10 interesting things about the 7th Pay Commission hike

The much sought-after sarkari naukri might have become more coveted after the Union government gave a go-ahead to the recommendations of 7th pay commission effecting a 23 per cent salary hike for government employees.

This at a time when private sector employees have not seen an average salary hike of more than 10-11 per cent.

Here are the 10 things you would like to know about the 7th pay commission recommendations and their impact:

1. The minimum salary recommended by the panel is Rs 18,000 a month and the maximum salary Rs 2.5 lakh a month.

2. The starting salary of Rs 18,000 is more than double the existing pay of Rs 7,000. On the other hand, the maximum salary has been increased from Rs 80,000 a month to Rs 2.5 lakh. The ratio of minimum to maximum salary is 1:11.4 to 1:13.9.

3. The ceiling of gratuity has been increased from the existing Rs 10 lakh to Rs 20 lakh.

4. Around 10 million government employees (including six million pensioners) would benefit from the pay hike.

5. The hike would be effective from January 1, 2016 and the revised salaries are likely to be paid July 1, 2016 onwards. Therefore, all government employees would get six months' arrears.

The government will decide if the arrears for the six months will be paid in one go or in instalments.

6. The increase in salaries of government employees is likely to boost consumption by Rs 40,000-50,000 crore and savings by around 30,000 crore. The boost to consumption would add 0.5 percentage points to the GDP.

7. The hike would mean an additional cost of Rs 1 lakh crore to the government, of which pension payments would account for Rs 33,700 crore.

8. A part of the additional cost to the government would be compensated by the increased income tax and sales tax following increased consumption.

India Ratings pegs the net impact on the central government finances at Rs 80,600 crore.

9. The hike in salary may increase inflation. The RBI's current inflation projections did not take into account the impact of salary hike.

10. The 6th pay commission had recommended a salary hike of 40 per cent in 2008, effective from January 1, 2006.