will come in, expenditure will add to the government’s burden, especially at a time when inflation is coming back. With higher demand, supported by higher money in consumers’ hands, it could push inflation higher.
While the additional burden could impact government’s fiscal deficit target of 3.5 percent, Das is confident that fiscal deficit target will be maintained.
The experts too are betting big on 7th Pay Commission for revival in demand and consumption cycle in India. Monsoon and Pay Commission will play main leads in India’s economic recovery story.
Adi Godrej of Godrej Industries told CNBC-TV18 that the Pay Commission along with GST and monsoon will help improve consumer sentiment
The 15 percent hike will be the lowest in 70 years. The 6th Pay Commission had recommended a 20 percent hike, which was doubled at the time of implementation in 2008.
The impact of Pay Commission will be 72 percent on the Finance Budget and 28 percent on the Railway Budget. The annual outgo on back of this is expected to be Rs 1.02 lakh crore.
Some additional provisions have been made for the defence personnel.
The Central Pay Commission is set up at regular intervals (usually every 10 years) by the government to review the existing pay structures for government employees.
As many as 48 lakh central government employees and 55 lakh pensioners will be befitted thanks to this pay hike.
Recommendations by the panel:
The 7th CPC has recommended an overall hike of 23.6 percent, of which 15 percent will be in basic pay, 63 percent in allowances and 24 percent in pension.
The recommended date of implementation for CPC was January 1, 2016 and hence, the employees will get arrears dating back to the start of this year.
The report also suggests capping maximum pay at Rs 2.25-2.50 lakh and minimum pay will be around Rs 18,000 per month. The current minimum pay stands at Rs 7,000 a month.
After the hike minimum entry level pay is expected to be Rs 23,500 and maximum at Rs 3.25 lakh.
On the whole, the CPC’s impact will be around Rs 90,000 crore to Rs 1 lakh crore on the government's coffers. Of this, Rs 73,650 crore will be borne by the general budget and the rest by the railways. The impact of the 7th CPC is expected to be lower than that ofthe 6th CPC.
The panel has also suggested replacing the existing system of pay bands and grade pay with new pay matrix to ensure more transparency in the system.
What it means for the economy
The Pay Commission will help boost consumption demand in the economy. Economic Affairs Secretary Shaktikanta Das said that the Pay Commission will put more money in hands of the people. The housing and consumer durable segments are the ones that will benefit the most, Das said.
However, while growth will come in, expenditure will add to the government’s burden, especially at a time when inflation is coming back. With higher demand, supported by higher money in consumers’ hands, it could push inflation higher.
While the additional burden could impact government’s fiscal deficit target of 3.5 percent, Das is confident that fiscal deficit target will be maintained.
The experts too are betting big on 7th Pay Commission for revival in demand and consumption cycle in India. Monsoon and Pay Commission will play main leads in India’s economic recovery story.
Adi Godrej of Godrej Industries told CNBC-TV18 that the Pay Commission along with GST and monsoon will help improve consumer sentiment
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