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According to a report by Kotak Institutional Equities, the salary of central government employees is expected to increase by about 13% after the implementation of the recommendations of the 8th Pay Commission. However, the report also states that the recommendations of this commission are unlikely to be implemented by the late 2026 or the beginning of 2027.
According to a report by Kotak, the Eighth Pay Commission can adopt a fitment factor of 1.8, which can increase the minimum basic salary from Rs 18,000 to Rs 30,000 per month. The fitment factor is a multiplier used to modify the basic salary of central government employees, which determines the new salary structure.
According to a report by Kotak, the appointment of members of the Eighth Pay Commission and the terms of reference (TOR) is yet to be announced. Although the Commission was announced in January 2025, its recommendations may take at least 18 months to implement. The last sixth and seventh pay commissions took about one and a half years to prepare their reports, and it took 3-9 months to implement them after approval by the Union Cabinet.
Kotak estimates that the economic impact of the 8th Pay Commission may be 0.6-0.8% of the GDP (GDP), which means that the government will cost an additional burden of Rs 2.4 to 3.2 lakh crore. This commission will directly benefit about 33 lakh central government employees, especially Grade C employees, who are 90% of the total workforce.
Kotak’s report states that previous commissions like the Seventh Pay Commission had temporarily increased consumer spending. Areas such as automobiles and durable consumer goods were temporarily benefited from these hikes. However, these effects usually decrease within a year. According to RBI data, the implementation of the Seventh Pay Commission and One Rank One Pension (OROP) scheme contributed two percent marks to GDP growth in FY 2016-17.
Kotak said that a part of the additional income from increment is likely to be invested in physical and financial assets such as shares and bank deposits. It is estimated that this salary increase may save an additional savings of Rs 1-1.5 lakh crore.
On July 21, 2025, Union Minister of State for Finance Pankaj Chaudhary said in a written reply in the Lok Sabha that suggestions have been sought from prominent stakeholders like States, Ministry of Defense, Ministry of Home Affairs and Personnel and Training regarding the formation of the 8th Pay Commission. He clarified that the recommendations of the Commission will be implemented only after the government accepted.
