7th Pay Commission: Employees’ delight, government's despair
New
Delhi: The Seventh Pay Commission report is awaited, the new pay scales
will be applicable to Central government employees with effect from
January 2016.
50 lakh central government employees and 56 lakh
pensioners including dependents hope to get this gift from April next
year. The revised pay scales are likely to be implemented
retrospectively starting 1 January 2016.
Many commentators say that the average increase in basic fair pay for all government employees will be in the region of 40-45%.
This
is a very rough average because for senior level officers, like the
Cabinet Secretary or officials at the secretary level, the payback could
increase by more than 50%.
As the Pay Commission numbers come through there could be a 30-40 per cent increase for each central government employee.
An
increase of salary and allowances would boost middle class central
government employees to spend more time with their families for
marketing.
The economy would get a major boost from a pickup in
consumption, resulting from an increase in salaries but the flip side to
the hike will be a spike in inflation.
The reports of Seventh Pay
Commission will be implicated from April next year as Finance Minister
Arun Jaitley said in the Parliament on February 27, “The Seventh Pay
Commission impact may have to be absorbed in 2016-17.”
Finance
Minister Arun Jaitley said above statement in his pre-budget speech. His
statement indicates that the government may implement Seventh Pay
Commission report from April 2016.
The strongest criticism of Pay
Commission awards is that they play havoc with government finances. The
pervious pay commissions’ rollout has been negative for fiscal balances.
The
recommendations of the second pay commission were accompanied with a
financial impact of about Rs 39 crore. The financial burden of the
implementation of the third, fourth, fifth pay and sixth pay commission
recommendations has been estimated at around Rs 144 crore, Rs 1,282
crore, Rs 17,000 crore and Rs 20,000 crore respectively.
Initial estimates suggest the seventh pay commission could add Rs 1,00,619 crore to the central government’s wage bill.
The
central government pay and allowances amount to 1 per cent of GDP
today. State wages amount to another 4 per cent, making for a total of 5
per cent of GDP.
The medium-term expenditure framework recently
presented to Parliament by Finance Minister Jaitley, which looks at an
increase in pay of 16 per cent for 2016-17 consequent to the Seventh Pay
Commission award. That would amount to an increase of 0.8 per cent of
GDP. This is a one-off impact.
One Rank One Pension is also a
rider to enforcement of the seventh pay commission’s recommendation. The
government is committed to OROP for the armed forces. This would impose
an as yet undefined burden on Central government finances.
