New Delhi, November 19: The panel of the Seventh Pay Commission who are submitting their report on Friday are likely to recommend 15% wage hike. The recommendation will affect for nearly 4.8 million central government employees and 5.4 million pensioners. Also Read - 'Greatest Emergency Since Independence,' Says Ex-RBI Governor Raghuram Rajan on Coronavirus

The panel headed by former Supreme Court judge Justice Ashok Kumar Mathur, will likely recommend an average 15% hike in salaries. Read Also: (Seventh pay commission to submit its report today) Also Read - Raghuram Rajan's Advice on Coronavirus: 'Fight The Epidemic First, Worry About Stimulus Later'



There are questions in front of the panel that higher salaries may prompt people to spend more on cars and houses, triggering a cycle of spending and investment. Also Read - 'Inspires us to Take Stock of What is Truly at Stake': Raghuram Rajan on Deepika's Silent Protest Against JNU Violence

Policy-makers and economists will be waiting for the panels recommendation on Seventh Pay Commission’s which will effect the fiscal deficit of the country after an increase in payouts of 10 million central government employees and pensioners.



In India there are scattered signs of consumption demand picking up. The countries economy is sputtering with latest industrial output data which suggest that factories are nor producing goods and people are not buying at a pace fast enough to push growth.

In September industrial output growth fell to a four-month low of 3.6% which is pulled down by a muted manufacturing and consumers non-durable sectors.

In April-September passenger vehicle sales have grown to 6.22% while the sales of two-wheelers have declined by 0.36%.

Raghuram Rajan, (RBI) governor had also placed his bets firmly on the Seventh Pay Commission’s handouts to boost spending and push up “aggregate demand”.

Last such comprehensive payout did prompt people to spend more in goods. For instance, passenger vehicles sales recorded a sharp rise in sales shortly after the Sixth Pay Commission payouts came into affect from January 1, 2006.

Sales sector witnessed a hike in 20% in 2008-09 and by 22% the next year. Part of the sales spike was driven by the arrears that employees received as the new salaries were notified in 2008, entitling them to an accumulated past dues of over two years.

A rough estimate suggest that 15% salary hike may push the government’s wage bill by Rs 25,000 crore, or about 0.2% of India’s GDP in few months.

The Sixth pay Commission cost the government an extra Rs 17,000 crore annually. The employees also got one-off arrears payments of about Rs 27,000 crore, driving up spending on assets.