{29 june 2016} 7th pay commission Latest News in Hindi & Eng (pdf)


{29 june 2016} 7th pay commission Latest News in Hindi & Eng (pdf)

What else could be better news for Central Government employees? The Union Cabinet has nodded positively to the recommendations made by 7th Central Pay Commission. This translates into one simple thing – more income and more money.

Finance Minister Arun Jaitley announced this move by Central Government in a press conference on Wednesday, June 29, 2016. The 7th Central Pay Commission submitted its recommendations to the Centre in November 2015. The recommendations were under review by Ministry of Finance. The Union Cabinet eventually approved the recommendations made by the commission.

7th pay commission Latest News

In the announcement made by Finance Minister Arun Jaitely, it was made clear that the minimum salary of Central Government employees will now be INR 18,000 per month. Previously, this salary was at INR 7,000 per month.

Mr. Jaitely made the following points clear during the long-awaited press conference:

  • 2.57 is the fitment factor that has been applied across all pay grades of Central Government.
  • Yearly increment rate has however not been changed at all. It has been retained at the previous level of 3%.
  • Gratuity for Central Government employees has been increased to INR 25 lakhs from the previous level of INR 10 lakhs.
  • House Building Advance, which previously stood at INR 7.5 lakhs has also been given a upward revision. It now stands at INR 25 lakhs.

This approval of recommendations will mean additional disposable income in the hands of Central Government employees. This in turn will lead to a boost in consumption.

Currently 4.7 million Central Government employees and additional 5.3 million Central Government pension holders will be benefiting from this decision.

Summary of 7th pay commission report Press Conference by FM

Let us take a look at the summary of the length press conference in a tabular format and find out what were the decisions taken by the Central Government.

7th Pay Commission Pointer Explanation
Increment effective date The date from which the increments will be effective will be January 1, 2016.
Arrears payout Since this is June, 2016 and the increments will be effective from January 1, 2016, there will be arrears. These arrears will be paid out by the government within this year.
Maximum salary Because of the approval of the recommendation, the maximum salary a Central Government employee can earn now is INR 2.5 lakhs per month. Previously, this maximum was at INR 90,000 per month.
Lowest salary The lowest salary for the junior most level Central Government employees was at INR 7,000 per month. This has now increased to INR 18,000 per month. This is more than double of the previous level.
Military service pay Military service pay has also been revised. INR 1,000 has become INR 3,600. INR 2,000 has become INR 5,200. INR 4,200 has become INR 10,800 and INR 6,000 has become INR 15,500.
Higher salaries equates to economic growth The government is hopeful that the increase in salaries will not help to boost economic growth. The logic is simple. More income means more disposable income. More disposable income means growth in spending. More consumer spending and consumer consumption means more demand and hence economic growth.
Inflation risk Because people will have more money than required, they will spend more. Increased spending always leads to increased demand. This breaks the equilibrium between demand and supply in an ideal economy. When supply falls short of demand, prices are pushed up. This means inflation. Experts are expecting inflation because of approval of salary hike recommendations by 7th Central Pay Commission.
Government will try to check inflation Well, inflation is not always good. Because this inflation will be driven by extra liquidity in the hands of only a fraction of Indian population, the lion’s share of Indian population will suffer because of low income. Thus inflation can lead to unrest. The government plans on keeping a close eye on how the market behaves in the wake of additional liquidity and take necessary corrective measures.
Half-yearly and yearly increments These increments were given to Central Government employees and were basically linked to market price or inflation. However, the 7th Pay Commission actually recommended to abolish 52 such allowances. Another 36 allowances will be merged together. So, price-linked half-yearly and yearly increments are history as per the new rule.
Compensation The Union Cabinet has approved the increase in military service pay as well as ex-gratia compensations that were made in lump sum have also been increased.
Group Insurance Central Government is known for providing group insurance. The existing monthly contribution rates will remain unaltered for the time being. The Central Government employees will continue to contribute what they used to contribute earlier before the 7th Central Pay Commission gave its recommendations.
Burden on government The increments approved by the government will now lead to an additional burden of INR 1,02,100 crores. In terms of US Dollars, this amounts to USD 15 billion in a single year. The government has to bear this burden every year.
Last major hike The last major hike in salary of Central Government employees took place in 2008. That increment was 50% hike.
Percentage of this hike Compared to the hike given in 2008, this hike is quite small. The gross hike (considering hike in allowance and all other remunnerations) this year is 23.55%. This is less than 50% of the hike that was given back in 2008.
0.7 % of GDP
The extra money that the government has to bear now accounts for 0.7 of total GDP or Gross Domestic Product of India.

Of course the approval of the recommendations made by the 7th Central Pay Commission is a matter of joy for millions of government employees in India, it is also a matter of concern for the economy as a whole. As mentioned earlier, money driven inflation may occur for the short term because of high disposable income. If something like that happens, a majority of the Indian population will suffer. The corrective measures that the government takes under such conditions will be worth watching because what the government does then will decide its future.