The financial impact of the recommendations will be Rs 1.02 lakh crore – Rs 73,650 crore on Central Budget and Rs 28,450 crore on Railway budget. While this will boost consumer discretionary demand, it will increase government’s fiscal burden and also raise inflation, feel brokerages and ratings agencies. For the lowest pay grade, it has been raised from Rs 30 per month to Rs 1,500 and the cover hiked from Rs 30,000 to Rs 15 lakh.
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PTI reported that the recommended raise in basic pay, a key segment that determines several allowances, is only 14.27 per cent – the lowest in 70 years.
“The past pensioners shall first be fixed in the pay matrix being recommended by the Commission on the basis of pay band and grade pay at which they retired, at the minimum of the corresponding level in the pay matrix”. Historically, Pay Commission’s rollouts have been positive for consumption trends but negative for fiscal balances. The Panel estimates the financial impact of implementing these recommendations at Rs1. “This is because the increase in the size of government (expressed as a percentage of GDP) can only be financed through an increase in the revenue-GDP ratio and/or an increase in the FD-GDP [Fiscal Deficit] ratio”, the commission said.
The total financial implication of the seventh pay commission has far surpassed expectations as it is going to cost an additional Rs one lakh crore to the exchequer.
– The Commission recommends One Rank One Pension for central government staffers as well as armed forces.
The 7 Pay Commission Report has been the talk of the town since few days.
So, let’s wait and watch what the 7 Pay Commission has in store for all. In the case of house rent allowance, the panel said since the basic pay was proposed at a much higher rate, such an emolument should be paid at the rate of 24 percent, 16 percent and 8 percent of the new basic pay for classes X, Y and Z cities, respectively.
The suggested wage increase by the 7th Pay Commission would come into effect at the beginning of the 2016 calendar year.
The overall increase in pay and allowance and pensions over the business-as-usual scenario will be 23.55 per cent, the report said.
While the expenditure incurred on contractual manpower is less than that of salaries for personnel serving in the government, “they are in their own right significant and also likely to increase in coming years”.
The government had unveiled a fiscal consolidation roadmap in Budget under which fiscal deficit was to be brought down to 3.9 per cent of GDP in 2015-16, 3.5 per cent in 2016-17 and 3 per cent by 2017-18.
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Then, India’s fiscal circumstances were less austere, with growing tax revenues, a buoyant economy and a fiscal deficit of 2.5 per cent. It said, “If the targets are adhered to, allotments towards capital expenditure are likely to fall”. “We have chose to express our resentment and demand at least 40 per cent hike in the pay of various categories of employees”, he added.
