Disappointing 8th Pay Panel Report: All hopes and fears of the Central Government employees and pensioners are attached to the 8th Pay Commission (CPC), which was approved by the Union Cabinet on January 16, 2025. As it is to be implemented from January 1, 2026, all expectations of a humongous salary and pension hike are being entertained, given the triple-digit inflation. But, a report of Kotak Institutional Equities talks of a meager 13% increase-the 7th being 14.3% thereby almost crushing 50 lakh employees and 65 lakh pensioners.
Expected Salary Increase and Fitment Factor
Like its predecessors, the 8th CPC is expected to adjust salaries through a fitment factor, which, when multiplied by the current basic salary, decides the amount of new basic pay. The Kotak report sees the fitment factor at 1.8, a heavy reduction from the 2.57 under the 7th CPC. Thus, for an old basic salary of ₹18,000, the resultant new basic would work to ₹32,400 decrepit from 27,900 plus DA at 55%, whereas, the new pay for 50,000 in basic would now stand at 90,000, i.e., a net save of only 12,500 after DA goes to naught.This rise, though modest, is much less relative to the effective increase during the 7th CPC and raises questions about its sufficiency vis-a-vis the escalating prices.
Why less?
The lower 13% raise is reflective of the government’s attempt to impose fiscal discipline in the aftermath of the COVID-19-triggered economic downturn. It is, in fact, slated to cost the exchequer approximately ₹2.4–₹3.2 lakh crore or about 0.6–0.8% of India’s GDP; hence, it must somehow balance the benefit of the employees against fiscal constraints. The DA, meanwhile, stands at 59% by July 2025 as per estimation, which will now be scrubbed off to zero with its implementation, substantially detracting from the effective gain from the salary. The reset is a standard process in pay commissions, which, basically in this case, restricts any real effect on the employees’ financial position even if the basic pay has been increased.
Employees’ Demand for Justice
The National Council-Joint Consultative Machinery (NC-JCM) feels there should be a fitment of 2.57, as given in the 7th CPC, to pay employees fairly. The unions further argue for the unification of ineffectual pay scales (Level 1 to Level 2, etc.) to bridge disparities as a remedy to the 7th CPC irregularities. Meanwhile, early indications highlight that the government is willing to go low on fitment so as to keep exertions on budget to a minimum, therefore cutting into the satisfactions of employee organizations.
Implementation Timeline
Currently in consultation phase, the 8th CPC has sought inputs from the Ministries of Defence and Home Affairs and the state governments. The commission’s formal notification pertaining to the appointment of its chairperson and members is expected shortly. Recommendations are likely to be finalised in late 2025 for implementation in January 2026. In case of abortive implementation, arrears may be granted to cover the break, as in the case of previous commissions.
Economic and Social Impact
Another economic growth engine, albeit limited due to the modest hike, the 8th CPC will stimulate additional consumption-generated income for sectors like consumer goods and automobiles, and increased savings into investments like stocks. But employees contend that a mere 13% increase cannot even stand the test against cost-of-living increases that have gone up since the DA has been adjusted. The success or failure of the commission will be strongly influenced by its determination to weigh economic realities against fair remuneration.
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