8th Pay Commission: Can employees expect a bigger pay hike this time?

The 8th Pay Commission has raised hopes of a higher salary hike for central government employees and pensioners. With consumption slowing and incomes under pressure, expectations this time are higher than in the past.

The proposed 8th Pay Commission could bring a major boost to household incomes and consumer spending across India. With around 11.2 million central government employees and pensioners expected to benefit, economists say the revised pay and pension structure could inject fresh momentum into the economy.

The new commission will replace the 7th Pay Commission, which has been in place since 2016. Its recommendations are expected to reshape basic pay, allowances and pensions, with wide-ranging effects on spending and savings.

The 7th Pay Commission had delivered a relatively modest salary hike of about 14%, excluding allowances. Despite a fitment factor of 2.57, the actual increase in basic pay was limited, as dearness allowance (DA) was reset to zero when the commission began, according to a report by Ambit Institutional Equities.

This time, expectations are higher. “A potential hike of 30-34% in wages and pensions could be on the table,” mentioned the report. Such an increase would be much larger than the last revision and could cover nearly 15.5% of total government expenditure.

The Centre is estimated to spend an additional Rs 1.8 trillion once the new pay structure is implemented. This would add to the impact of income tax cuts announced for FY26, which are already expected to leave more money in people’s hands.

States are also likely to follow the Centre’s move, as they have done in the past. This could push up state spending by at least 0.5% of their gross state domestic product.