Seventh Pay Commission Hike Approved: What It
Means For You
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 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 Governor Raghuram Rajan had in the central bank's June
policy statement cited the risks from Seventh Pay Commission awards.
4) Some analysts have expressed concern over
the hike in the 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) Axis Bank's Mr Bhattacharya further said
that the struggling real estate sector will also benefit from Seventh Pay
Commission awards.
8) Economists also see a boost to the services
activity from the Seventh Pay Commission awards. Aditi Nayar, senior economist
at ICRA, says that 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 the Indian 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.
Source : http://profit.ndtv.com/