Seventh Pay Commission Implementation Likely Mid-2016: Macquarie India

The seventh pay commission that has recommended a 23.5 per cent hike in salaries for central government employees may only get implemented by the middle of next year, according to Rakesh Arora, managing director and head of research, Macquarie India.

However, there is no certainty that it would happen even in the next six months, he said.

"And still there is no guarantee that it is going to be implemented in the next six months, it is still for the government to really consider.

"So what we are saying is from the timing it can happen by middle of 2016 and not be pushed out too late."

The sixth pay commission was delayed by 2.5-3 years, Mr Arora pointed out.

The seventh pay commission, headed by Justice AK Mathur, last month submitted its report to Finance Minister Arun Jaitley. The recommendations, once cleared by the Cabinet, will lead to a substantial hike in salaries of central government employees and pensioners with effect from January 1, 2016.

However, there are worries on the fiscal deficit front due to the seventh pay commission, he said.

The government will incur an additional expenditure of Rs 1.02 lakh crore to pay higher salaries and pensions recommended by the seventh Pay Commission. Of this, Rs 28,000 crore will go for salary hikes of railway employees.

According to the finance minister, the implementation of the seventh pay commission will impact the fiscal deficit by 0.65 per cent of GDP.

However, it will ensure more money in the hands of the people, Mr Arora said. The salary hikes are expected to boost sales of affordable homes and consumer durables, which in turn will drive demand in the economy.

The seventh pay commission proposes a 16 per cent hike in basic salaries of 47 lakh serving government employees, and a 63 per cent hike in allowances. As a result, the overall hike in salaries will be 23.55 per cent. This compares with the 35 per cent salary hike central government employees got on implementation of the sixth pay commission in 2008.

The minimum salary for central government employees has been fixed at Rs 18,000 per month by the seventh pay commission.



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