As soon as the 7th pay commission is approved, it would result in 24% hike in salaries for government employees. This means the budget deficit will increase. So government will have to raise taxes. Higher taxes cause growth to slow.
Since already India has high taxes, the government will also have to print currency to cover deficit. So inflation will rise.
As growth slows, the interest rates will have to be dropped to prevent systematic collapse.
Thus, the impact of 7th pay commission approval is
- Inflation will rise
- Taxes will rise
- Growth will slow down
- Interest rates will fall
- Gold/Silver will rise
- Stocks will fall
- Real estate sales will fall further
If Indian government is interested in welfare of common people, then it will reject the 7th pay commission.
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