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u The post independence period of economy of India
was a litmus test for the economic planners.
Having come out of the shadow of colonial rule,
the nation had a huge challenge of undoing the
exploitation of colonial era. The founding fathers
had to use economic upliftment as a tool for nation
building. The economy then was backward in
nature.
u India resorted to economic planning by the way of
five year plans for economic development.
   



m The beginning of 1990·s, the Indian Economy was
under great crisis and faced its stiffest challenge.
India faced a serious balance of payment problem and
foreign exchange reserves were at record low. That is
when the government decided to alter the course of
the Indian economy.
 

m The introduction of reforms in 1991 resulted in
sweeping changes in the Indian Economy. The reforms
process consisted of three processes, liberalization,
privatization and globalization (LPG model). Under
liberalization markets were deregulated, under
privatization private participation was encouraged and
many a public sector undertaking (PSU) were
privatized and under globalization restrictions on
foreign investments were removed. The Indian
economy moved away from its isolation, to be
integrated with the global economy and to
competitively utilize its advantages to make rapid
strides in terms of growth.
 
m In India today 60% of the population is dependent
directly and indirectly on agriculture and agriculture
contributes 17% of GDP.

m The supply of money into the economy has increased

steadily due to FDI·s. (Between April 2008 and
January 2009, India received total foreign
investments of US $ 15,545 million).The Foreign
Institutional Investors (FII·s) have invested heavily in
the stock market, resulting in a continual bull run for
an extended period of time. The BSE indices scaled a
new peak of 21,000 in January 2008.
 

 

m The Pay Commission is an administrative system /
mechanism that the government of India set up in
1956 to determine the salaries of government
employees.

m Pay Commission comprises of a panel of members of

the Union Cabinet of India who decide on and are
responsible for increasing the salaries of government
employees.
 

 
 
m After the Indian independence in 1947 there have
been six pay commissions which have been set up in
order to look into and recommend changes in the pay
structure of all government employees.
   
  

 

 !"#$"%&
m The first pay commission was set up in May 1946 and it
took a year to submit its report. The chairman of the first
pay commission was Srinivasa Varadachariar.

m The First Central Pay Commission innovated the principle

of "living wage" to Government employees. It observed
that "the test formulated by the Islington Commission is
only to be liberally interpreted to suit the conditions of
the present day and to be qualified by the condition that in
no case should be a man·s pay be less than a living wage."
Amplifying the concept of "living wage", it stated that the
Government which sponsored the minimum wage legislation
for private industry must be willing to give the benefit of
that principle to its own employees. In other words, that
Commission was of opinion that the salary of the lowest
paid employee should not be less than the minimum wage.
 
 
  

 

 !'%$'!&
m The second pay commission was constituted 10 years after
independence in August 1957. It took two years to submit
its report. The chairman of the second pay commission was
Jaganath Das. The financial impact of the second pay
commission was Rs 396 million.
m The Second Central Pay Commission reiterated the
principle that the pay structure and the conditions of
service of Government employees should be so designed as
to ensure recruitment of persons with requisite
qualifications and ability at all levels and to maintain their
efficiency. It went on to state that, after determining the
minimum and the maximum salaries on a combination of
both economic and social considerations, the intermediate
salaries should be fixed on sound and equitable relativities.
   
  

 

 !%($%)&
m The Third Pay Commission was constituted in April
1970 under the chairmanship of Raghubir Dayal. The
pay commission gave its report in approximately three
years in March 1973. The financial impact of the
recommendations of the third pay commission created
proposals cost the government Rs 1.44 billion.
 
  
  

 

 !%($%)&
m Third Central Pay Commission proceeded on the premise, inter
alia, that the pay structure, if it is to be sound, should satisfy
the tests of "inclusiveness", "comprehensibility" and "adequacy"
and should, at the same time, be fairly simple and rational.
Beyond the minimum subsistence level, the adequacy or
otherwise of the salary structure should be judged by the level
of salaries obtaining in alternative occupations. In the
intermediate ranges, the Commission emphasised that a limit
should be set by what the economy can afford and the upper
range limit should be on considerations of social acceptability.
While observing that the Government should formulate a set of
principles of wage fixation as suited to its needs, it also
remarked that the true test to be adopted should be whether
the Government service is attracting and retaining the persons
it needs and whether such persons are reasonably satisfied with
the pay and other benefits taken together.
  
