Seventh pay commission: Govt may pay Rs34,600 crore as arrears in August salary

New Delhi: The Indian government may disburse Rs.34,600 crore to its employees in August salary as arrears because of implementation of the seventh pay panel recommendations, India Ratings and Research Pvt. Ltd said on Wednesday. 

The government had last month announced that it will pay its employees arrears arising out of implementation of the seventh pay commission award at one go in August salary. 

“The combined outgo for the centre on account of arrears for January to July and payments for August will total Rs.34,600 crore,” India Ratings said in a statement. The outgo due to the hike in salary and pension is unlikely to cause significant systemic liquidity disruption, it said. 

The government has already notified the 2.57-time hike in basic salary for 1 crore government employees and pensioners as per the seventh pay commission recommendations. The pay hike has been made effective 1 January 2016. 

According to India Ratings, the banking system liquidity will experience transient frictional tightness ahead of the payment of arrears. “The government is likely to go slow on spending as it gears up to meet lumpy payments. Temporal adjustments notwithstanding, the overall liquidity conditions will be cushioned as Reserve Bank of India (RBI) will transfer its profit to the government of India,” it said. In the current fiscal year, RBI will transfer its surplus profit of Rs.65,876 crore. 

Out of the Rs.1.02 lakh crore gross impact of the seventh pay commission on the exchequer, the Union budget has made a provision to the extent of Rs.93,325 crore. “Any shortfall arising out of the arrears’ payment is likely to be marginal and will not significantly affect the country’s fiscal position,” the rating agency said. 

The minimum pay in the central government with effect from 1 January 2016 will now be Rs.18,000 per month, up from Rs.7,000 per month. At the highest level of the cabinet secretary, the salary will go up to Rs.2.5 lakh, from Rs.90,000 a month. There shall be two dates for grant of increment—1 January and 1 July every year—instead of the existing 1 July only. The proposal for hikes in allowances has been deferred and will be taken up by a committee later.

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