New Delhi, August 02: India’s upcoming 8th Pay Commission is set to inject a major boost into the economy and equity markets, with a projected payout of INR 3 to 3.15 lakh crore in 2026. This will benefit around 11.2 million central government employees and pensioners. The income hike is expected to spur consumption significantly, benefiting sectors like automobiles, consumer durables, FMCG, BFSI, real estate, and QSR, analysts say.

According to Elara Securities, this payout would represent 0.65–0.85% of India’s projected FY27 GDP—nearly triple the INR 1.02 lakh crore disbursed under the 7th Pay Commission, which equaled 0.66% of FY17 GDP. Average monthly salary hikes are expected to range between INR 30,000–40,000, while pensioners may see INR 15,000–18,000 monthly gains. 8th Pay Commission Update: Government Confirms Panel Formation, Seeks Stakeholder Inputs; Notification and Member Appointments Likely Soon.

Unified Pension Scheme Could Double Equity Flows

With the rollout of the Unified Pension Scheme (UPS) from FY26, the government’s pension contribution has increased to 18.5% of salary, up from 14% under the National Pension Scheme (NPS). Ambit Capital estimates that if the government invests 45% of its 8.5% discretionary UPS contribution in equities—as per global norms—equity inflows could jump from INR 245 billion to INR 465 billion, accounting for 7.7% of net domestic flows.

Employee and government contributions combined under NPS in FY26 are projected to hit INR 1.2 trillion, with about INR 182 billion potentially entering equities, assuming the standard 15% default allocation. 8th Pay Commission: Will Central Government Employees See Revised Salaries From January 2026? Check Details.

Consumption Boom Likely in Auto, Housing, BFSI and QSR

The increased disposable income is likely to trigger higher consumption, mirroring trends observed after past pay commission rollouts. Maruti Suzuki reported a 31% YoY spike in sales to government employees post the 7th Pay Commission in FY17. Similarly, after the 6th Pay Commission’s 54% hike in purchasing power, government employees made up 8% of Maruti’s Q4FY09 sales, up from 3.5%.

Experts also foresee growth in consumer durables, insurance, non-lending financials, and real estate—driven by revived middle-income demand and evolving service-oriented consumption.

 

(The above story first appeared on LatestLY on Aug 02, 2025 10:34 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).