Mar 20, 2018

7th Pay Commission: Here’s What Could Hinder Additional Pay Hike In April

While the country is waiting with bated breath for some good news on the 7th Pay Commission front to kick-start the new fiscal, the situation on the ground suggests that a further pay hike is far from a given. The latest news from various states suggests that clearing the 7th Pay Commission itself has led to higher-than-projected revenue deficits.

Earlier this month, Maharashtra’s State Finance Minister Sudhir Mungantiwar had said that the move to pay the sanctioned arrears would put a burden of Rs 21,500 crore on the state exchequer. A week later, K. Shanmugam, Additional Chief Secretary (Finance) to the Tamil Nadu government, estimated that the implementation of the new pay hikes would cost them an additional Rs 14,719 crore a year.

The smaller states are in a fix too. Take Tripura, where the Bhartiya Janta Party recently surged to power promising to implement Seventh Pay Commission in the state where state government employees continue to draw salaries on the basis of the Fourth Pay Commission. With Deputy Chief Minister Jishnu Dev Varma announcing yesterday that the state is already facing a fiscal deficit of Rs 11,355.53 crore, how this promise will be fulfilled is anyone’s guess. According to sources, Tripura’s new Chief Minister Biplab Kumar Deb plans to approach the Centre for a special package to tide over financial crisis soon.

All this is significant because state expenditures contribute significantly to the country’s consolidated fiscal deficit. Against this backdrop, the Modi government might find it difficult to top-up the recommendations of the 7th Pay Commission. Besides, earlier this month, the Cabinet approved a 2 per cent hike in the Dearness Allowance (DA) and Dearness Relief (DR) for central government employees, which together will put additional burden of Rs 6,077.72 crore on the exchequer every year. The financial pressure is projected to cross Rs 7,090 crore during the 14-month period between January 2018 and February 2019. With general elections coming up next year, the Centre would hardly want to risk placing extra demands on its coffers.

To remind you, the minimum basic pay for central government employees as per the 7th Pay Commission is Rs 18,000, up from Rs 7,000, based on a fitment factor of 2.57 times the basic pay of 6th pay commission.

But, faced with employee demands for a higher pay hike, the government is reportedly considering hiking the minimum wages with a fitment formula of 3 times the previous basic pay. This would increase the minimum basic pay to Rs 21,000. The Centre, according to media reports, is expected to make a decision sometime next month.

Of course, there’s cause for optimism, too. The economy is on a positive growth trajectory – in fact, a recent Deloitte report predicts a faster than expected growth for the Indian economy in 2018, at 6.8- 6.9 per cent, helping us retain the tag of the ‘fastest growing large economy’ in the world. Data like this only improve the possibility of a pay hike in the offing, bringing cheer to 48 lakh central government employees and 58 lakh pensioners.
Source-Gconnect