8th pay commission: How will the market environment change if more money starts coming into the pockets of crores of employees at once? Expenditure will increase, crowd in shops will increase and the earnings of companies will increase rapidly. The same picture may be visible after the implementation of the Eighth Pay Commission. Global banking firm JP Morgan says that the more the expenditure increases, the more the stock market will go up. This process of the government is not just a wage reform, but can become an engine to give new momentum to the Indian economy in the future.
There is a lot of stir regarding the Eighth Pay Commission. This committee formed under the chairmanship of retired Justice Ranjan Desai has become active in its initial meetings. The government has declared its terms of reference. Now the committee has about 18 months to submit its report. After the report is ready, the central government will take a final decision on this. If approved, the employees may receive payment of new salary and benefits later, but its effect will be considered retroactive from January 1, 2026. This means that the entire outstanding balance will be received.
Consumption Acceleration: People will spend faster
JPMorgan has clearly stated in its note given through NDTV Profit that the consumption acceleration, i.e. rapidly increasing expenditure, due to the implementation of the Eighth Pay Commission, will strengthen the Indian stock market. The bank says that when employees get more money in their pockets, they will make purchases on a large scale. There will be more expenditure on house, car, electronics, furniture and everyday things. This will increase the sales and profits of companies, and seeing strong results, domestic and foreign investors will invest more money in the stock market.
Fitment factor will be very important
The important thing that the committee looks at while deciding the salary is the fitment factor. This is the coefficient to convert the old basic pay into the new structure. Inflation, cost of living and Dr. Wallace R Aykroyd’s formula are also used to decide this. These factors decide the actual increase in salary.
JP Morgan has also compared the impact of the 6th and 7th Pay Commission in its analysis. When the Sixth Pay Commission came into effect in 2008, the fitment factor was approximately between 1.74 to 1.86. The effect of this was that the salary got increased by almost 40%. Employees also received huge arrears, the direct effect of which was visible in the market and new cars, houses, electronics and big expenses increased significantly.
7th Pay Commission increased the salary, but…
But after the 7th Pay Commission of 2016, purchases increased, but not that much. Even though the fitment factor was kept at 2.57, the actual salary increase was only 23–25 percent. The reason for this was that at that time Dearness Allowance i.e. DA, which had reached 125 percent of the basic salary, was reduced to zero in the new system. The employees also received almost no arrears, hence the impact of increase in expenditure was limited only to everyday things, big purchases were seen less.
Expectations are high from the Eighth Pay Commission, because the consumption cycle may accelerate again if the salary increases. This will give more income to the government in the form of tax, strengthen the results of companies and can create a positive environment in the Indian stock market. Experts believe that if the salary increase this time remains practical and balanced, then its impact will be visible not only on government employees but on the entire Indian economy.
