7th pay commission: What is on Modi govt table for central government employees?

7th pay commission: The wait has become longer for Central government employees demanding pay hike over and above the panel report recommendations. On the other hand, employees of many state governments have received pay hikes as per the recommendations. The recent pay hike news from poll-bound Rajasthan and Madhya have raised hopes of the central government employees.  However, not a single word assurance has, so far, come from the authorities.

While some states are going to polls this year, the Lok Sabha polls will be held next year. There are about 48.41 lakh central government employees and 62.03 lakh pensioners. It is quite possible that the central government may announce a pay hike for its employees much before the elections. However, all of that is in the real of conjecture.   

Under the 7th Pay Commission, the minimum salary of central government employees have been been hiked by the Centre to Rs 18,000 as per the fitment factor of 2.57 times. However, they have been demanding a hike in minimum salary to Rs 26,000 based on a hike as per the fitment factor of 3.68 times. This however, is a massive hike demand and the Centre is balking at taking a decision that would increase its expenditure phenomenally.

However, the Narendra Modi government may have a number of other options on its table to keep the central government employees from venting their frustrations on the streets. So, if not 3.68 times, the government has the option of mulling a fitment factor of anything between 2.70, 2.80 times to 3.00 times or perhaps even 3.10 times. Anything above that will increase outgo of funds by a huge amount.

Therefore, while hike to Rs 26,000 seems too large, Centre may well look at a salary hike at the minimum level to something like 20,000 or even Rs 21,000.

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However, any such move under the 7th pay commission will be a shock for the government as it may well upset government's fiscal deficit target. Finance Minister Arun Jaitley wants to strictly maintain the 3.3% fiscal deficit target. Any pay hike news may lead to overshooting of the current fiscal deficit target. The government does not want to spend more money than it earns and as it is, with elections looming, it is in a situation where it must grant sops to a huge number of lobbies - from farmers to businessmen. 

Nevertheless, given the state and general elections, the government cannot afford to disappoint its flock of 11 million strong employees and pensioners.