The Big Story: More money, mo' problems
The government on Wednesday approved the Seventh Pay Commission's recommendations, hiking the pay and pensions for 10 million current and former government employees, a move that could potentially have a massive impact on the economy. The hikes are quite substantial, with entry-level basic pay going from Rs 7,000 to Rs 18,000 per month, while top-level cabinet secretaries are now going to be earning Rs 2.5 lakh per month, as opposed to Rs 90,000 earlier.
In all, that will mean additional expenditure Rs 1.02 trillion in the current fiscal year, as well as a massive amount in arrears dating back to the previous year, which the government says it hopes to pay off in the next six months. Combined with One Rank One Pension implementation in the armed forces – and not counting the changes to the allowances, which have been deferred – the government has effectively added a huge stimulus to the economy, although that might mean less spending elsewhere.
In the short-term this is both good and bad. Good because stimulus will ensure that an economy that has still not recovered from the malaise of the global recession will get another positive jolt, one that most analysts expect to result in increased consumer spending: think FMCGs, auto-makers, even real estate.
Bad, because inflationary pressures were already rising, and adding Rs 1 trillion into the system may not exactly go smoothly. Even shunting Raghuram Rajan out of the Reserve Bank of India will not be enough to get the central bank to cut rates if the Pay Commission's hikes cause price rise across the board.
Finance Minister Arun Jaitley said after the announcement that the raises were meant to ensure government salaries were commensurate with those in the private sector, so that the state can attract the best talent. Which is great news for government employees, but does bring up the question: Will this "minimum government-maximum governance" administration also take a look at whether all those hundreds of thousands of state employees are actually productive?
The Big Scroll
Gentle reminder, Mr Modi: What happened to "minimum government, maximum governance"? Six charts tell you all you need to know about the Pay Commission recommendations.
Political Picks
1. The Samajwadi Party's first family is still struggling with the decision not to permit the Qaumi Ekta Dal, with Shivpal Yadav, brother of Mulayam Singh Yadav, sulking.
2. Prepare for another round of speculative stories about an upcoming, at this point long-awaited Cabinet reshuffle, with consensus seeming to suggest it will happen by the first week of July.
3. The Trinamool Congress' Mukul Roy will today launch Mission Tripura, the party's attempt to dislodge the Left from yet another state.
4. Out of power and out of cash? The Enforcement Directorate has attached assets worth Rs 2,524 crore belonging to YSR Congress party chief YS Jagan Mohan Reddy in an alleged money laundering case.
5. External Affairs Minister Sushma Swaraj and Law Minister Sadananda Gowda have been asked to "sort out differences" with the higher judiciary over proposed clauses in the proposed Memorandum of Procedure for appointment of judges. Rumours suggest Gowda may not be law minister for long.
For the rest of the day's biggest headlines, go check out The Latest.
Giggle
Punditry
1. Greg Chappell in the Telegraph says Anil Kumble's appointment as captain of the men's cricket team is "inspired".
2. Pradip Phanjoubam in the the Hindu looks back at the legacy of Isak Chishi Swu, the "I" of the NSCN-IM.
3. Indian Public Sector Units need to be taken away from ministries and put into a holding company, a HOLDCO, writes Manish Sabharwal in the Indian Express.
4. Ramanathan S. in the News Minute says Ola's endorsement of licence raj and jingoism is an embarrassment to the startup ecosystem.
Don't Miss
Aarefa Johari writes about drought-hit Saurashtra, where lack of internet access can mean people going hungry.
"At the ration shop, wheat is priced at Rs 2 a kg and rice at Rs 3 a kg. Chhaiya lined up with other villagers for his quota of five kg of grain per person per month. But the queue didn’t seem to move.
“They were giving rations only after putting our thumbs on those scanning machines,” said Chhaiya. "And after some time they told us,tower nahi mil raha hai, ghar jao." The thumbprint scanners to verify their identities couldn’t connect to the local internet network, so the villagers were asked to go home. “We had to make another trip to the shop the next day to get our rations.”
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