The revision will impact around 3.1 crore people—1.8 crore government employees and 1.3 crore pensioners—shaping the country’s economic landscape from 2026 to 2028. UBS expects the wage increase to contribute more to savings than consumption while maintaining fiscal stability, with the government focusing on macroeconomic stability and investment-led growth.
UBS has outlined three possible scenarios for the upcoming wage revision. In its base case, the firm anticipates a 15-20% hike, lower than the 24% increase recommended by the previous commission, which would raise the government’s wage bill by ₹4.5 lakh crore ($50 billion) without disrupting broader macroeconomic forecasts.
A more significant 20-25% hike could provide a temporary boost to GDP growth but might also push up interest rates. If the pay hike is steeper, in the range of 40-45%, it could weaken the rupee, increase inflation, and compel the Reserve Bank of India (RBI) to raise rates. This could lead to an initial acceleration in GDP growth, followed by a slowdown.
The precise percentage of the salary hike under the 8th Pay Commission has not been revealed yet. While it is too early to determine the exact increase for central government employees, past commission recommendations offer a broad sense of the potential impact.
A crucial element of the pay commission is the fitment factor, a key multiplier used to calculate revised salaries and pensions. This will play a significant role in determining the overall hike.
Content Source: economictimes.indiatimes.com