Extra R84,933 crore to over 1 crore employees in FY17

WITH the government accepting the pay- and pensionrelated recommendations of the 7th Pay Commission with a slight betterment of the commission’s package for specified cadres of armed forces, over 1 crore central government staffers and pensioners will get an additional

R84,933 crore as recompense in FY17 — 19.6% higher than in a business-as-usual scenario. The largesse, though much lower than in the generous 6th pay panel’s award (which brought about a hefty and historic 54% “real hike” in pay compared with the current panel’s 14.3%), would still provide some boost to consumption and savings, but policymakers said its inflationary impact would be minimal.

Finance minister Arun Jaitley said the Central Pay Commission’s recommendation for a 63% rise in allowances (which would have inflated the Centre’s and railways’ outgo by R29,300 crore) has been put on hold until a finance secretary-led committee reviews this along with the commission’s suggestions for an overhaul of the 196-odd such benefits. He said the fitment factor of 2.57 proposed by the commission for pay and pension has been accepted, while the index has been improved to 2.67 for brigadiers and additional stages provided for lieutenant colonel and colonel to bring parity with their counterparts in paramilitary forces. Annual increment has been retained at the current 3%.

Although the central government staff ’s extra spending due to the latest pay panel award would form only a tiny part of the aggregate demand, consumption would get a further fillip as the state governments and central/state PSUs will most likely follow suit with similar pay increases in staff remuneration. But the impact of these follow-up steps would be felt only in FY18, analysts said, adding that pay increases commensurate with the central staff’s would imply an annual outgo of R2.3 lakh crore by states and PSUs.

Of the R84,933-crore hit on the exchequer this year, a recurring expenditure of

R72,800 crore is due to pay and pension while R12,133 crore is earmarked to pay arrears from last financial year (the panel’s award will take effect from January 2016). The burden will be shared between the general and railway budgets, in a roughly 10:4 ratio.

Officials said the pay panel induced consumption increase could be partially offset by the resultant cut in government’s capital expenditure to tread the fiscal road map. A finance ministry official on condition of anonymity said that while Budget FY17 did not provide any explicit provision for pay panel, some R54,000 crore was built into the allocations to various ministries and R20,000 crore in the rail budget, adding that additional amounts will have to found in both general and railway budgets.

The Cabinet accepted the 7th Pay Commission’s proposal that the present system of pay bands and grade pay be supplanted with a new pay matrix, wherein grade pay is subsumed. The status of an employee will now be determined by her level in the pay matrix.

The minimum pay for the lowest level staff will now be Rs 18,000 per month (Rs 7,000 earlier); the apex pay (drawn by secretaries to the government) will be Rs 2,25,000 per month and the pay of the Cabinet secretary will be Rs 2,50,000 per month. While the 5th and 6th commissions had worked on the principle of reducing the differential between the remuneration of the government and private-sector employees, the latest pay commission acknowledged the fact that at the lower levels government staff are better paid. According to a study by the IIM-A assigned by the commission, the total emoluments of a general helper, the lowestranked employee in the government, is more than two times the emoluments of his private-sector counterpart. Also, as the commission pointed out, “a mere comparison of the salaries should not form the benchmark for remuneration, it is to be viewed keeping in mind the uniqueness inherent in the government in terms of security of tenure, assured prospects of financial progression even when no promotional avenue sexist, leave and pensionary privileges which are not available to their counterparts in the private sector”.

While it is rumoured that the government might pay allowances only prospective ly, if it decides otherwise and payments are made in the current year, the exchequer will face additional pressure. The panel had estimated thetotal expendit ure to be borne by the general and rail budgets in FY17 to implement its proposals at Rs 1,02,100 crore.

Analysts put out figures on the consumption and savings boost from pay panel. According to India Ratings, thanks to development, consumption will increase by 0.3% of GDP and savings by 0.2% of GDP. “Ind-Ra believes that after the sharing of central taxes with the state governments, the central government’s net tax revenue will increase by 0.09% of GDP in FY17,” it said.

