India Insight-Wage revision:win some,lose some

Today the cabinet approved implementation of the 7th pay commissionrecommendations for central government employees and pensioners:The central government adjusts the salary structure of its employees everyten years. It has in principle approved an average 23.6% hike in salaries ofcentral government employees (4.7mn) and pensioners (5.3mn) effective fromJan-16 onwards and entailing a wage bill of Rs1.02 trillion (US$15bn or 0.7%of GDP).

but the effective increase in wages in FY17 will be lower: Consideringthat only the pay and pension segments have been increased and allowanceshave been kept on hold (will be revised over the next four months andprospectively) implies that the effective increase in wages currently will beonly ~16.8% (US$10.8bn, 0.5% of GDP) although this could change later.

(Details on the next page.)