8th Pay Commission: Central government employees and pensioners may soon receive a positive update regarding the 8th Pay Commission. Following its implementation, salaries and pensions could see an increase ranging from 30% to 40%. This adjustment is anticipated to take effect from the fiscal year 2026-27, with the government potentially incurring an additional expenditure of ₹1.8 lakh crore. In comparison, the implementation of the 7th Pay Commission previously cost the government ₹1.02 lakh crore, as reported by a financial analysis firm.

According to the financial analysis firm, the formation of the 8th Pay Commission will require time for report preparation and discussions with various stakeholders. The 7th Pay Commission took 18 months to submit its report, which suggests that recommendations from the new commission may not be effective until FY27. The report will include calculations based on the determination of the fitment factor.

The salary increase in the pay commission is determined through the fitment factor. In the previous 7th Pay Commission, this factor was set at 2.57, establishing a minimum basic pay of ₹18,000. However, with each new commission, the dearness allowance (DA) is reset to zero, which reduces the actual salary increase. The financial analysis firm predicts that this time, the fitment factor could be significantly stronger, potentially leading to an overall salary increase of 30% to 34%.

The financial analysis firm believes that the increase in salaries and pensions will boost consumption, potentially accelerating GDP growth by 30 to 50 basis points. Sectors such as real estate, automotive, insurance, quick-service restaurants (QSR), and non-banking financial companies (NBFCs) could see direct benefits. The previous 7th Pay Commission contributed approximately 200 basis points to GDP growth in FY16.

The report also indicates that the implementation of the 8th Pay Commission may lead to increased investments in equity markets through pension funds. Starting FY26, a unified pension scheme will be introduced, raising the government's stake in the pension fund from 14% to 18.5%. If 45% of this is allocated to equities, total investments could rise from ₹24,500 crore to ₹46,500 crore.