The 7th Pay Commission has been implemented, and around 10 million government employees and pensioners are now receiving the hiked salary. The committee has recommended 23.5% overall salary increment for the government employees. The new pay commission has provided quite a good increase in the allowances, including HRA, TA, DA, etc. The increased salary will provide more cash to the salaried people, and that will improve their living standards and saving habits. Bankers have estimated that more money in the bank accounts of the people will allow them to purchase expensive items like automobiles, consumer durables, etc. and encourage them to make investments in the realty market.
The rise in the employee salary will increase their spending habits, and that is likely to enhance the growth of the manufacturing sector. More manufacturing units will be set up to keep up with the increasing demand for the goods, in particular for the automobile and consumer durables industry. The growth of the industries will lead to the requirement of the employees which will result in a significant number of employment opportunities for the skilled workforce of the country. The automobile industry, consumer durables sector, manufacturing sector, FMCGs, construction industry, and real estate market will receive the enormous benefits and increase the employment rate in the country to a great extent.
RBI is also asking the banks to lower the interest rates on the loans. Reduced interest rates on home and auto loans will encourage buyers to opt for them. The salary increment and affordable home loans will allow people to buy houses and apartments which will give a boom to the real estate sector. More building and apartments will be constructed, and that will create more jobs for the engineers, drafters, architectures, laborers, etc.
The previous year note ban has caused severe liquidity crunch in the Indian market. The flow of liquidity in the form of arrears and salary hike to the employee will replenish the cash flow and will bring positive impact on Indian economy. The cash crunch reduces the rate of employment, which will be healed by the current salary increment in the 7th pay commission.