Knowledge nugget of the day: The government has announced the constitution of the 8th Pay Commission. (File photo)What is the 8th Pay Commission? Take a look at the essential concepts, terms, quotes, or phenomena every day and brush up your knowledge. Here’s your knowledge nugget for today.
(Relevance: The Pay Commission periodically assesses the pay scales, allowances, and other benefits for government employees. It takes into consideration the inflation in the economy. Therefore, the impact of the Pay Commission is significant on the overall finances of the government. It is important to understand the multi-sectoral impact of the Pay Commission and its objectives as part of your UPSC syllabus)
On 16 January, the Union government announced the constitution of the 8th Pay Commission to revise the salaries of nearly 50 lakh central government employees and allowances of 65 lakh pensioners. Union minister Ashwini Vaishnaw said the decision to set up the Commission was taken at a meeting of the Cabinet chaired by Prime Minister Narendra Modi. The minister told reporters that the chairman and two members of the commission would be appointed soon.
1. A Pay Commission, set up by the government of India, decides the salary and compensation of Central government staffers and allowances of pensioners. The 8th Pay Commission will recommend revisions in the salary and pension structure of the beneficiaries, resulting in a hike in the remuneration and allowances.
2. Pay commissions consult with central and state governments, along with other stakeholders, before recommending salary structures, benefits, and allowances for government employees. Their recommendations are often adopted by state-owned organisations.
3. The implementation of the pay commission’s recommendations results in increased consumption and economic growth, with an improved quality of life for government employees. Generally, every 10 years, the central government implements a pay commission to revise employee remuneration.
Prime Minister Narendra Modi said the 8th Pay Commission will “improve quality of life and give a boost to consumption”. (X/Modi)
4. The commission also suggests formulas for revising dearness allowance and dearness relief for central government employees and pensioners, aiming to offset the impact of inflation. The recommendations are suggestive, there is no obligation on the government to accept the recommendations of the pay commission.
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Dearness allowance (DA) Story continues below this ad |
| DA is a crucial component of the salary that adjusts for the cost of living to offset the impact of inflation. The dearness allowance for employees and pensioners is calculated based on the latest Consumer Price Index for Industrial Workers (CPI-IW), which is released by the Labour Bureau each month. |
5. Since 1947, seven Pay Commissions have been constituted, with the last one constituted in 2014 and implemented on January 1, 2016. The 7th pay commission saw an expenditure increase of Rs 1 lakh crore for fiscal 2016-17. The chairman of the 7th Pay Commission is Justice Ashok Kumar Mathur.
6. There are over 49 lakh central government employees and nearly 65 lakh pensioners who will benefit from the salary hike. As the 7th Pay Commission’s term concludes in 2026, initiating the process now ensures sufficient time to receive and review recommendations before its completion, Vaishnaw said. He further said the setting up of the new Pay Commission in 2025 will ensure that its recommendations are received well before the completion of the term of the seventh pay panel.
1. Inflation refers to the rate at which the general price level for goods and services increases over a period of time, causing a decrease in purchasing power of money or real income. In other words, as inflation rises, each unit of currency can buy fewer goods and services than before.
2. Rising inflation affects the financial well-being of households, especially those with lower incomes or fixed incomes. As the cost of goods and services increases, it reduces the quantity of goods and services that can be purchased with the same nominal income, thereby affecting households’ cost of living.
3. High inflation eats away the real interest earned from keeping one’s money in the bank or similar savings instruments. Earning a 6% nominal interest from a savings deposit effectively means earning no interest if inflation is at 6%. By the reverse logic, borrowers are better off when inflation rises because they end up paying a lower “real” interest rate.
4. There are different methods for measuring inflation such as Consumer Price Index (CPI), Wholesale Price Index (WPI), GDP deflator, Producer Price Index (PPI), and wage inflation, with each focusing on a specific aspect of price changes. Read about these methods here.
(Source: 8th Pay Commission for govt employees approved by Cabinet, What is 8th Pay Commission, approved by Union cabinet?)
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