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8th pay commission: Driving strong auto volumes upside in FY27-28E

ICICIdirect Research 26 Dec 2025 DISCLAIMER

Central Pay Commission (CPC) is entrusted upon revising the salaries for government employees including pensioners.
It conducts quintessential pay revision exercise every 10 years. Last two pay revisions were implemented from 2006 & 2016 and hence next revision in due in 2026.
6th CPC awarded a ~35% salary hike with annual outlay of > ₹25,000 crores. It had salaries revised from 2006; however, arrears were paid FY09 and FY10
It revived consumer spending, driving 26-28% YoY growth in 2W and PV volumes in FY10-11. It was also supported by govt. measures in the aftermath of GFC (global financial crisis)
7th CPC provided a ~23-24% salary increase with annual outlay of >₹1 lakh crore. It had salaries revised from 2016, with ₹65,000 crores hitting the system in FY17
Despite demonetisation, the income effect supported 7-15% YoY volume growth across 2W & PVs
Now central employees Pay is due for revision from 1st Jan 2026 while its rollout is expected anytime in CY26-27E.
It will benefit ~50 lakh central govt. employees & ~69 lakh pensioners.
8th CPC is expected to provide a ~20-30% salary increase with annual outlay expected at ~₹2 lakh crores
We expect the 8th CPC to upgrade industry growth rate by ~300-400 bps resulting in double digit volume growth especially in the 2-W and PV segments in FY27E-28E.
With positive levers of low vehicle penetration, GST rate cut, 8th pay commission rollout and lower interest rates, auto sector is well poised for double digit value growth over the next 3-5 years. Underlying premiumization trend remains unabated.
Our Top bets are Maruti Suzuki (BUY, Target: ₹18,700) and M&M (BUY, Target: ₹4,180) in the Auto OEM space; Lumax Auto Tech (BUY, Target: ₹1,800) & Uno Minda (BUY, Target: ₹1,500) in the ancillary domain

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