Published On: Wed, Apr 6th, 2016

7th Pay Commission award to boost pay for millions, but debate goes on

New Delhi: 7th Pay Commission award is to boost pay for millions, which will come into effect in the second quarter of 2016-17, with the debate about its impact on inflation and boosting of GDP.

7th Pay Commission submitted its report to Finance Minister Arun Jaitley in November.

7th Pay Commission submitted its report to Finance Minister Arun Jaitley in November.

Effectively a increase in the pay and allowances for central government employees is likely boost to consumption demand as it will boost GDP during the current fiscal but its impact is expected to persist up to 24 months,” RBI Governor Raghuram Rajan said.

As of today, the 7th Pay Commission recommended minimum pay to Rs 18,000 per month from Rs 7,000 for central government employees.

Already relatively very low pay by international standards, this will make the India’s low-pay threshold “one of the lowest” minimum pay, according to all the countries in the world, say the Financial experts.

Analysis by the 7th Pay Commission revealed that low paid employees will suffer the biggest financial hit. With the new changes affecting 48 lakh central government employees and 52 lakh Pensioners, while the central government claims the government will have to burden of an additional annual fund of Rs 1.02 lakh crore on exchequer.

Opponents also warn that customers may find themselves paying more at the till to make up the difference. Retailer said it will have to increase prices to cover the expected cost of implementing the pay rise.

If other businesses follow suit, they could end up in a vicious circle where the central government employees’ pay rises but the cost of living also goes up as businesses attempt to cover the cost. For the record, though insisting the higher charges would be partially offset by productivity gains and that the pay rises would still amount to a net gain for employees.

A higher pay that will come into force for central government employees in July, will provide a boost for up to all low paid employees, according to a new analysis.

The 7th Pay Commission headed by Justice A K Mathur presented its report to Finance Minister Arun Jaitley in November with the recommendations for 14.27 per cent increase in basic pay, the overall increase in salary, allowances and pensions is 23.55%. The increase in allowances will be higher by 63% while pensions will rise 24%.

The Empowered Committee of Secretaries (CoS) for processing the report of the Seventh Central Pay Commission before cabinet nod, has been consisted of thirteen secretaries headed by Cabinet Secretary P K Sinha with experience of working with low-paid government employees, like experience of government employees’ interests and experience of labour market economics and employment law.

The Finance Ministry officials on Tuesday said the Empowered Committee of Secretaries will come out with its report in June or July on the 7th Pay Commission recommendations.


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