The government has announced the formation of the 8th Pay Commission to review the pay scales of its employees. With the economy at a critical juncture, a hike in their salaries will help boost consumption and put the economy into a higher growth trajectory, explains Lekha Chakraborty.
A helping hand to drive economic recovery
This is a crucial announcement by the government, meant to convey the message that India will not get into “fiscal austerity mode” by staggering the salaries and pensions amidst the global fiscal crisis and mounting global debt burden. This is a bold move to boost consumption amidst mounting global inflation and sluggish economic growth.
After the global financial crisis, India could withstand the aftermath effects mainly due to the timely announcement of Pay Commission (PC) hikes and the employment guarantee schemes then. The revisions in salaries and pensions are much awaited to increase disposable income in the hands of the people. Private investment has been shy (though India has been consistent about capex spending), primarily due to uncertainties about consumer demand in the post-pandemic period. A significant way to boost consumption is to increase salaries and wages. It is also important to support the employees by providing them emoluments to fight mounting inflation.
Genesis of Pay Commissions
The Pay Commission in India was established to review and recommend changes to the salary structure of government employees, to provide a fair and equitable pay scale to improve the wellbeing of the employees to tackle the inflationary pressures. The first PC was set up in 1946, just before India gained independence. It aimed to standardise pay scales and allowances for central government employees. Since then, seven more PCs have been constituted in India. The 6th PC (2006) recommended a significant increase in pay and allowances, against the backdrop of widening wage gaps between public and private sectors in a globalised India. The 7th PC (2015) recommended a 14.29% increase in basic pay, and introduced a new pay matrix system. The 7th PC announcements generated concerns from the Armed Forces, and hopefully the 8th PC will take into consideration these concerns.
Intended beneficiaries of the PC recommendations
The intended beneficiaries of the PC recommendations are government employees including civil servants – including those working in various ministries, departments, and public sector undertakings; pensioners, and family pensioners.
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