7th Pay Commission: Cabinet approves recommendations

Deepak Kumar

The Cabinet on Wednesday cleared all the recommendations of the 7^th Pay Commission. The details are expected to be made public soon.

Once effective, over 50 lakh government employees and about 58 lakh pensioners are expected to see an increase in their monthly income. The total increase in salaries, pension and allowances will be at least 23.5%, with 15% increase in the basic pay.

The 7^th Pay Commission had in November last year recommended a 14.27% increase in basic pay at junior levels. The recommendation was the lowest in 70 years. The 6th Pay Commission had recommended a 20% hike, which nearly doubled when implemented in 2008.

The new salary structure will officially be implemented from January 1, while the Cabinet will decide if the arrears for the six months from now have to be paid once or in installments.

Once the new payment structure is put in place, it will put an additional burden of Rs.1.02 lakh crore, or nearly 0.7% of the country’s GDP, on the government.

The government feels that the decision will lead to an increased consumer spending and will put the country’s economy on a higher growth trajectory.

“The hike would boost consumers’ spending power, which will increase flow of money into the domestic market, leading to a stimulation of economy. The infra structure which has been going through stagnation for years will now attract more investments. There are several other global concerns, including Brexit and the ongoing economic slowdown worldwide, that India needs to be wary of. The decision has come at a right time,” a government official told The Dollar Business on the condition of anonymity.

Finance Minister Arun jaitely underscored the 7^th pay rise as ‘historic’. “Congratulations to central government officers, employees & pensioners on a historic rise in their salary & allowances through the 7th CPC,” he said in a tweet.

Indian Workers' Union, however, said the increase was not in line with its earlier demand and the government should consider meeting that demand.

“The increase is not what we had originally recommended to the government. We had pitched for Rs.24,000 to be the minimum pay for a government employee. We will have more clarity once the government comes out with a clearer picture,” Indian Workers' Union President Baij Nath Rai told The Dollar Business.

In January, the government had formed a high-powered panel to process the recommendations of the 7th Pay Commission.

Many industry analysts also predicted that an increase in the salaries would trigger inflation in the market, thereby making life difficult for the common man.

Rai, however, declined any particular impact that the hike could cause on the market scenario and said, “Inflation or price rise is not a new phenomenon, and not strictly related to an increase in workers’ payment. Inflation was high even prior to this implementation. Although it will affect the economy in various ways, both in terms of India’s economic growth and inflation, it is just not natural to price rise in the market.”