8th Pay Commission: Following the introduction of the 8th Pay Commission, approximately 50 lakh central government employees will experience an increase in their disposable income, allowing for greater spending capacity. This development is anticipated to positively impact the automobile sector in the country, benefiting companies such as Eicher Motors, TVS Motor, and Maruti Suzuki, according to Goldman Sachs.
The financial institution noted that the 8th Pay Commission could raise the average monthly salary by Rs 14,000 to Rs 19,000, potentially reaching up to Rs 1 lakh. Additionally, employees will enjoy monthly tax savings of Rs 7,500, effective from the financial year 2025-26, a reduction in income tax that was announced in the 2026 budget.
Pay commission effect on automobile companies
The 7th Pay Commission was implemented in January 2016, and during the subsequent three years, the aforementioned automobile companies experienced significant growth. From FY 2016 to FY 2018, Eicher Motors reported a compound annual growth rate (CAGR) of 44%. According to Goldman Sachs data, Uno Minda achieved a CAGR of 27% during the same period, followed by Maruti Suzuki at 17% and TVS Motor at 15%. In contrast, other automobile manufacturers such as Mahindra & Mahindra Ltd. recorded a CAGR of 9%, Hero Motocorp at 6%, Bajaj Auto at 5%, and Tata Motors at 4%.
The Union Cabinet approved the establishment of the 8th Pay Commission in January of this year, and media reports indicate that the formal formation of the panel is anticipated in April 2025. The revised pay structure is expected to be implemented in either 2026 or 2027.