7th Pay Commission to bring good news for Indian business?

The reports and recommendation of 7th Pay Commission is likely to be taken up by the union Cabinet on Wednesday. Nearly 47 lakh central government employees and 52 lakh pensioners are expected to see a pay hike to the tune of 20-30%.

“Factors like the Seventh Pay commission and GDP (growth rate) may surge spending power, which may translate into more demand for other sectors than housing, which is key for cement consumption. Better monsoon may help with some increase in the rural housing demand,” Amey Joshi, associate director (corporate), India Ratings and Research told LiveMint.

During announcement of Union Budget 2016-17, the Government of India had sanctioned Rs 70,000 crore for the implementation of 7th Pay Commission for government employees.

Naturally, businesses are looking forward to this bounty to increase their sales of cars, air conditioners, two-wheelers, etc.

Though investment demand continued to fumble, Indian economy has recorded a sustained recovery in private consumption demand by growing 7.6% in the fiscal year 2015-16 and 7.9% in the March quarter. This is only likely to be accentuated once these nearly one crore Indians get Rs 70,000 crore from the government as arrears and increased salaries.  

Some improvement in economy has already started to show by reflection in revenue and profit growth of Indian industries.  

According to a Confederation of Indian Industry-ASCON survey of around 35,000 companies and industry associations in 102 sectors,  about 30.8% of the respondents have registered capacity utilisation to be in the range of 75-100% in the March quarter against 21.4% in the previous quarter. Around 53% of the respondents witnessed capacity utilisation in the range of 50-75% during March quarter, reflecting a marginal improvement from their previous quarter, LiveMint reported.

Capacity utilisation is the rate at which a factory is producing goods as against its full extent.

Adi Godrej, chairman of the diversified Godrej Group in International Business Times, stated that the implementation of the pay panel's proposals, along with a good monsoon and the Goods and Services (GST) Bill, could lift economic growth exponentially. He expects boost in growth rate by five percent points.