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.
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)
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.
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.
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.
and Madhya Pradesh have already indicated that they are going to
implement the 7th Pay Commission recommendations from January 1, 2016,
clarity emerges on the 7th Pay Commission, consumption will see an
uptick and that could act as a stimulus to the economy, the brokerage
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.