The 7th Pay Commission is likely to raise the salaries of government employees by up to 40 per cent, said Neelkanth Mishra, India equity strategist of Credit Suisse. The Pay Commission will submit its recommendations in October and it will be implemented by next year.
"As the Pay Commission numbers come
through there could be a 30-40 per cent increase for each individual. It
won't be as big as last time because it was driven by a lot of arrears
but definitely a large number of government employees will come into the
pay bracket which can afford to have, for example, four-wheelers," he
said in an interview with NDTV. (Watch the full interview)
Credit Suisse says about one-third of
India's middle class is employed by the government and as the 7th Pay
Commission comes through, there will be an improvement in discretionary
spending.
"In Tier 3, Tier 4 towns where
government employees are 50-60 per cent of the middle class, it is very
likely that real estate markets will take off again," Mr Mishra said.
Once the Pay Commission submits its
recommendations in October, it will take 3-6 months for the Centre and
the states to announce its implementation, Credit Suisse said.
Gujarat and Madhya Pradesh have
already indicated that they are going to implement the 7th Pay
Commission recommendations from January 1, 2016, he said.
As clarity emerges on the 7th Pay
Commission, consumption will see an uptick and that could act as a
stimulus to the economy, the brokerage said.
However, Mr Mishra struck a note of
caution. "Clearly if you see a third or 35 per cent of your middle class
getting a 40 per cent or 30 per cent jump in compensation in one shot,
the fears of inflation will rise." Expectations of rate cuts can get
pushed out and some possible fiscal pressures can emerge, he warned.
Source: http://profit.ndtv.com/news/life-and-careers/article-7th-pay-commission-likely-to-hike-salaries-by-40-credit-suisse-1201386
