A very big pay hike for over a crore government employees and retired person was cleared by the cabinet in Delhi on Wednesday 30 June 2016.
With this increase, numerous senior government officers will draw a higher salary than lawmakers in Parliament.
Salaries and allowances will increase by at least 23.5 per cent, which had been recommended by the 7th Pay Commission the board that chooses on government salaries.
The rise the lowest in last 70 years is expected to cost taxpayer an additional rs. 1 lakh crore yearly, or nearly 0.7 per. Of GDP.
The change will effect approximately 50 lakh employees and 58 lakh pensioners. The changes will be effective from January 1 this year.
The promotion is built around a 14.27 per cent hike in basic pay.
The change has led to the discontent among the lawmakers who allege inconsistency with government officers. To address their hatred, the government is also seeing a hike in salaries and allowances of policymakers.
Rs. 73,650 crore of the total payout will come from the general budget, while Rs. 28,450 crore will come from the railways.
The previous pay panel had suggested a 20 per cent hike which was finally doubled when it was implemented in 2008.
The present Rs. 7,000 is doubled and now the minimum salary is Rs. 18,000 per month. Finance Minister Arun Jaitley has made requirements for the payout.
However, the government is making an effort to increase income by taking more under the tax net, the payout will reduce its fund. The Centre also needs about Rs. 70,000 crores to meet the OROP (One Rank One Pension) commitment for the armed militaries.
On the reverse side, the huge payout will increase demand at a time the economy is inactive.
While some trust extra cash in the market may fuel an inflationary trend, experts say that the impact of the pay hike may become a turning point for the Prime Minister Narendra Modi’s government to generate demand that pushes growth investment and profits.
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