New Delhi: Amid the concerns of a Brexit induced global slowdown, the implementation of the Seventh Pay Commission award will turn out to be a mega financial stimulus of Rs 1.02 lakh crore to the economy, which will boost consumption of consumer durables and non-durables, giving a leg up to manufacturing in the country. The Union Cabinet on Wednesday approved the pay panel recommendations, which give nearly 24 per cent hike in the salaries of one crore government employees.
It could revive sentiments in the real estate sector, which has been facing a severe slump. It will also increase a falling savings rate, as a result hike the gross capital formation for the industry. However, an increase in supply of currency in the economy could aggravate retail inflation and any stress on government finances due to huge pay-out may limit its ability to spend on infrastructure. “A rise in demand is likely to not only increase capacity utilisation but may also help revive the investment cycle earlier than expected,” said Dr Devendra Pant, chief economist, at rating agency India Ratings and Research (Ind-Ra).
“The 7th Pay Commission will boost consumption to the economy by Rs 45,110 crore (0.30 per cent of GDP) and increase savings by Rs 30,710 crore,” said Dr Pant “This addition to income can be expected to have a multiplier effect on urban demand in India,” said Richa Gupta, senior economist at Deloitte.
Consumer Electronics and Appliances Manufacturers Association president and Panasonic India president and CEO Manish Sharma said that the pay panel award is one of the much needed cursors to boost the domestic demand. CII said the acceptance of the pay panel recommendations would rev up consumer sentiment and in the process provide a big boost to the industry.
