8th pay commission
8th Pay Commission: At present, the eyes of crores of government employees and pensioners of the country are fixed on only one news, that is the 8th Pay Commission. From the corridors of Delhi to the offices of the states, the murmur has intensified. It is expected that the commission will submit its report within the next 18 months and the new salary system may be implemented from January 2026. This news is definitely going to bring a smile on the faces of the employees, but the other side of the coin is that where will so much money come from for the bumper increase in salaries? If we analyze the latest reports and figures, it emerges that 8th pay commission The implementation of this can have a tsunami-like impact on the government’s treasury. It is estimated that the central and state governments together will have to bear additional expenditure of about Rs 3.7 to 3.9 lakh crore every year.
Salary may increase by 25%
First of all let’s talk about the good news. If you are a government employee or have a pensioner in your house, then this news is like a Diwali bonus for you. According to current estimates, after the implementation of the 8th Pay Commission, there may be a direct increase of 20 to 25 percent in the basic salary and pension. About 2.5 crore people of the country will get its direct benefit.
If we understand this figure in some detail, it includes approximately 50 lakh central employees and 65 lakh central pensioners. But the real number is from the states, where about 1.85 crore employees will come under this purview. Obviously, when the income of such a large population increases by 25 percent, their ‘purchasing power’ i.e. spending ability will increase, which can increase the demand in the market.
Where will Rs 3.9 lakh crore come from?
Now coming to the part which is giving sleepless nights to the government. In a report published in ‘The Indian Express’, Assistant Professor Pushpendra Singh of Somaiya Vidyavihar University and Assistant Professor Archana Singh of IIPS have drawn a detailed outline of this expenditure. According to their analysis, once the Pay Commission recommendations are implemented, there will be an additional burden of Rs 1.4 lakh crore annually on the central government budget.
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But the real crisis is before the states. Since the number of employees in state governments is much greater than that of the Centre, its impact on them will also be widespread. It is estimated that the total additional expenditure of the states can reach Rs 2.3 to 2.5 lakh crore annually. When we add this expenditure of the Center and the states, this figure reaches Rs 3.7 to 3.9 lakh crore per year.
What will be the impact on GDP?
As a common citizen, it is important to understand that when government expenditure increases, it impacts the entire economy. At present the fiscal deficit of the central government is 4.4 percent of the GDP. Experts believe that after the implementation of the Pay Commission, it may increase to 5 percent. To put it in simple language, the situation of government’s income being Rs 8,000 and expenditure Rs 1,000,000 may become more serious.
The condition of the states may become even more critical. The salary and pension bill of many states is already around Rs 9 to 10 lakh crore annually. Even if 70 per cent of states adopt the 8th Pay Commission (as has been the case historically), their fiscal deficit will exceed the safe limit of 3 per cent and reach 3.7 per cent. This simply means that states will have less money left to spend on development works like roads, hospitals and schools.
Governments will have less ‘financial space’
The story of the 8th Pay Commission is not limited to salary slips alone. This is an issue related to the economic health of the country. The total expenditure on salaries and pensions by 2025-26 is anyway estimated to be Rs 5.7 lakh crore. In such a situation, when there will be an increase of 20-25 percent in salaries, the governments will have very little ‘fiscal space’ i.e. freedom to spend.
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Economy experts believe that this situation may force governments to take tough decisions. To cover the expenditure, either taxes can be increased, or the government will have to borrow more from the market. If productivity does not increase in the same proportion, it may have a negative impact on the economy in the long run.