Hero MotoCorp showroom
An employee speaks to a customer inside a Hero MotoCorp showroom in Mumbai January 17, 2013. [Representational Image]Reuters

Domestic automobile companies are eagerly awaiting the Seventh Pay Commission recommendations, as the salary hike to be proposed for government employees by the pay panel is likely to boost sales. 

In August, the Union cabinet had extended the deadline for the Seventh Pay Commission to submit its recommendations by four months, to 31 December.

Purchase of two-wheelers and passenger vehicles had witnessed a sharp pick up in the past whenever there was a hike in the salaries of government employees as per the recommendations of pay commissions, Livemint reported.

The implementation of the Sixth Pay Commission recommendations in 2008 saw a spike in passenger vehicles by 19.45% to 2.22 million units in the fiscal year 2008-09 and 21.18% to 2.8 million in the following year, data from the Society of Indian Automobile Manufacturers (Siam) showed.

Similarly, sales of two-wheelers went up by 16.11% to 9.7 million units in 2008-09 and 31.22% to 12.73 million in 2009-10.

The government expenditure on the salaries of central government employees rose to Rs.96,589.70 crore in 2008-09 from Rs.73,717.80 crore in the previous year. It was Rs.45,962.60 crore in 2007-08.

Government employees saw an average increase of 35% in their salaries after the implementation of the recommendations made by the Sixth Pay Commission. As there was a delay in the implementation, the employees also got arrears for over 30 months.

Likewise, the implementation of the Fifth Pay Commission report in September 1997 led to a surge in sales of passenger vehicles and two-wheelers by 33.19% and 11.74%, respectively, in 1998-99.

The Seventh Pay Commission, headed by Justice AK Mathur, is expected to recommend a 40% hike in salaries, according to an analyst at global financial services firm Credit Suisse.

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