8th Pay Commission: 8th Pay Commission Likely To Boost Salary And Pension With Higher Fitment Factor

8th Pay Commission: The anticipation surrounding the proposed 8th Pay Commission is palpable among India’s approximately 11.2 million central government employees and pensioners. Economists suggest that this revised pay structure will not only boost individual household incomes but also inject fresh momentum into the broader economy through increased consumer spending. The new commission is set to replace the existing 7th Pay Commission, operational since 2016, and is expected to reshape the landscape of basic pay, allowances, and pensions.

Could the Salary Hike be Bigger This Time?

The previous 7th Pay Commission delivered a relatively modest outcome for many. According to a report by Ambit Institutional Equities, despite a fitment factor of 2.57, the actual hike in basic pay was limited to about 14% (excluding allowances). This was largely because the Dearness Allowance (DA) was reset to zero at the start of the commission’s implementation.

Expectations for the 8th Pay Commission, however, are significantly higher. Reports indicate a potential wage and pension hike ranging between 30% and 34%. Such a revision would be a substantial leap compared to the last cycle and could encompass nearly 15.5% of total government expenditure.

Expert Predictions on Fitment Factor

The ‘fitment factor’ remains a crucial element in determining the final jump in salaries. Ambit’s analysis suggests that based on historical trends from various pay panels, the government might consider a fitment factor ranging between 1.83 and 2.46.

Providing a broader perspective, CA Manish Mishra, Founder of GenZCFO, estimates that the uniform increase across pay levels could see a fitment factor anywhere between 1.9 and 2.8-3.0. To put this into perspective, if the current basic pay stands at Rs 50,000 and DA reaches 60% by the end of 2025, salaries could witness a rise of at least 14% even at the lower end of the spectrum.

Impact on Government Finances

Implementing the new pay structure is estimated to cost the Centre an additional Rs 1.8 trillion. This expenditure comes on top of the income tax cuts announced for FY26, both of which are designed to leave more disposable income in the hands of citizens. Historically, state governments tend to follow the Centre’s lead, which could further push state spending up by at least 0.5% of their Gross State Domestic Product (GSDP).

Implementation Timeline and Arrears

Regarding the timeline, experts believe that while the actual disbursement might take time following the clearance of recommendations, the benefits are likely to be retroactive. Arrears are expected to be computed from January 1, 2026, marking the end of the 7th Pay Commission’s tenure. While final approvals are pending, the scale of the proposed hike points towards a meaningful financial uplift for government households.