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Anticipation is high among government employees and pensioners for the 8th Pay Commission, as they expect their pay and pensions to be aligned with rising inflation. Hopes are for a substantial lift, yet a recent analysis from Kotak Institutional Equities suggests that the actual outcome could be more subdued than many are hoping for.
The Kotak update indicates that central government employees could see an effective salary rise of just 13% under the 8th Pay Commission. This, the report notes, falls short of the 14.3% boost that accompanied the 7th Pay Commission. The new formula is expected to set the fitment factor at 1.8, compared with a more generous 2.57 in the previous review. As a result, the new basic pay will be the current basic multiplied by the 1.8 factor, but the dearness allowance will reset to zero, leading to a smaller jump in the overall pay packet.
The basic pay is set to rise once the 8th Pay Commission is put in place. A staff member now on a basic of ₹ 18,000, for instance, could see that leap to ₹ 32,000 using the proposed 1.8 factor. At present, however, ₹ 9,900— 55% of the current dearness allowance—gets tacked on, bringing the take-home to ₹ 27,900. The trouble is that the next pay round will realign DA, so the net rise in take-home may lag behind headline numbers.
Someone on ₹ 50,000 now could, in theory, move to ₹ 90,000, yet once the present DA of ₹ 27,500 is stripped out, the effective jump will shrink to ₹ 77,500—meaning the headline pay seems generous while the real-world bump is calmer.
Expectations float that the employee side of the National Council for the Joint Consultative Machinery will push for a 2.57 fitment factor, pulling a page from the 7th Pay Commission. Early signals from the government, however, hint a more restrained number. Analysts underline that the reported rise in basic pay will appear solid, yet the material difference in hand will pivot on how dearness allowance weaves into the revised scale.
The official groundwork for setting up the 8th Pay Commission is likely to commence within the next couple of months. If all proceeds smoothly, the recommendations should come into force by 2026. Under optimal circumstances, the Commission is slated to take effect on January 1, 2026. Should any delays arise beyond that timetable, the government can disburse arrears to both serving employees and retirees.
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