The Seventh Pay Commission's recommendations were approved by the Cabinet today. The Seventh Pay Commission has recommended a 23.55 per cent rise, effective from January 1, 2016 – which will impact 47 lakh central government employees and 52 lakh pensioners.
Here Are 10 Things To Know:
1) The pay commission's recommendations also influence wages of employees of state-owned firms, local bodies and 29 states. Including pensioners, analysts say that 3 crore people will be directly impacted by the pay commission's recommendations.
2) The extra cash in consumers' pockets is estimated to boost sales of automobile and white goods. Auto and consumer durable shares outperformed today.
3) However, the extra cash in the hand of government employees is likely to stoke inflationary pressure on the economy, analysts said. RBI chief Raghuram Rajan had in the central bank's June policy statement had cited the risks from the Seventh Pay Commission awards.
4) Some analysts have expressed concern over the hike in HRA component as recommended by the government employees. Saugata Bhattacharya, chief economist at Axis Bank, said that the HRA component of central government employees will have a direct impact on the overall rent in the broader market.
5) The pay panel had recommended that HRA be paid at the rate of 24 per cent, 16 per cent and 8 per cent of the new basic pay for Class X, Y and Z cities respectively.
6) Economists say that the RBI would be watchful about the impact from Seventh Pay Commission. This could possibly delay a rate cut from the central bank even if the monsoon pans out as expected.
7) Mr Bhattacharya also said that the struggling real estate sector will also benefit from the Seventh Pay Commission's awards.
8) Economists also see a boost to the services activity from the Seventh Pay Commission awards. Aditi Nayar, senior economist at ICRA, says more people would be dining out while some components like school fees may see an increase.
9) Economists see the pay panel hike boosting India's GDP growth. Credit rating agency ICRA sees a 50-basis-points increase in gross value added (GVA) for India's economy from the impact of pay hike.
10) Implementation of the Pay Commission's awards will put an additional burden of Rs 1.02 lakh crore annually on the government exchequer.
Source: NDTV Profit)