Jun 24, 2016

Brexit fallout: 7th Pay Commission payout likely to be delayed

New Delhi: Amid all the implications of Brexit on India, something that may stand out is a strong possibility that the much-waited payout of 7th Pay Commission Commission likely get delayed for another 2-3 months.

The delay may result in wake of increased volatility in the markets as a result of Britain's exit from the European Union. For the markets to re-stabilize, it may take another 2-3 months. The same period also awaits the next bi-monthly RBI Monetary Policy (of the outgoing RBI Governor) which may most likely see interest rates remain intact. Even a slight hike holds adequate possibility.

This talked about tenure is critical as amid the already happening exodus from domestic equity markets, load of huge 7th Pay Commission payout on the government exchequer can further jeopardize its fiscal health.

Similar to Europe's main stock markets which observed a around 10 percent fall, India's market benchmark Sensex tanked over 1,000 points on Friday as UK's vote to exit European Union sent financial markets into a tailspin.

It resulted in the erosion of nearly Rs 4 lakh crore from the investors' wealth held in stocks.

In order to stabilize overall outflows from the domestic equity markets, government needs to adopt “wait-and-watch” policy for another quarter before thinking of implementing the payout as any haste can further increase volatility in the market, seriously dent the fiscal situation and instill more weakness in rupee.