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Even as critics have argued that Prime Minister <keyword id="6354477" type="UNKNOWN" weightage="20" keywordseo="Narendra-Modi">Narendra Modi</keyword>'s black money jolt last year brought down India's GDP growth by almost 1 per cent, RBI’s recent 2016-17 annual report has some good news. <keyword id="3315394" type="UNKNOWN" weightage="20" keywordseo="demonetisation">Demonetisation</keyword>, it says, has brought the country’s currency in circulation to GDP ratio at par with with advanced economies like Germany and France. High <keyword id="4954359" type="UNKNOWN" weightage="20" keywordseo="cash-to-GDP-ratio">cash to GDP ratio</keyword>, according to experts, is the biggest impediment in India's bid to transform into a cashless economy. Last year, India’s cash to GDP ratio (12.2%) - an indicator of the amount of cash used in the economy - was much higher than developed economies including the US, UK and Europre but below Japan (around 18%). It came down to 8.8% by the end of March 2017 as a result of demonetisation which hit the total high value currency in circulation. Modi government's demonetisation move on November 8 last year had scrapped old high-value currency notes of Rs 500 and Rs 1,000. “At end-March 2017, currency in circulation amounted to 8.8 per cent of GDP, down from 12.2 per cent in the previous year. At this level, India’s currency to GDP ratio compares well with a host of advanced and emerging market economies (such as Germany, France, Italy, Thailand and Malaysia),” reads the RBI report. Just a week before the announcement of demonetisation decision, India’s cash in circulation was at an all-time high of Rs 18 trillion. In the weeks following demonetisation until December 31, 2016, the RBI pumped in 23.8 billion pieces of bank notes into circulation, which was Rs 5,540 billion in value. By the end of March 2017, currency in circulation had reached 74.3% of the peak. Other highlights of the RBI report: Most of the demonetised notes are back The <keyword id="1198400" type="UNKNOWN" weightage="20" keywordseo="RBI-annual-report">RBI annual report</keyword> revealed that only around 1.4% of scrapped Rs 1,000 notes didn’t come back into the banking system post demonetisation. Out of 632.6 crore pieces of Rs 1,000 currency notes in circulation, 8.9 crore haven’t yet returned to banks. According to the report, around 89 million old Rs 1000 notes were in circulation in March 2017, while in March 2016, around 6.3 billion Rs 1000 notes were in circulation. It implies 89 million (or 8.9 crore) of Rs 1000 notes, which were banned by Centre in November, didn’t return to the banks. More counterfeit notes have been detected According to the RBI, detection of counterfeit notes was 20.4 per cent higher than the previous year. A total of 762,072 pieces of counterfeit notes were detected in the banking system during financial year 2016-17. Out of these fake notes, 95.7 per cent were detected by commercial banks. Currency notes will have new designs The RBI Annual Report stated that new design notes in other denominations are due for phased introduction. The central bank has already issued Rs 500 notes with new designs after demonetisation last year, and new design Rs 50 notes earlier this month. Purchasing capability of Indians will increase For the coming year, the RBI report speculates that both rural and urban parts of the country are expected to see high demand values on account of several factors. With normal southwest monsoon likely this year, policy initiatives of the government - for example, hike in maximum support prices, and increasing crop insurance coverage are likely to help in boosting crop production. The resultant increase in rural income is likely to boost rural consumption demand, said the document. In urban areas, implementation of new rates of House Rent Allowance as per recommendations of the <keyword id="1597088" type="ORGANIZATION" weightage="20" keywordseo="seventh-central-pay-commission">Seventh Central Pay Commission</keyword> for central government employees will contribute to increased consumption. Several state governments have also hiked salaries of their employees, or are about to, in accordance to the new pay panel. According to the report, this will again improve urban consumption demand. (Image courtesy - Reuters)

How demonetisation got India’s Cash to GDP ratio at par with advance economies like Germany and France

Seventh central pay commission, the report of which has been submitted to the finance minister, is all set to benefit 52 lakh pensioners. This would be done under the much-in-news one-rank, one-pension (OROP) principle. Having lesser liabilities than other beneficiaries, these pensioners are more likely to spend the money they get than save it. This would increase the demand for consumer goods and services as well as for recreation and travel. 
 
As per the proposal by the pay commission, past pensioners and current retirees would be at complete parity with each other, owing to which, the amount paid to both these sections would be comparable. 
 
"The rate of growth is relatively higher for pensions because of the recommendation to adjust scales of pensioners, akin to OROP," ICRA senior economist Aditi Nayar told ET. 
 
For serving employees, the pay increase is 16%, while pensioners would get 24% increase in benefits. However, the allowances given to serving employees would also see a boost, making the benefits equaling 23.6%. 
 
However, if reports are to be believed, a pressure on fiscal deficit might induce some delay in the increase of allowances. If this happens, pensioners stand to benefit the most from the pay commission award, starting January 1, 2016. 
 
