The much awaited seventh pay commission has been finally approved by the centre. The cabinet has cleared all the recommendations of the seventh pay commission which reportedly will result in almost 23.55 percent increase in the current salaries of the government employees. More than 1 crore government staff and pensioners will be benefited under this commission. It was formed by previous UPA Government. The commission, headed by Justice A K Mathur was formed in February 2014 and since then was not approved due to some or the other reasons.
The seventh pay commission is expected to boost the Indian economy to a greater extent as the centre government employees will get more money and thus more power to spend the same money in the market. People might be seen spending more on homes, automobiles and electronics. Chandan Taparia, analyst, Anand Rathi Financial Services, said, “Markets requires liquidity whether through monetary policy, fiscal policy or rise in spending power of common man or end user of the country. I believe auto, FMCG and NBFC sectors will benefit from the rise in income. Stocks such as TVS Motors, Ashok Leyland, Dabur, DHFL, LIC Housing Finance and SKS Microfinance will benefit from the 7th Pay Commission.”
Nikhil Kamath, co-founder and director, Zerodha said, “The implementation of the 7th pay commission will both help and deter economic growth simultaneously. While more money in the hands of pensioners and central govt employees is bound to boost consumption, inflation could rise as a aftermath of this liquidity. The most obvious sectors which could see growth from these amendments will be the FMCG, auto and real estate sectors, stocks like ITC have been rallying in response to this policy change. Some of the stocks that could benefit from the 7th pay commission are Maruti Suzuki, ITC, HUL, DLF and Unitech.”
The commission is implemented from January 1 2016. After this the minimum income of any government employee would be 18000 rupees, which is more than the double of current minimum salary-7000 rupees. Also to insure higher transparency in the seventh pay commission had also recommended replacing the present system of grade pay and pay bands with a new pay matrix.
