The implementation of 8th Pay Commission, which will increase the disposable income of around 50 lakh central government employees, is likely to benefit automobile manufacturers like Eicher Motors Ltd., TVS Motor Co. and Maruti Suzuki India Ltd., according to Goldman Sachs.
The once-in-a-decade wage revision exercise can increase the median monthly salary of Rs 1 lakh by Rs 14,000 to Rs 19,000, the brokerage said in a note.
The pay commission earnings stimulus will be in addition to an estimated “monthly tax saving of around Rs 7,500”, which should come into effect with the start of financial year 2025-26, it added. The reduction in income tax was announced in the 2026 Union Budget.
According to Goldman Sachs, Eicher Motors, TVS Motor and Maruti Suzuki, along with automotive systems supplier Uno Minda, are “potential 8th Pay Commission beneficiaries, based on the growth sensitivity exhibited by these companies to the previous pay commission wage hikes rolled out in 2016”.
Notably, the 7th Pay Commission came into effect from January 2016. In the three-year period that followed, the four companies mentioned above grew at a significant pace.
Eicher Motor’s revenue grew at a compound annual growth rate of 44% between fiscal 2016 and fiscal 2018. Uno Minda logged a CAGR of 27% in the same three-year period, followed by Maruti Suzuki at 17% and TVS Motor at 15%, Goldman Sachs data showed.
In comparison, some of the other automobile players like Mahindra & Mahindra Ltd. grew at CAGR of 9% in the same period, Hero MotoCorp Ltd. at only 6%, Bajaj Auto at 5%, and Tata Motors at 4%.
Notably, the 8th Pay Commission’s formation was approved by the Union Cabinet in January this year. The panel is expected to be formally set up in April 2025, Goldman Sachs said, citing media reports. The revised salaries are expected to be rolled out in calendar year 2026 or 2027, it added.
Apart from the salary hike for 50 lakh central government employees, the pay commission’s implementation would also raise the pension of 65 lakh retirees.
According to Goldman Sachs, the estimated allocation for the pay commission’s implementation could be of around Rs 2 lakh crore, as indicated in press reports.
Notably, the rollout of 7th Pay Commission had cost the exchequer Rs 1.02 lakh crore in fiscal 2017.
. Read more on Auto by NDTV Profit.The three automobile majors had logged significant revenue growth in the period following 7th Pay Commission’s implementation. Read MoreAuto, Business, Economy & Finance, Notifications
NDTV Profit
