Prime Minister Narendra Modi's cabinet greenlit the 8th Central Pay Commission's terms today, paving the way for salary revisions impacting 50 lakh central staff and 69 lakh pensioners. A projected 25% basic pay increase, via a 2.86 fitment factor, could inject 1.2 lakh crore rupees into household incomes from 2026.
This move addresses 6.5% inflation eroding real wages since the 7th Commission's 2016 implementation. Unions hail it as overdue, with dearness allowance merging boosting take-home by 15% immediately.
India's public sector wage bill, at 4% of GDP, risks widening the 5.1% deficit target. Economists forecast a 0.5% GDP lift from multiplier effects, as spending on durables rises 20%.
Policy-wise, the commission eyes performance-linked incentives, aligning with NEP 2020's skill focus—potentially upskilling 10 lakh workers. Consumer trends show 70% prioritizing essentials, but hikes could spur 12% luxury demand growth.
The revision, delayed from mid-2025, stabilizes morale in a 7.8% growth economy, per RBI. As states follow suit, the ripple could add 2 million jobs in retail.
