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Fatter pay cheques for 10 mn govt employees, demand boost for economy

The Pay Commission, which submitted its report in November last year, had recommended an average 23.55% increase in emoluments of central government employees, including salaries, perks and pensions.

union budget Updated: Mar 01, 2016 01:31 IST
HT Correspondent
HT Correspondent
Hindustan Times
Union Budget,Paychecks,Government employees
This handout photograph released by the Press Information Bureau (PIB) on Sunday shows finance minister Arun Jaitley with budget officials before the Union Budget 2016 in New Delhi.(AFP)

Finance minister Arun Jaitley on Monday budgeted for higher salaries for central government employees in line with the recommendations of the 7th Pay Commission, brightening the prospects of a sharp boost in the earnings of 4.8-million staffers and 5.5-million pensioners.

The Pay Commission, which submitted its report in November last year, had recommended an average 23.55% increase in emoluments of central government employees, including salaries, perks and pensions.

“The next fiscal year (2016-17) will cast an additional burden on account of the recommendations of the 7th Central Pay Commission and the implementation of defence OROP...The government, therefore, has to prioritise its expenditure,” Jaitley said.

More cash in hand is likely to result in higher consumption by the government employees, who account for a large segment of the Indian middle-class. More demand could boost the economy through higher spending on assets such as cars and housing.

According to the Seventh Pay Commission, headed by former Supreme Court judge AK Mathur, the total emoluments of a general helper, the lowest-ranked employee in the government, is Rs 22,579 — more than two times the emoluments of a general helper in a private sector organisations at Rs 8,000-9,500, according to a study commissioned by the panel.

The government’s overall payout will be lower because of no arrears this time, compared to the previous pay commission, which came in late.

The government has accepted the broad proposals for pay revision — due every 10 years. Previous pay hikes of central government employees had promoted state governments to respond with their own hike. While there are scattered signs of consumption demand picking up, the government would be hoping that the pay hikes will prompt people to spend more and aid budding signs of revival in the broader economy.

The last such comprehensive hike in salaries did lead to a sharp vault in consumer spending.

Car and two-wheeler sales, for instance, recorded a sharp sales surge shortly after the Sixth Pay Commission payouts.

The Sixth Pay Commission report was submitted in 2008, with the higher salaries coming into effect retrospectively from January 1, 2006.

This entitled them to arrears of about Rs 27,000 crore, part of which was spent in cars and houses.

Passenger vehicle sales vaulted nearly 20% in 2008-09 and by nearly 22% the next year, signs that people spent part of their higher salaries on buying newer cars.

First Published: Mar 01, 2016 01:31 IST