  

 

 !*)$*#&
m The fourth pay commission was set up in June 1983 and it
presented a detailed report in three stages in a span of
four years. The chairman of the fourth pay commission was
P N Singhal. The proposals of the fourth pay commission
cost the government Rs.12.82 billion.
m The Fourth Central Pay Commission was, however, guided
by a number of factors for determining the pay structure,
viz., social status regard to which the public employment
carries in society, the authority of the post, security of
tenure and the welfare measures adopted by the
Government for the benefit of its employees. Motivation
for employees, efficient performance and comparability
were also considered by the Commission. The Commission
gave greater importance to the capacity of the State to
pay its employee. The Commission observed that the pay
structure must be fair from the point of view of employees
as well as the people they serve.
  


 

 !!"$!%&
m Fifth Pay Commission was constituted in 1994. The
chairman of the fifth pay commission was Justice S.
Ratnavel Pandian and its recommendations cost the
government Rs.17, 000 crore.
m The Fifth Central Pay Commission was specifically asked to
evolve the principles which should govern the structure of
emoluments and other conditions of service. So, the
Commission had to survey the principles adopted by the
antecedent Commissions and accepted some of the general
principles including the three characteristics of a sound
pay structure, namely, inclusiveness, comprehensibility and
adequacy. The well-accepted principle of supply and
demand consideration as emphasised by Islington
Commission was also reiterated.
m The Commission also laid emphasis on the principle "equal
pay for equal work", "fair compensation", "productivity" and
"model employer".
  +

 

m Members of the Sixth Pay Commission

Chairman : Mr. Justice B.N.Srikrishna

Members : Prof.Ravindra Dholakia,
Mr. J.S.Mathur
Member-Secretary : Smt. Sushama Nath
  +

 

m The sixth pay commission was set up in July 2006 under
the chairmanship of Justice B.N.Srikrishna. The
recommendation of the commission cost the government
about Rs. 20,000 crore.
m The pay commission suggested that arrears be paid to all
government employees from January 2006 to September
2008. 40% of these arrears were paid by the government
in 2008 and the remaining 60% were paid in 2009. The
primary goal of the Sixth Pay Commission was to iron out
complications in respect to various pay scales. In fact it
recommended the
removal of pay scales and introduction of pay bands.
m The Sixth Pay Commission mainly focused on removing
ambiguity in respect of various pay scales and mainly
focused on reducing number of pay scales and bring the
idea of pay bands. It recommended for removal of
Grouped-D cadre.
  +


 

  
m The central government approved the setting up of the
sixth pay commission to upwardly revise salaries and
perks for its 550,000 employees across the country.

m A cabinet meeting headed by Prime Minister Manmohan

Singh decided that the term of the commission would be
for 18 months.

m The commission will comprise one chairman of the rank of

minister of state, one part time member and one member-
secretary of the rank of secretary or additional secretary
in the central government,' Information and Broadcasting
Minister Priyaranjan Dasmunsi said after the cabinet
meeting.
m 'The prime minister will appoint the chairman and other
members of the commission,' He said-The proposal is
estimated to cost the government an additional Rs.200
billion ($4.2 billion).

m The implementation of the panel's proposals is expected to

take two to three years, and an interim relief of 10-15
percent may be announced for that period.

m The sixth pay panel had been announced by Manmohan

Singh in February this year. Pay panels are periodically
constituted to examine various issues such as pay and
allowances, retirement benefits, conditions of service and
promotion policies of central government employees. There
is no stipulation regarding any specific time period for
constitution of a pay commission.
 



 

m Several government services, most notably the armed
forces have complained bitterly of down gradation due
to pay commissions exceeding their brief, and
introducing anomalies in the relative scales of pay of
government services. At present, the armed forces
have represented to the government for the removal
of anomalies which it is felt that the civil servants on
the commission have deliberately introduced to
upgrade themselves vis-a-vis service officers in the
defence forces.



 






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m The implementation of the Commission's
recommendations ravaged the finances of the central
and state governments.
m The impact of the Fifth Pay Commission was so brutal
that some 13 states did not have money to pay salaries
in 2000.
m The Commission also suggested that the grant of
salary hikes to employees be linked to issues of
downsizing government, efficiency and administrative
reforms.
m The World Bank held the Fifth Pay Commission as the
'single largest adverse shock' to India's strained
public finances.
 
m Congress sources say the rising political pressure from
the Communists - key partners in the United
Progressive Alliance coalition - has prompted Prime
Minister Singh to announce the new pay commission.
m New Delhi now argues the Sixth Pay Commission will
not adversely affect the states as they are sitting on
cash surpluses.
m The global body said India's civil service was 'not
unduly' large, but there was a 'pronounced imbalance'
in the skills.
m The Twelfth Finance Commission also urged the
government to stop the practice of increasing salaries
by appointing pay commissions every 10 years.
 


m The Indian economy is one of the fastest growing
economies in the world. It can also be said that the
Indian economy has coped well to the pressures of
the global recession, far better than most other
nations. The future looks positive for India and one
can expect the nation to progress strongly in the
path of development.