The Centre is likely to implement the Seventh Pay Commission award from
September-October, the beginning of the festive season, to give a
consumption boost to the economy. However, in order to restrict the
budgetary outgo, it would pay the revised allowances only prospectively,
unlike the pay component that will be paid along with arrears from
January 2016.
Allowances currently are roughly half of the Centre’s salary bill; as
per the pay panel award, the steepest increase — 63% — was in
allowances, while the overall rise in pay, allowances and pensions
recommended was 23.55%.
If the revised allowances take effect only from September this year, the
savings to the exchequer would be to the tune of R11,000 crore,
official sources told FE. Additionally, if the railway ministry decided
to toe the Centre’s line, the national transporter will save around
R3,800 crore. The Budget in February had provided R53,500 crore towards
the pay panel-induced overall rise in pay, allowances and pension (PAP)
and also to finance the one-rank-one-pension scheme for the armed
forces. The commission had estimated the additional outgo in FY17 due to
its award at R73,650 crore.
The Centre’s additional bill on allowances in FY 17 due to the pay panel
would have been about R22,000 crore, but since it would release
allowances only from September (and not with retrospective effect from
January as envisaged by the commission), the actual outgo would be
nearly half that.
Some analysts reckon that the consumption stimulus to the economy from
the increased pay to government staff this time around could be somewhat
muted.
Compared with the Sixth Pay Commission award — which led to an overall
salary increase of 40% and was released first with arrears of 30 months
paid over two years — the disbursement now includes only six months’
arrears in pay, they noted. “If the pay commission’s award is
implemented across the board (including state governments as well as
public institutions/enterprises), it would bring in an additional 0.9%
of GDP growth in FY17,” said NR Bhanumurthy, professor at the National
Institute of Public Finance and Policy. Even if states lag in
implementing the pay revisions, Bhanumurthy said, GDP growth still could
be at least 8% in the current fiscal, up from likely 7.6% last year.
Contrary to some reports that government employees could be asked to put
part of the increased salary in bank capitalisation bonds to be issued
by the Centre to infuse capital in the banks, officials said there was
no such move. The government would like the employees to spend
additional money in their hands to perk up the economy, sources added.
The seventh pay panel had projected the railways budget would bear the
additional R28,450 crore in FY17 due to its award. However, officials
reckon that the actual requirement could be lower by about R3,800 crore
for the railways due to prospective implementation of allowances.
Highlights
The Centre is
likely to implement the Seventh Pay Commission award from
September-October, the beginning of the festive season, to give a
consumption boost to the economy.
Courtesy: sapost.blogspot.in
EmoticonEmoticon