Seventh Pay Commission recommendations to cost Rs 1.02 lakh crore to govt

New Delhi: The hefty increase in salary and allowances of central government employees and pensioners following the implementation of the 7th Pay Commission recommendations will put a strain on exchequer to the tune of Rs 1.02 lakh crore in 2016-17, or 0.65 percent of GDP.

The Pay Commission, headed by Justice A K Mathur, today recommended an increase in pay by 16 percent, 63 percent in allowances and a 24 percent hike in pension, suggesting a total increase of 23.55 percent.

"The total financial impact in the FY 2016-17 is likely to be Rs 1,02,100 crore, an increase of nearly 23.55 percent over the business as usual scenario," the 7th Pay Commission report said.

Of the Rs 1.02 lakh crore outgo, Rs 74,000 crore will have to be funded from the Union Budget and another Rs 28,000 crore from the Railways Budget, Finance Minister Arun Jaitley said. The recommendations of the pay commission will come into effect from January 1, 2016.

The financial impact of the recommendations of this Commission will be reflected through increases in expenditure on pay, allowances and pension.

While the pay will increase 16 percent to Rs 2.83 lakh crore, this will have a financial impact of Rs 39,100 crore in the current fiscal.

Also House Rent Allowance (HRA) will go up by 138.71 percent to Rs 29,600 crore and have a financial impact of Rs 17,200 crore.

The expenditure on account of other allowances is likely to go up to Rs 36,400 crore, an increase of Rs 12,100 crore or 49.79 percent.

Pension expenditure would increase 23.63 percent to over Rs 1.76 lakh crore. The financial impact of this would be Rs 33,700 crore in the current fiscal.

"The total monetary impact of this on the finances of the Union Government entirely is approximately Rs 1.20 lakh crore. This jointly on the Union Government amounts to 0.65 percent of the GDP," Jaitley said.

The Pay Commission recommendations will benefit 47 lakh existing government employees and 52 lakh pensioners.