Finance Ministry braces itself for Seventh Pay Commission Recommendations

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Salary, pension costs set to grow 15.8% and 16%, respectively, in FY17, leaving govt less money to build capital assets

New Delhi: The finance ministry is apprehensive about the recommendations of the Seventh Pay Commission, expected this month, significantly increasing the revenue expenditure of the government in the next fiscal, leaving it less money to spend on building capital assets.

In the medium-term expenditure framework statement laid before Parliament on Wednesday, the finance ministry said salary and pension expenditure is expected to rise by 15.8% and 16%, respectively, in 2016-17, which may leave capital expenditure room to grow by no more than 8% during the year.

Total revenue expenditure is expected to jump 8.1% to Rs.16.6 trillion in 2016-17 against a budgeted growth of 3.1% in 2015-16. During the same period, growth in capital expenditure is expected to slow to 8%, at Rs.2.6 trillion, from a budgeted growth of 25.4%.

The finance ministry said award of the Seventh Pay Commission’s suggestions, with their consequent impact on government finances, “poses a risk”.

The government appointed the Seventh Pay Commission on 28 February 2014 under chairman, Justice Ashok Kumar Mathur, with a time frame of 18 months to make its recommendations.

“The pay commission impact may have to be absorbed in 2016-17. The phase of consolidation, extended by one year, will also be spanning out in this period. Thus, in the medium-term framework, the fiscal position will continue to be stressed,” the finance ministry said in the 2015-16 budget presented in February.

The Union budget cut the plan expenditure for the first time in many years byRs.2,657 crore to Rs.4.7 trillion in 2015-16 from the revised estimate of 2014-15, as the centre shared an additional Rs.1.86 trillion with states. 7th Pay Commission was constituted in Feb- 2014 and given was 15 months time to give its report is expected to be tabled soon. Central Government Employees will get increased pay scales from January 2016. But Finance Ministry is already gearing up to meet the expenditure.

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