India Inc's cheer to report muted

The missing lump sum effect after implementation of the 7th Pay Commission largesse may not lead to a major fillip in consumer sentiment, say many in corporate India.

"Unlike last time when employees had got arrears due to the retrospective nature of the pay hike, they will not get any arrear this time. So, this is not going to be a positive factor for car sales," said an official at Maruti Suzuki, the country's largest car maker.

Harsh Mariwala, chairman, Marico Industries' said that it might not lead to any immediate uptake in demand in the fast-moving consumer goods (FMCG) sector. "Only when the money comes into the hands of the people will there be any improvement in demand."
 

Industry executives said this is likely to be treated more as annual salary increase. "There may not be major jump in overall consumer sentiment as the lump sum effect is missing," said Arvind Singhal, chairman, Technopak Advisors.

In 2006, given the large recommended salary hike and retrospective implementation, the government decided to pay the arrears in two instalments of 40 per cent in FY09, and 60 per cent in FY10 to spread its impact on government finances.

However, some players in consumer electronics and mobile phone spaces said the move will have a positive impact on consumer sentiment relating to their sectors. "Increase in disposable income will spur consumers to upgrade to the latest technology, leading to a surge in consumer electronic demand," said Niladri Datta, head, corporate marketing, LG India.