While private consumption expenditure had already gained pace in 2015-16, investments are hard to come by. Private final consumption expenditure (PFCE) rose 7.4% in 2015-16, the highest in the current GDP series and compared with 6.2% in the previous fiscal. PFCE accounted for 55.5% of GDP in 2015-16. Growth in government final consumption expenditure dropped to just 2.2% in 2015-16 from as high as 12.% a year earlier.

Commenting on the pay panel award submitted to the government in November last year, the Economic Survey 2015-16 had said in February that retail inflation would remain in the 4.5-5% range in 2016-17, within the central bank’s target of 5% by March 2017, despite an expected spiral in wage costs following the implementation of the commission’s recommendations. Citing the subdued impact of the 6th panel on inflation despite higher wages (CPI-IW inflation remained around 7% for almost a year in 2008 when the gover nment started to implement the last panel’s recommendations), the survey argued that the effect of the current panel’s suggestions on inflation would also be minimal. However, it admitted that a sharp increase in public sector wages could affect inflation if it spilled over into private sector wages and, hence, private sector demand. “But currently this channel is muted, since there is considerable slack in the private sector labour market, as evident in the softness of rural wages,” it said. the explorer.

“The exploration sector has been largely untapped in the country. Only 10% of the 8lakh sq km potentially resource bearing area has been explored so far. The policy will help attract private sector and FDI,” mines minister Narendra Sing hT omar toldreporters after the Cabinet meeting, chaired by Prime Minister Narendra Modi.

Currently, there is a nearabsence of exploration firms in India, especially those with the special is ed technologies to hunt for rare materials like diamonds, copper, zinc, uranium, etc, which tend to occur at greater depths. As a result, India’s mining industry is largely confined to exploitation of so-called surficial deposits of iron ore, bauxite, etc. The exploration work remained the preserve of public sector GSI and MECL for long; recently, a few state-run firms have been allowed to take up exploration, but that was not enough to address the technology constraints.

Mines secretary Balvinder Kumar said the rules under NMEP would likely to be notified in the next two to three months and the auction of 100 blocks —70 of themlike diamonds and gold — for exploration in the first phase would be over in the following six months.

“The NMEP primarily aims at accelerating the exploration activity in the country through enhanced participation of the private sector. There is a need for comprehensive mineral exploration of the country to uncover its full mineral potential so as to put the nation’ s mineral resources to best use and thereby maximise sectoral contribution to the Indian economy ,” the statement said.

Under NM EP, the government would create baseline geoscientific data as a public good for open dissemination free of charge and carry out a National Aero geo physical Programme for acquiring state-of-the-art baseline data for targeting concealed mineral deposits. more manpower to run 24X7 throughout the year. This is on top of the Centre last week offering a Rs 6,000-crore package and effecting radical changes to labour rules to boost jobs in the garment sector.

“We can expect more formal jobs to be created across retail, IT and services sectors. There will be a 10% growth in jobs in the short term. The Bill will also make the job market more accessible to women by making it easier for employers to have women working in the night shifts as well,” said Sonal Arora, assistant vice-president, Team Lease Services.

Job creation has been one of the priority areas for the NDA government. Employment generation in eight select sectors had fallen to a sixyear low in 2015.

Hailing the move, retailers say much will also depend on the respective state, as maintaining law and order — which has been often cited by the law enforcement agencies as a key reason to deny permission to open commercial establishments at nights — is a state subject.

The draft law provides for exemption of highly skilled workers (for example, workers employed in IT, biotechnology and R&D) from daily working hours of nine hours and 48 hours a week subject to a maximum 125 overtime hours in a quarter.

According to the CII-BCG report, organised retail and ecommerce will grow rapidly to touch $140-160 billion and $45-50 billion, respectively, by 2020. The retail sector will reap the benefits of a large, young population adding to the workforce, a 70% increase in income levels during the period up to 2020, nuclearisation of families and increasing urbanisation, according to the report.

The draft law makes a provision for 12 days’ casual cum-sick leave for workers, one day earned leave for every 20 days of work performed (can be accommodated up to 45 days), five paid holidays for festivals in addition to three national holidays and compensatory leave in lieu of overtime wage. The Bill also provides for common latrines and urinals, crèche, and canteen facility by a group of employers in case providing basic amenities is difficult for one individual establishment due to space constraints or otherwise.