7th Pay Commission: Central government employees good news set for this massive impact

Centre has yet to indicate whether it is mulling a pay hike. But notably, the build-up is there. Many segments of the bureaucracy have received pay hikes based on seventh pay commission report. However, considering the massive numbers involved, the order to hike salaries of central government employees will drain the Centre's treasury. The pay hike good news will depend a lot therefore, on how fat is the treasury.

7th Pay Commission: Central government employees have been in the news for quite some time over their demands for a hike in their pay. Image source: Reuters

7th Pay Commission: Central government employees have been in the news for quite some time over their demands for a hike in their pay. They have been waiting even as the country moves inexorably towards the 2019 general elections and the window of opportunity gradually closes. Centre has yet to indicate whether it is mulling a pay hike. But notably, the build-up is there. Many segments of the bureaucracy have received pay hikes based on seventh pay commission report. However, considering the massive numbers involved, the order to hike salaries of central government employees will drain the Centre's treasury. The pay hike good news will depend a lot therefore, on how fat is the treasury. That in turn will depend on how well the Indian economy, whether inflation is in control and how Centre is spending the money. In its latest move, Centre has taken a step that will hurt chances of a salary hike for staff.

NDA Government has increased the minimum support price (MSP) for paddy by a massive Rs 200 per quintal! According to economists, this will accelerate retail inflation by as much as 70 basis points! This MSPs is set to destabilise quite a few macroeconomic variables. This red flag has been raised by economists. They also said it will also boost wholesale inflation by 38 bps. How will that impact 7th pay commission based demands of central government employees?

Staff is demanding a 3.68 times hike in 7th CPC fitment factor and not the current 2.57 times that will boost salaries at the lowest levels to Rs 26,000. They have cited the inadequate nature of their salaries for this demand. However, any step by Centre to hike their pay may boost inflation. The number of central government employees is almost 50 lakh and a similar number of pensioners too! Pay hikes inevitably lead to a massive spike in spending and this boosts inflation.

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However, the fast growing Indian economy augurs well for everyone concerned, even for salary hikes over and above the 7th pay commission report recommendations. Indian economy is expected to hit the 8% GDP growth mark, but that is likely to happen in 2019 and not 2018.

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