For computing the pension benefits, there have been two methods proposed. The pensioner will get the higher of the two sums, based on parity with current retirees and the uniform 2.57 fitment allowed to everyone. This is the factor, as determined by the pay commission, by which the old number will be multiplied to arrive at the new sum for beneficiaries. Accordingly, for those who retire now, the minimum monthly pension is set to increase to Rs 9,000, which previously was Rs 3,500. On an estimate, a pensioner will on average get Rs 65,000 more a year now. 
 
"Assuming that the revision is rolled out as scheduled and there are no lump sum arrears that need to be released, we expect the lower ticket sized consumer durable segment to receive a spending boost, from new as well as replacement demand," said Nayar. This obviously depends on the financial positions of the pensioners, including a house and other liabilities that they might not have to pay for, as opposed to the serving employees. 
 
<a href="http://economictimes.indiatimes.com/thumb/msid-49788582,width-600,resizemode-4/fpis-take-out-rs-2800-crore-in-two-weeks.jpg">Image source</a>

52 Lakh pensioners to be benefitted by Seventh Central Pay Commission

The Indian government has said that it is "not appropriate" at people’s part to compare the increase in minimum pay as suggested by the seventh Central Pay Commission with that of the previous commissions applied in the country. 
 
As per the 7th Pay Commission that gets effective from January 1st, the real increase given in minimum pay in years 1996 and 2006 was 31% and 51%, respectively, compared to which the commission has recommended an increase of 14.29%. 
 
"The 7th Central Pay Commission has worked out its recommendations on pay based on all relevant factors having a bearing on the prevailing circumstances and, therefore, viewing the increase on this occasion in the light of the circumstances obtaining 10 and 20 years ago is not appropriate," Minister of State for Finance Arjun Ram Meghwal replied to a query in Rajya Sabha. 
 
He added that the ratio between the minimum pay of Rs 18,000 per month and top pay of Rs 2,25,000 per month is 1:12.5. 
 
"In order to enhance the income of other categories of workers, both central and state governments are required to fix, review and revise the minimum wages of the workers employed in scheduled employment under their respective jurisdictions at an interval not exceeding five years." 
 
"The minimum rates of wages are also applicable for the workers engaged on contract basis," he added. 
 
<a href="http://quintype-01.imgix.net/thequint/2016-06/99f71f9b-90f2-444b-8a30-abf6d6fe837c/Pay_Commission_PTI_HERO.jpg">Image source</a>

Government asks people to not compare seventh pay panel with previous ones

The Seventh Central Pay Commission has suggested a 23.55% hike in the salaries and pensions of over 45 lakh government employees and 52 lakh people who have retired. 
 Panel headed by Justice AK Mathur submitted the recommendations to <keyword id="6391015" type="UNKNOWN" weightage="20" keywordseo="Finance-Minister-Arun-Jaitley">Finance Minister Arun Jaitley</keyword>. A pay commission is constituted every decade to revise the salary scales of government employees. 
 
The salaries are adjusted for inflation every year through Dearness Allowance and the pay and pension components are hauled once in a decade. 
In the report, the panel has suggested an increase of 16% in pay, 63% in allowances and 24% in pensions. This adds up to Rs 1.02 lakh crore in FY16, which will have a financial impact of Rs 73,650 crore on Union Budget and Rs 28,450 crore on Railway Budget. 
 
Experts point out that the 7th Pay Panel’s recommendations will have an effect on fiscal consolidation plans. The forecast of Indian economy’s growth is 7.5% in the current year. 
 
The Pay Panel has recommended that minimum pay for government workers should be Rs 18,000 per month, an increase of 14.33% and maximum pay in the apex scale, drawn by secretaries, should be fixed at Rs 2.25 lakh per month and that for the cabinet secretary at Rs 2.5 lakh. 
 Meanwhile, the <keyword id="1482858" type="ORGANIZATION" weightage="20" keywordseo="Seventh-Pay-Commission">seventh pay commission</keyword> also suggested a revised pension formulation for non-military personnel including the Central Armed Police Forces as well as for defence staff who retire before January 1, 2016. 
 
(Image: Thinkstock)

Central government employees cheer as 7th Pay Commission recommends 23.55% hike in salaries

After a four-quarter slide, India Inc's business optimism registered an increase for the first quarter of this year, largely driven by GDP growth, easing FDI norms and RBI rate cuts, says a Dun &amp; Bradstreet report. 
 

	The Business Optimism Index (BOI), which measures the pulse of the business community, improved to 85.9 for the January-March 2016 quarter, registering a rise of 2.5 per cent compared with first quarter last year. 
 

	"After a four-quarter slide, the D&amp;B Composite Business Optimism Index for Q1 2016 provides tentative evidence that the recovery should slowly resume," Dun &amp; Bradstreet - India Senior Economist Arun Singh said. 
 

