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Govt to set up 8th pay commission for staff

ByRajeev Jayaswal
Jan 17, 2025 06:58 AM IST

The panel is constituted so that its suggestions are received well in time before the 10-year period of the seventh commission ends in 2026

Prime Minister Narendra Modi has approved the constitution of the Eighth Central Pay Commission to recommend salary revisions for around five million central government employees and 6.5 million pensioners, including defence persons, the Union government announced on Thursday.

Govt to set up 8th pay commission for staff
Govt to set up 8th pay commission for staff

The economically and politically significant decision is likely to brighten the prospects of the Bharatiya Janata Party (BJP) in a string of upcoming assembly elections, including in Delhi, as central pay revisions shape the salaries and emoluments of the state’s employees.

“Honourable Prime Minister has given approval for constitution of a central pay commission for all central government employees,” information and broadcasting minister Ashwini Vaishnaw said in a briefing. “The government will soon appoint its chairman and two members,” he added.

The panel is constituted so that its suggestions are received well in time before the 10-year period of the seventh commission ends in 2026, and the government gets sufficient time for implementing its recommendations, he said.

Modi welcomed the move and in a post on X said: “We are all proud of the efforts of all Government employees, who work to build a Viksit Bharat. The Cabinet’s decision on the 8th Pay Commission will improve quality of life and give a boost to consumption,” Modi posted on X.

Central Pay Commissions have been periodically constituted since 1947 to go into various issues of emolument structure, retirement benefits and other service conditions of central government employees and to make recommendations on the required changes. Several states and their agencies often follow recommendations of the commission. These commissions often take factors such as inflation, burden to the exchequer and prevailing economic conditions into account.

“Prime Minister @narendramodi approves setup of the 8th Central Pay Commission for all employees of the Central Government. Since 1947, seven pay commissions have been constituted, with the last one implemented in 2016. As the 7th pay commission’s term concludes in 2026, initiating the process in 2025 ensures sufficient time to receive and review recommendations before its completion,” the Press Information Bureau said on X.

The commission will give its recommendations after intensive consultations with all stake holders, including states, and many employees in Delhi will be direct beneficiaries, a government official said, requesting anonymity.

“Approximately 4 lakh employees in Delhi will benefit, including defence and Delhi government employees. Typically, Delhi government employees see their salaries increased with the central pay commission,” the official mentioned above said.

The 7th Pay Commission saw an expenditure increase of 1 lakh crore for FY 2016-17, he said. “The move will provide a significant boost to consumption and economic growth, along with improved quality of life for government employees,” he added.

The decision was announced days before the Delhi assembly elections scheduled on February 5. Its recommendations are likely to be submitted before a string of key assembly elections scheduled in 2026 and 2027, including in Uttar Pradesh, Tamil Nadu, and West Bengal.

The 7th Pay Commission was constituted in February 28, 2014, it submitted its report on November 19, 2015 and the Cabinet approved most of its recommendations on June 29, 2016. Its chairman was Justice Ashok Kumar Mathur and the two full-time members were Vivek Rae and Rathin Roy. As per the estimation made by the 7th Central Pay Commission, the financial impact of its recommendations was 1,02,100 crore in FY 2016-17. Matters related to pay and pension were implemented from January 1, 2016. Allowances were implemented later with some modifications based on recommendations of another panel led by then finance secretary Ashok Lavasa. According to a 2016 note by the department of expenditure, an arm of the Union finance ministry, the revised rates of the allowances came into effect from July 1, 2017.

The fifth and sixth pay commissions, between 1994 and 2006 and between 2006 and 2008 respectively, are widely considered having unlocked a consumer boom and propelled a new middle class into prosperity. Their financial impact was 18,500 crores and 22,000 crores, respectively.

The pay commissions not only shape the salaries and benefits of millions of central government employees but also have a broader impact on consumer sentiment and the economy. They also carry enormous political significance as government employees make up a key electoral demographic.

The regular pay commissions also help keep central government jobs among the most lucrative forms of employment in India, and one that sees tens of millions of people vie for them in an array of competitive examinations. Pay revisions implemented by the central government are traditionally followed by similar moves by state governments -- another process imbued with political significance.

ICRA Ltd chief economist Aditi Nayar said: “While the award related to the 8th Pay Commission is unlikely to affect fiscal metrics in FY2026, the potential impact of the same should be built into the new medium term fiscal consolidation path as well as the Finance Commission’s recommendations.”

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