Various expectations of pay hike in 7th Pay Commission

Quantum of hike in salary after 7th CPC – analysts differ in opinion

In an article published yesterday in profit.ndtv, economists expected salary hike of the Govt. employees trigger the overall growth of the economy of the nation. Selected parts of the said article is reproduced below.

“The 6th Pay Commission played a key role in insulating the Indian economy from the shocks of the Lehman crisis of 2008. According to Bank of America Merrill Lynch, higher salaries – resulting from the implementation of the 6th Pay Commission – drove two-wheeler and car sales, and led to a recovery in cement demand.

Salaries of government employees went up by an average of 35 per cent on the back of the 6th Pay Commission recommendations; employees also got arrears for more than 30 months because of the delayed implementation of the 6th Pay Commission in October 2008.”

“According to Religare, nearly 50 lakh central government employees (including 15 lakh defence personnel) and over 1 crore state and local government employees will benefit from the 7th Pay Commission.

There’s no consensus about how much salaries will go up — Bank of America expects a modest 15 per cent increase, while Religare expects salaries to go up by 28-30 per cent. Credit Suisse says salary hikes can be as high as 40 per cent.”

“Large-scale salary hikes, however, are also expected to stoke inflation and fiscal pressures.

“Clearly if you see a third or 35 per cent of your middle class getting a 40 per cent or 30 per cent jump in compensation in one shot, the fears of inflation will rise,” Mr Mishra warned. He added that expectations of rate cuts can get pushed out and some possible fiscal pressures can emerge.

According to Jai Shankar of Religare, the salary bill (centre plus state combined) will be much higher at $50 billion or Rs 3.12 lakh crore if the Pay Commission recommend a 28-30 per cent salary hike. “The total amount will be in excess of $50 billion, making deficit reduction extremely challenging in FY17,” he said.”

Source: NDTV