Who is going to benefit from revised pay scales?

Recently, the Sixth Pay Commission adopted the revision of salaries of the government employees ranging from 25% to 50%. While this is the general average for all, the hike is exceeding 75% in case of high-ranked officials like IAS officers and the likes, clearly defining the government's ecstatic mood after the vote of confidence for the nuclear deal was passed. This revision, spanning through all three classes, namely, high, middle and low, of the Government service structure will benefit 1.86 lakh employees across the country in total. Apart from salaries, government employees will also enjoy substantial allowances for purposes like transport and others. However, while computing increments, these allowances will not be considered as part of salary.

The revised pay scales will not only act as a favor to central government employees but will also add an estimated amount of Rs 4500 to 5500 crore to the exchequer this fiscal year in the form of personal income tax. Since the increased pay would go into buying goods and services, the government will earn more revenue in the form of indirect taxes. Although the increased payout will add to the burden of the Central Government, but it is expected that one-fith to one-fourth of this amount will come back to government exchequer in the form of personal income tax and indirect taxes.

However, coming to the corporate sector, it is expected that none of the companies will be favouring an unexpected hike in salaries this year. This is because sectors such as automobiles, banking, IT and retail have been hardly hit by domestic inflation. Market experts are of the opinion that the average rate of increase in salaries across sectors is going to slow down this year. However, in my viewpoint, the future seems bright as majority of the companies are expecting salary revisions to be implemented in year 2009 with performance of the individuals acting as the major evaluator. Further, big market players like ICICI bank and Maruti Suzuki are gearing up to make changes in the compensation structure to be implemented from next year. Just wait and watch.