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Research Article
7th Pay Commission & Opportunities for MFDs
Mutual Fund Live

“Money is of prolific generating nature. Money can beget money and its offspring can beget more.”
Benjamin Franklin

The norms of governance has changed from time to time but main concern of bringing changes into the policy framework and administrative reforms is always to include value-based ethics, enlightened leadership and human quality development. And to induce market in motion, government keeps taking regulatory measures. Market motion prods governments to take requisite actions and market is shaped by those measures; curious indeed, isn’t it? 

Seventh pay commission’s recommendations have been implemented by Government of India w. e. f. 1st January 2016. What does that mean in terms of market, investment and financial advisory? The move is certainly going to give a big boost to the economy as well as consumption demands. Let’s have a look inside the seventh pay commission’s recommendations and the predicament of the same on the market-

The overall hike of 23.55 percent in the basic salary and allowance of government employees has injected financial impetus of Rs. 1.02 Lakh Crore – Out of which Rs. 73,650 crore to be borne by Central Budget and Rs. 28,750 crore by railway budget.

The recommendations have been implemented retrospectively from the month of January 2016 which is being doled out from the month of August 2016.Not just that, the 7th CPC has mandated for inclusion of an assured increment of 3% in the monthly salary even if there is no promotion.

Although it is the lowest pay hike when compared to previous pay commissions, yet it is an important one as it comes in the present context of weak global recovery, low commodity prices, slow domestic revival in consumption and a significant turnaround in global competitive index of India.  
What it means to a MFD post- 7th CPC?

This is just the start. In fact, local and state governments are also going to bring their own financial measures in 2016 and ’17 to tackle inflationary concerns. The action again is surely going to pump up the market with optimism.

But more than optimism, it is also about exploring opportunities that comes with new investors coming aboard. With seven months of arrears in hands (January- July 2016) and festive seasons ahead, consumers are upbeat about spending or should we say, splurging?

The role of a financial advisor becomes more definitive and prominent in such scenario. As the gratuity limit increases to 20 lakh from the earlier Rs. 10 lakh, this brings in more temptation to spend now and invest later. It is a tipping point moment for anyone in the profession of financial advisory as the increased pay packet comes with its own set of concerns of managing money.

Usually, people feel that they know everything around an investment decision but they don’t. Investing is not putting money in Fixed Deposit or insurance schemes. It is about diversification and taking care of compounding interest. No matter how steep the appraisal is, it will be adjusted down the time with inflationary effects. Everyone experience inflation- but despite understanding it, they don’t consider its impact for the future.

As per ET wealth survey around financial literacy, even investors are not aware about relevant information that can be used for better monetary gains. That ability only comes from tacit understanding of financial products.

The best time to deploy that knowledge base and negotiation skills by the MFD is right now as with rising income level, essential and discretionary spending will go up. 

Opportunities ahoy!  

Salary hike and arrears from the recommendations of 7th pay commissions would lead to massive reshuffle of income tax brackets and transform the whole spending pattern and the market. Unlike past, best things don’t come to those who wait, but to those who understand spending patterns and savings schemes better than the rest.

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