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NEW DELHI: It is an Independence Day bonanza for the central governement employees.The union cabinet approved the Sixth Pay Commission today. Now, about 50 lakh governement employees will get an addition of 21% to their gross salary effective January 1, 2006.
As per the recommendations, those drawing a gross salary of Rs 20,000 per month are now likely to get between Rs 25,000-28,000 per month. The employee will also be entitled to arrears between Rs 1-1.6 lakh.
Similarly, employees drawing Rs 50,000 as gross monthly salary are now expected to get between Rs 62,000-68,000. They will be getting arrears between Rs 1-4 lakh according to their grades.
Armed forces are likely to get, at the soldier level, Rs 2,000 as hardship allowance, which is four times more than the current level. At the Brigadier level, the hardship allowance will be Rs 6,000 per month.
The government has also increased the minimum entry level salary of a government employee to Rs 7,000 from Rs 6,660. Consequently, it would push up the total emoluments of an employee at the lowest level beyond Rs 10,000 per month including allowances.
The governemnt has also increased the rate of annual increment from 2.5% to 3%.
In the defence sector, it approved at least three assured promotions for all defence forces personnel and civilian employees under the modified Assured Career Progression (ACP) scheme. While civilians would get this after 10, 20 and 30 years of service, defence forces would be promoted under ACP after 8, 16 and 24 years.
Finance Minister P Chidambaram said the impact of the revised pay scales on inflation was taken into account when the government cleared the recommendations.
6th Pay Commission: Equation
Pay Hike : Rs 12,561 crore
Arrears : Rs 11,000 crore
Total : Rs 23,561 crore
Fiscal Impact
Pay Commission would cost 0.4-0.5% of GDP to exchequer
Accounting for pay hike, farm loan waiver & higher subsidies, fiscal deficit expected to reach 4.3% from govt target of 2.5% in FY09
Economists expecting another CRR hike of 25 bps to absorb money supply
Money supply expected to surge even if 40-50% of amount realeased is used for consumption
Current money supply growth of 23% still way higher than RBI target of 17%
As a thumb rule, incrased money supply will increase inflation by 20-30 bps
10-year govt bond yield up 2bps to 9.16%
Increasing bond yield implies pressure on interest rates as govt will borrow more to pay employees |
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