New Delhi. Cabinet has cleared the big pay hike for over a crore government employees & pensioners on Wednesday as recommended by the 7th Pay Commission which will result in 23.55 percent overall increase in salaries, allowances and pension. This big decision is expected to boost the economy as consumption demand in urban area is likely to rise due to increasing income levels.
With this hike, several senior government officers will get a higher salary than the lawmakers in the Parliament.
The hike, that is the lowest of the last 70 years is supposed to cost the taxpayers an additional Rs 1 lakh crore yearly or nearly 0.7 percent of the GDP.
The move will impact approx 50 lakh employees and 58 lakh pensioners that is likely to be implemented from January 1 this year.
The hike si built around the suggestion for a 14.27 percent increase I basic pay. While, Rs 73,650 crore out of the total payout will be drawn from the general budget, Rs 28,450 crore will come from railways.
One of the key changes recommended by the pay commission is the “New Pay Structure’, which will do away with the pay bands and grade pays.
The highest pay is pegged at Rs 2,25,000 per month for apex scale and 2,50,000 per month for cabinet secretary and others at the same level. This rise will be more than double as compared to the current pay scale of Rs 90,000 per month.
The move has led to the restlessness among the lawmakers who allege disparity. However, the government is also considering hike in lawmaker’s salaries and allowances.
The minimum pay recommendation is Rs. 18,000 per month, which too has been doubled to Rs. 7,000.
Sources say Finance Minister Arun Jaitley has made provisions for the payout. Though the government is making an effort to increase revenue by bringing more heads under the tax net, the payout will reduce the government's kitty. Mainly, because the Centre also needs about Rs.70,000 crore to meet the One Rank One Pension (OROP) commitment.
But the government is not complaining. The huge payout, once implemented, will boost the consumption demand at a time when the economy is moving sluggishly due to poor demand.
While some experts believe that the additional cash in the market may fuel an inflationary trend, experts say that the impact of the pay commission may become a turning point for the Prime Minister Narendra Modi's government to trigger the demand that drives growth investment and profits.