India’s 8th Central Pay Commission (CPC) is facing administrative delays implying revised payouts with sizeable arrears.
Download ReportQuantEco Research | INDIA Macro Tidings: 8th Pay Commission - Understanding the wait and the weight
Revised payouts with sizeable arrears will have implications for growth as well as inflation – and in turn, both fiscal and monetary policy. The fiscal cost of the commission is pegged at an incremental Rs 2.0-2.5 tn, as per QuantEco estimates. A delayed implementation of the 8th CPC offers the Government a window to carry-out GST reforms especially with the end of Compensation Cess now in sight. GST reforms truly have the potential of structurally improving India’s tax revenue-to-GDP ratio in the coming years. From a monetary policy perspective, the 8th CPC is likely to tilt the growth-inflation balance somewhat unfavourably. It will hit core inflation harder, as it propels demand for goods and services overtime, and leads to an instantaneous reset of housing rents. There is a high possibility that 8th CPC may perhaps turn out to be “that” factor that kicks off RBI’s rate hiking cycle in late FY27/FY28.