8th Pay Commission: The 8th Pay Commission can lead to a huge increase in the salary of central employees. Brokerage firms estimate that the salary will increase more than the previous pay commission, know the reason for this.
8th Pay Commission: Central employees and pensioners are eagerly waiting for the 8th Pay Commission. However, the 8th Pay Commission has not been officially constituted yet. In such a situation, it is not decided how much the salary of government employees is going to increase. But, brokerage firms estimate that the salary can increase from 13% to 54%.
Brokerage house estimates
According to the July 9 report of brokerage firm Ambit Capital, the Fitment Factor can be between 1.83 to 2.46. According to this estimate, the salary can increase from 14% to 54%. However, Ambit Capital itself says that the expectation of a 54% increase in salary is very low. In such a situation, the estimate of an increase of 14% to 34% may be correct.
1.82 factor: 14% increase
2.15 factor: 34% increase
2.46 factor: 54% increase
On the other hand, Kotak Institutional Equities’ July 21 report has made a more restrained estimate. It estimates a factor of 1.8 and an increase of only 13%.
Effect of fitment factor and DA reset
The fitment factor applies to the basic pay, but the actual salary increase is less because the dearness allowance (DA) is reset to zero as soon as the new pay commission is implemented.
For example, in 2016, the 7th Pay Commission suggested a factor of 2.57. This increased the minimum basic salary from ₹7,000 to ₹18,000. But after the DA reset, the actual increase was only 14.3%.
Why there can be a big increase this time
At present, DA is 55% of the basic pay, which is much less than the 125% level before the 7th Pay Commission. Experts believe that even if the fitment factor is low, the actual increase can be more than the DA factor.
Possible salary change
If the current salary of a government employee is ₹ 50,000 per month, then there can be a huge jump in it when the 8th Pay Commission is implemented. But, it will depend on what the government keeps as a fitment factor and by how much percentage it increases the salary.
1.82 factor (14% increase): ₹57,000
2.15 factor (34% increase): ₹67,000
2.46 factor (54% increase): ₹77,000
Impact on government budget
The implementation of the 8th Pay Commission will lead to a major increase in the salary and pension bill of the central government. This increase in the budget estimate for the financial year 2025-26 can put pressure on the fiscal deficit. Experts believe that the burden of increased salary can be up to ₹1.5–2 lakh crore, which can affect infrastructure and capex allocation.
Impact on stock market
The brokerage house says that the increase in salary under the 8th Pay Commission can lead to a boost in consumer demand. Especially FMCG, automobile, consumer durables and retail sectors will directly benefit from this. Also, consumption is expected to increase in rural and semi-urban areas. This can lead to a rise in the shares of related companies.
Ambit says that the government can consider a factor between 1.83 to 2.46. However, the exact figure will be decided only when the 8th Pay Commission is formed and discussions with stakeholders are completed. This process can take several months after the Terms of Reference are decided.
