Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

India just drew a $50 billion lottery, but analysts can't find the guy with the winning ticket.

The bonanza in question is a once-a-decade raise in civil servants' pay. Traditionally, the bounty has been spent on cars, refrigerators and home improvements. That won't change. But unlike previous rounds, the real winner this time will be e-commerce. Since most of the online shopping businesses in India are still private equity-owned, investors in public markets don't stand to reap much of a windfall.

Home Shopping
Monthly online orders in India are expected to reach 12 million next year
Source: Technopak, Accel Partners
* estimated

The mechanics of the pay increase ritual are fairly standard. On Thursday, the government's Pay Commission recommended a 23.55 percent jump in the wages of about 10 million federal employees and pensioners. The finance minister will make a provision for the raise in his February budget, following which about $15 billion of extra money will enter workers' and retirees' bank accounts during the financial year starting April 1. Soon after, the 29 Indian states will follow with similar wage awards for their own employees. State-owned companies will bump up salaries, too. All told,  analysts expect the transfer from taxpayers to public servants to be as large as $50 billion.

Assuming 80 percent of the amount is spent, there will be a 3.4 percent increase in India's $1.16 trillion annual private consumption. And that's bound to have a multiplier effect. Corporate revenues will expand for at least a year or two. In the past, investors could capture those gains by buying shares in domestic companies that make the stuff families spend their extra cash on. That may not be a great strategy this time because manufacturers in India, like their counterparts elsewhere, have very little pricing power. At the wholesale level, their output prices have been in deflation for eight straight months.

Lonely Factories
Manufacturing in India is mired in deflation
Source: Press Information Bureau of India

The combination of deflation, debt overhang and weak demand -- both at home and in overseas markets -- is hurting manufacturers' earnings. While a carmaker such as Maruti Suzuki might be able to capture a bigger share of improved consumer sentiment next year, it's not clear whether Tata Motors, burdened by the weak margins of its global Jaguar business, will benefit as much. The industry as a whole may fail to shore up profitability, a sure disappointment for investors.

But in private markets, it will be a different story altogether. There, it's almost impolite to mention profit. Companies such as Snapdeal, the Indian e-commerce startup backed by Alibaba, and Flipkart, worth about $15 billion according to its latest round of fundraising from investors including Tiger Global, are fighting an intense battle for customers.

Cyber Spending
India's e-commerce sector has grown four-fold since 2009
Source: Source: IAMAI, CRISIL, Gartner, PwC analysis

So long as people spend more of their windfall online, those companies' shareholders will hear the story they want to. Witness the happy news just this week that SoftBank-backed sold almost $40 million of homes online during its Diwali special offer.

The new business is very welcome, coming at a time when at least some large investors are beginning to wonder whether  Indian e-commerce has seen a rush of overly optimistic investment.

Catching Up
A fast-growing Internet population is an indicator of the sector's growth potential
Source: Internet Live Stats

For now, the optimists have the winning bet. All eyes are on next year's fourth-generation mobile phone service launch by billionaire Mukesh Ambani's Reliance Jio. As Jio chases its target of 100 million subscribers, the ensuing price war for data services might tempt even the most junior government employee to upgrade to a smartphone and use his higher pay to buy a motorcycle online.

There's no history to back this prediction: Practically all of India's online shopping industry has sprung up in the years since the last big salary adjustment in 2008. But there are good reasons to suspect this pay increase will be as much a windfall for startups and their private equity backers as it is for the civil servants. Investors in public markets might just have to content themselves with one or two aggressively priced e-commerce IPOs down the track.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Andy Mukherjee in Singapore at

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Katrina Nicholas at