7th Pay Commission extended to college teachers: Who will benefit from bonanza, how will it impact economy

The government on Wednesday extended the benefits of the Seventh Pay Commission for the teaching faculty of central and state universities and aided colleges. The Seventh Pay Commission recommendations for the central government staff was implemented from 1 January, 2016. Here are all the facts you need to know about the Pay Commission extension to college teachers: How much will the pay hike be? [caption id=“attachment_4134693” align=“alignleft” width=“380”]  Representational image. Reuters[/caption] The hike would be anywhere between Rs 10,000 and Rs 50,000. At the entry level, the revision would result in a 22 -28 percent pay rise, the government said. The approved pay scales would be applicable from 1 January, 2016. Who will benefit? According to the government press release, 7.58 lakh teachers and equivalent academic staff in the 106 universities / colleges which are funded by the UGC/MHRD and also 329 Universities which are funded by state governments and 12,912 government-owned and private aided colleges affiliated to state public universities. In addition, the revised pay package will cover teachers of 119 centrally funded technical institutions such as IITs, IISc, IIMs, IISERs, IIITs and NITIE. For the institutions funded by state governments, the revised pay scales will require adoption by the respective governments. What would be impact on government finances? The annual liability for the government on account of this measure would be about Rs. 9,800 crore. According to the press release, the Centre will bear the additional burden of the states on account of revision of pay scales. What is rationale behind the increase? The measures proposed in the revised pay structure are expected to improve quality of higher education and also attract and retain talent, the government said. However, another intention could be to offer a consumption boost for the economy. It has to be remembered that the decision comes at a time when the government has come under attack from within the ruling BJP and outside for mismanagement of the economy and thus worsening the economic slowdown. How would this impact the economy? It should serve a confidence booster for the middle class. It is notable that the decision has come during the festival season. The Reserve Bank of India’s ( RBI) recent Consumer Confidence Survey had showed that the Current Situation Index (CSI) waned further into the pessimistic zone, reflecting deterioration in sentiments on the employment scenario, the price level and income. It found the households’ economic sentiment has been in the pessimistic zone for the last few quarters. A report by brokerage Ambit had in September warned that lack of jobs and investments may end the consumption story altogether. All this at a time when the only factor that is fuelling economy is the consumption and not investment. Seen in this background, the move may be another attempt by the government to boost the consumer confidence. However, in case the move results in increased consumer spending it may also push the inflation up. Already a section of economists are expecting a bump-up in inflation due to the House Rent Allowance (HRA) hike that kicked in from July. However, the RBI is of the view that “the baseline path of headline inflation excluding the impact of house rent allowances (HRA) awarded under the recommendation of the seventh central pay commission (CPC) was likely to fall below the projection made in June to a little above 4 per cent by Q4”. Now, in the likelihood of a further spike in spending, it remains to be seen whether the central bank will change its stance.