1. 7th Pay Commission bonanza for babus tomorrow, watch consumer stocks surge

7th Pay Commission bonanza for babus tomorrow, watch consumer stocks surge

If all goes to plan, the Cabinet will approve the 7th Pay Commission’s whopping 24% hike in salaries on Wednesday for close to 5 million employees and an equal amount of pensioners

By: | Published: June 28, 2016 8:47 PM
7th pay commission, 7th pay commission hike, 7th pay commission news, sensex If all goes to plan, the Cabinet will approve the 7th Pay Commission’s whopping 24% hike in salaries on Wednesday for close to 5 million employees and an equal amount of pensioners (PTI Photo)

If all goes to plan, the Cabinet will approve the 7th Pay Commission’s whopping 24% hike in salaries on Wednesday for close to 5 million employees and an equal amount of pensioners and, if all is given out this year, that’s an additional Rs 1 lakh crore stimulus or around 0.7% of GDP. Since this will also have to be given for teachers and PSU and state government employees, that will ensure a regular dose of stimulus for the next few years. Chambers of commerce will cheer it, markets will bounce back and little will be done to address the real issue of too many clerks in the government and too few officers which is the primary reason for service quality being so poor despite India’s large bureaucracy. In the end, since pay commissions are really about balancing the maximum demands of the bureaucracy with the minimum needed to keep it from revolting, the issue of fixing the head-to-tail ratio and implementing performance-linked-pay will be cursorily mentioned by the Eighth Pay Commission, and then the Ninth …

No attempt, similarly, will be made to fix the issue of salaries. Even after their very generous pensions – which are adjusted for inflation every quarter and hiked dramatically every decade – top bureaucrats typically get paid much less compared to the private sector while the legion of peons, drivers, secretaries and teachers get paid 3-4 times as much; and with little pressure on performance, deliver very little. A government school teacher, before the pay panel award, with no experience gets paid Rs 52,000 as compared to a mere Rs 19,000 (at the top end) in the private sector; a fresh government nurse gets 3.4 times her private sector counterpart, a driver 1.8-2 times. It pays a lot more to be a doctor in a government hospital if you’re an MBBS but as the skill levels rise – to an MD or an MS – private jobs pay much more.

As for the 7th Pay Commission impact, as Kotak Institutional Equities points out, things are quite different from the last pay panel report in 2008. Halving of excise duties – from 16% to 8% between February 2008 and 2009 – ensured automobile prices were dropped significantly, a 425 bps cut in the policy rate in a span of just seven months made money much cheaper. The rural economy was also in far better shape thanks to big hikes in MSPs and, with private sector investment peaking that year, overall sentiment was buoyant. Even so, a Rs 1 lakh crore stimulus will help, though this will have to be balanced by lower spending elsewhere. While that will play out as it will, the important question to ask when the Cabinet clears the pay panel award, is when the larger issues of right-sizing – and right-paying – the bureaucracy will happen.

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  1. M
    Mohamed Mustafa
    Jun 29, 2016 at 11:19 am
    Mr.Arunjetly has created whooping anger in the government staff and not in ry.Only 14.25% in applicable to most of the persons and after paying to CGIS and TAX nothing more exist.What a big change in the pay commission drama
    Reply
    1. M
      Mohamed Mustafa
      Jun 29, 2016 at 11:14 am
      Such a bad pay commission i never expect from this governmentI get Rs.6800 change in ry for 14.25 % calculation in PB-3 out of which i have to pay for CGIS (Rs.5000/=) and Rs.2000/= more for the income tax and what is exist in change of ry.I am not getting any other allowances to say i am getting overall 23.5% raise in ry.why the government is not thinking and why the pay commission spitted the government staff like this. I never expected such a historical change in ry as Mr.Arunjetly said!!!!!!
      Reply
      1. Teem Ideas
        Jun 30, 2016 at 6:03 am
        Cabinet Approved Final 7th Pay ry, Pension and Arrears on your fingertips, Download Android App
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