Recommendations of the 7th Pay Commission got the Cabinet nod on Wednesday, which will benefit over one crore government employees and pensioners.
Below are some of the highlights.
7TH PAY COMMISSION
- Pay commission recommended 23.55% hike in salaries, allowances, pensions the move will impact nearly 50 lakh employees and 58 lakh pensioners recommended date of implementation: 01.01.2016
- Many senior government officials will now draw higher salaries than mps
- Minimum pay: the minimum pay in government is recommended to be set at rs 18,000 per month. This too is more than double of the present rs. 7,000.
- Maximum pay: rs 2,25,000 per month for apex scale and rs 2,50,000 per month for cabinet secretary and others presently at the same pay level. The rise will be more than double as the current pay in this scale is rs. 90,000 per month.
- The previous pay panel had recommended a 20 per cent hike which was eventually doubled when it was implemented in 2008
HOW GOVERNMENT EMPLOYEES WILL BENEFIT:
- ENTRY-LEVEL EMPLOYEES: The entry level pay has been recommended to be raised to Rs 18,000 per month from current Rs 7,000.
- HIKE IN ALLOWANCES AND SALARIES: The basic salary hike recommended is 16%, while that of housing rent allowance, other allowances and pensions are 138.71%, 49.79% and 23.63%, respectively.
- MILITARY PERSONNEL: The starting salary of a sepoy (the army’s entry rank) has been raised from Rs 8,460 (plus grade pay and allowances) to Rs 21,700 a month. At the other end of the rank spectrum, a lieutenant general will now earn above Rs 2,00,000 per month.
- New salaries in the lowest grades (Pay Band 1) will be 2.57 times higher than the existing base line salaries. This caters for a multiplier of 2.25 for merging Dearness Allowance (DA) into the salary.
- The total financial impact in the FY 2016-17 is likely to be Rs 1,02,100 crore, over the expenditure as per the ‘Business As Usual’ scenario. Of this, the increase in pay would be Rs 39,100 crore, increase in allowances would be Rs 29,300 crore and increase in pension would be Rs 33,700 crore.
- Out of the total financial impact of Rs 1,02,100 crore, Rs 73,650 crore will be borne by the General Budget and Rs 28,450 crore by the Railway Budget.
- In percentage terms the overall increase in pay & allowances and pensions over the „Business As Usual‟ scenario will be 23.55 percent. Within this, the increase in pay will be 16 percent, increase in allowances will be 63 percent, and increase in pension would be 24 percent.
- The total impact of the Commission‟s recommendations are expected to entail an increase of 0.65 percentage points in the ratio of expenditure on (Pay+Allowances+ Pension) to GDP compared to 0.77 percent in case of VI CPC.
- Expected to boost the consumption demand, and in turn growth.
- There are chances that a spike in demand supported by higher pay to the government staff may just push the inflation further up.
- The housing and consumer durable segments are the ones that will benefit the most
- Pay commission along with gst and monsoon will help improve consumer sentiment.
WHAT IS A PAY COMMISSION?
For instance, the ToR of the 7th Pay Commission said salaries will be revised keeping in mind “rationalisation” and “simplification” of pay structures and “specialised needs of various departments”. The 7th Pay Commission was constituted in February 2014 and submitted its report in November 2015.
WHO IS COVERED UNDER PAY COMMISSIONS?
According to the 7th Pay Commission, central government employees are all persons in the civil services of the central government and those who are paid salaries out of the consolidated fund of India, which is the account in which government collects its revenues.
Employees of public sector undertakings (PSU) and autonomous bodies, and gramin dak sevaks are not under the remit of the 7th Pay Commission. This would mean someone working in Coal India will not be covered.
As of 2014, there were 4.7 million central government employees. Indian Railways has the highest number of employees at 1.3 million, followed by the home ministry and the defence ministry at 980,000 and 398,000 respectively. Defence ministry personnel refer to civil employees and not those engaged in the Indian Armed Forces, which employs 1.4 million persons.
WHAT ABOUT PENSIONERS?
As of January 1, 2014, there were 5.2 million pensioners. Out of these, 36% of the pensioners are from the Indian Armed Forces, followed by railways at 25%.