7th pay commission: Why Central government employees may not get desired pay hike

7th pay commission: Contrary to several reports claiming an expected pre-election pay hike under the 7th Pay Commission, it is unlikely that the central government will pay heed to employee's demand. The central government employees have been demanding a pay hike over and above the recommendations of the 7th pay commission. Though the employees are getting the benefits and increased salary as per the fitment factor of 2.57 times, they are demanding a fitment factor raise to 3.68 times. Currently, the minimum salary of the employees has been set at Rs 18,000 while the hike as per the fitment factor of 3.68 times will set it at Rs 26,000.

Some poll-bound states like Rajasthan and Madhya Pradesh have hiked salaries of their respective employees but the same may not get replicated for central government employees even though the general election is just around eight months away.

One of the key reasons that government may not opt for a further pay hike is the fiscal deficit situation. The latest government data has revealed that the April-July fiscal deficit has already touched Rs 5.40 lakh crore or 86.5 per cent of the budgeted target for the current fiscal year.  The fiscal deficit target for 2018-19 is Rs 6.24 lakh crore.

The fiscal deficit target for the FY18 was 3.53 per cent. The Centre wants to trim the deficit to 3.3 percent for FY19. And the Union government led by Prime Minister Narendra Modi has been vigilant about fiscal deficit since coming to power in 2014. 

Finance Minister Arun Jaitley has said the government is determined to keep the fiscal deficit at 3.3 per cent.

This may be one reason also behind government being non-committal on cutting tax on petrol and diesel. If the government cuts central tax on the fuel prices, it will have to bear the burden of the subsidy amount incurred after that.

Watch This Zee Business Video

On the similar line, if the government gives the 11 million-strong central government employees and pensioners pay hike gift, this will further burden its finances and may lead to overshooting of the fiscal target. The Centre's recent decision to give a 2 per cent DA hike to its employees will cost Rs 6,112 crore per annum and Rs 4,074 crore in the financial year 2018-19 to the exchequer. Therefore, any hike above and over the fitment factor of 2.57 times is going to be a further burden on the government's coffer. The FM is determined to contain the fiscal deficit at 3.3 per cent and any hike in salaries for the central government employees appears unlikely.