Employees better placed in new pay matrix
As the Union Cabinet has finally cleared the Seventh Central Pay Commission report on Wednesday, it is sharply narrowing the gap between the salaries paid in private and public sectors. It is expected that by raising the starting pay from the current Rs7,000 to Rs18,000 for new recruits, the Government will be boosting the morale of lakhs of employees across the country. Unlike the delay in implementing the recommendations of fifth and sixth pay panels, which took 19 and 32 months respectively, the BJP-led National Democratic Alliance Government is bringing the seventh pay commission within six months from the due date. This will set a record and indirectly reflects how the current Government is working effectively to meet the grievances of the employees within a short period.
As a result of the salary hike, there may be an impact on inflation which is natural. Finance Minister Arun Jaitley is of the opinion that since more resources are being made available in the hands of the Government employees, this will have definite impact on inflation. This inflation can enhance through both direct and indirect channels. As per the projected estimate of the Reserve Bank of India, a direct impact of the latest seventh pay commission recommendations on headline inflation will be around 150 basis points whereas indirect effects may be around 40 basis points. The seventh pay commission recommendations marking an overall hike of 23.6 per cent in salaries and pensions of the Union Government employees, was submitted to the Government in November last year.
However, the Government set up a panel in January to look into the commission's recommendations. It needs to be highlighted here that unlike the past political dispensations in Delhi, the NDA Government has taken a decision much faster, by including the salary hikes in the coming August month with a retroactive pay effective from January. Also the Government is disbursing the arrears for the last six months during the current financial year 2016-17 itself. Though this will be a huge financial burden on the Union Government as it will have to address 47 lakh Union Government employees and 53 lakh pensioners but with an increase of 16 per cent in pay and 24 per cent in pension will obviously make majority of them happy. The striking feature of the seventh pay panel is that it has dispensed with the present system of pay bands and grade pay with a new pay matrix. But without creating any new levels, the Government has drawn up separate pay matrices for the civilians, military and for Military Nursing Service.
The likely impact on the States as a result of the coming of the seventh pay commission is that they will have to eventually raise the salaries of their employees sooner or later. There has been a tradition that the States normally restructure the salaries of its employees once there is a hike at the Centre. So, there could a surge in demand from the State employees once their brethrens are comparatively better placed across the country. Simultaneously, the reservations raised by the Confederation of Central Government Employees, the Bharatiya Mazdoor Sangh, various trade unions and the Army in regard to the pay hike must be addressed by the Government at the earliest.