	Optimism level for net profits, selling prices and level of employees saw an increase of 1 percentage points, while optimism for new orders rose by 4 percentage points. 
 

	"The acceleration in GDP growth, easing of FDI norms and rate cuts by the RBI could be partly responsible for the improvement in confidence level of corporate India in the recent period," Singh said. 
 

	The increase in government spending has clearly raised hopes of a government investment-led recovery. 
 

	"A number of stalled projects have been de-bottlenecked and fast-tracked while hopes of a recovery in demand conditions have gathered strength particularly owing to Seventh Central Pay Commission payouts next fiscal," Singh added. 
 

	He further noted for business confidence to get a sharp boost from hereon, the government should "shift up several gears from the slow drip-feed of reforms to targeted measures" that are aimed at encouraging investment and correcting structural deficiencies in the economy. 
 

	"Going forward, the measures announced in the Budget will also play a crucial role in shaping business sentiment," he added. 
 

	For calculating the composite BOI, each of the six parameters -- net sales, net profits, selling prices, new orders, inventories and employee levels -- is assigned a weight. The parameter weights are then applied to these ratios and the results aggregated to arrive at the Composite Business Optimism Index. 
	 
	(Image credits: BCCL)

India Inc's business optimism rises after four quarters of fall: Dun & Bradstreet report

The Seventh Central <keyword id="35069" type="ORGANIZATION" weightage="100" keywordseo="pay-commission">Pay Commission</keyword> recommendations have largely been accepted by the central government, thus benefiting its 1 crore employees and pensioners. Moreover, this step is also expected to boost demand that can support the <keyword id="6356076" type="UNKNOWN" weightage="100" keywordseo="indian-economy">Indian economy</keyword> amidst the post-Brexit global uncertainty. However, one can’t ignore its possible impacts on <keyword id="22195" type="COMPANY" weightage="100" keywordseo="Inflation">inflation</keyword> and <keyword id="35078" type="UNKNOWN" weightage="100" keywordseo="government-finances">government finances</keyword>. 
 
With the passage of 7th pay commission, the entry-level salaries have been increased from Rs 7,000 per month to Rs 18,000 a month; other than this, the Cabinet Secretary, which is the top civil servant post, will have about Rs 2.5 lakh a month, as against the present Rs 90,000. 
 
The increased salaries would be paid from tomorrow, i.e. July 1st 2016, while the arrears will also be paid within the year. 
 
In response to some trade unions threatening strike, FM Arun Jaitley said that after the 7th pay commission, <keyword id="1631116" type="UNKNOWN" weightage="100" keywordseo="government-salaries">government salaries</keyword> have become distinctively higher than private sector salaries. 
 
Earlier, it was expected that the overall impact of the commission would be Rs 1.02 lakh crore in FY17; however, reports now suggest a much lower impact because of the delay in paying allowances, which would distribute the impact between the current and upcoming FY. 
 
Jaitley added that the fiscal deficit target of 3.5% of GDP will not get affected by this, since provisions had already been made in the budget for the revised salaries and the targets were set accordingly. 
 
Also, the government has bid goodbye to the system of pay bands and grade pays, while welcoming a simpler and transparent system. 
 
The pay commission would give the economy a much required boost since it will push forward an already strong urban consumption, benefiting various sectors like automobiles, white goods, mobiles and FMCG. 
 
"When people get more money, it comes back in the system in the form of taxation. Savings will increase... spending will go up," said Jaitley. 
 
Not only spending, the government is also expecting a raise in financial savings, since a part of the hike would most likely be saved. 
 
However, there are chances of inflation too, even though economy experts do not expect it to be much, considering an already excess capacity in the economy and forecasts of a good monsoon. 
 
"Inflation may rise by a few basis points but that increase would be neutralised by higher capacity utilisation and better monsoons, which will contain food inflation," Indranil Pan, chief economist at IDFC Bank, told <a href="http://economictimes.indiatimes.com/news/economy/policy/7th-pay-panel-hike-economy-may-hit-the-jackpot-with-government-bet-on-public-sector/articleshow/52981617.cms">ET</a>. 
 
<a href="http://d1pcxoetpnw26i.cloudfront.net/thequint/2015-11/0ae1252a-ec66-4085-9ca8-44818dfccea3/PAY%20COMMISSION%20HERO.jpg">Image source</a>

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How demonetisation got India’s Cash to GDP ratio at par with advance economies like Germany and France

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52 Lakh pensioners to be benefitted by Seventh Central Pay Commission

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Government asks people to not compare seventh pay panel with previous ones

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Central government employees cheer as 7th Pay Commission recommends 23.55% hike in salaries

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India Inc's business optimism rises after four quarters of fall: Dun & Bradstreet report

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7th Pay commission will impact government finances, but boost economy too

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