Central staff, pensioners could see 30 34% rise under 8th Pay Commission; fitment factor up to 2.46: Report

The 8th Pay Commission is expected to propose a significant salary and pension hike for central government employees and pensioners, potentially ranging between 30% and 34%. The report from Ambit Capital suggests that the fitment factor, which determines the new salary levels, might be set between 1.83 and 2.46. This factor will adjust current basic salaries accordingly. This increase is anticipated to affect over 1.2 crore beneficiaries, according to recent reports. The proposal, if implemented, will follow the 7th Pay Commission that had resulted in a 14% salary increase, the lowest since 1970.

This potential hike aims to address inflation and align government salaries with the private sector, ensuring competitiveness and retention of skilled personnel. Additionally, the proposed changes are expected to provide a much-needed relief to employees who have been waiting for an update in their compensation structure. 

However, the implementation timeline remains uncertain, with speculative delays pushing it beyond the initially expected January 2026 start date. The financial implications of this increase are estimated to impose an additional burden of Rs 1.3 to Rs 1.8 lakh crore on the government. This substantial fiscal impact underscores the need for careful planning and phased implementation to manage the economic strain. 

Ambit Capital’s projections also indicate that this salary hike could boost consumer spending significantly, benefiting sectors such as FMCG, BFSI, retail, and automobile industries. The report notes, “The 7th Pay Commission (January 2016 – December 2025) had implemented a modest salary hike of 14%. We expect the 8th Pay Commission to announce a hike of 30-34% for salaries and pensions to cover 11 mn beneficiaries to boost consumption.” Such an increase in disposable income among government employees is likely to lead to heightened demand for goods and services, thereby stimulating economic growth. This anticipated rise in consumption could play a crucial role in revitalizing various sectors of the economy. 

The necessity of the Pay Commission arises from the need to align government salaries with those in the private sector, ensuring the retention of skilled personnel within the government. The 8th Pay Commission is expected to not only adjust salary structures but also stimulate economic activities across the country. This commission follows the tradition of periodic reviews every ten years to update pay scales for government employees. These reviews are crucial for maintaining parity with inflation and market trends, ensuring that government roles remain attractive to talented individuals. 

While the Unified Pension Scheme (UPS) has been introduced as an alternative to the National Pension Scheme (NPS), guaranteeing 50% of the last-drawn salary as base pay from FY26, the overall benefits for pensioners might be slightly less due to the absence of housing rent or other allowances. The complete implementation of the 8th Pay Commission, however, remains contingent on the finalisation of the Terms of Reference and subsequent government announcements. The anticipation surrounding these changes reflects the broader economic implications and the critical role of government policy in shaping fiscal outcomes.