India Inc hails pay panel report

India Inc today welcomed the Sixth Pay Commission report that has suggested an average increase of 40 per cent...

India Inc today welcomed the Sixth Pay Commission report that has suggested an average increase of 40 per cent in salaries of Central government employees and said that the move will not lead to a rise in inflation or the government8217;s revenue deficit. The Federation of Indian Chambers of Commerce and Industry Ficci said the pay hike would not add to inflationary conditions and revenue deficit due to buoyant revenue collections. 8220;The revenue collections and the overall economy are growing. If these trends are kept intact, then this additional expenditure should not be too much of a problem,8221; Ficci secretary general Amit Mitra said.

Echoing similar sentiments, the Associated Chambers of Commerce and Industry Assocham said that the increase in salaries would not fuel inflation and increase the revenue deficit as the country is witnessing increased direct and indirect tax collections as a result of higher tax compliance. 8220;The government is going to witness a substantial hike in its revenue collections, the benefits of which ought to be given to its employees and there should be no grudge against such pay commissions recommendations,8221; Assocham president Venugopal Dhoot commented.

Assocham said that the move would make Central government employees more accountable, productive and responsive as the Exchequer would shed Rs 12,561 crore in fiscal 2008-09 itself on account of the higher package. Also, Ficci said that the hike would reduce the problem of governance and attract talented personnel, besides making employees more responsible. The Sixth Pay Commission submitted its report to finance minister P Chidambaram today, recommending implementation of the revised pay from January 1, 2006, which would impose an arrears payout burden of Rs 18,060 crore on the government.

Reacting to the proposals, credit rating agency Crisil said that they will put pressure on government finances, but on the brighter side, they would fuel demand and boost consumption. 8220;It is going to pressurise government finances. It will push up the fiscal deficit. The extent of pressure will depend on how the government implements the recommendations8221;, Crisil principal economist D K Joshi said.

Comparing the Sixth Pay Commission8217;s recommendations with those of the Fifth Pay Commission, Joshi said that the macroeconomic situation at the time of the previous commission recommendations was weak. 8220;And so the impact was big. This time, the economy is in good shape and the Sixth Pay Commission recommendations will not derail the government finances as it happened the last time,8221; he said.

However, he also pointed out that the financial position of some states has not been good and they could face problems if they decide to accept the recommendations. According to Joshi, a good thing about the Sixth Pay Commission is that the issue of talent crunch in the government has been addressed. Government jobs will now be more attractive to many talented people who are presently working in the private sector, he added.

ICICI Bank chief economist Samiran Chakraborty said that the recommendations will make a limited impact on government finances and the burden will be manageable. 8220;The commission recommendations will be manageable from the fiscal perspective,8221; he said. According to him the salary hikes, combined with the rationalisation of taxes effected in the budget, may boost purchasing power. 8220;This will offset factors like the global slowdown affecting growth in India,8221; he added.