Over the decades, especially since the mid-1990s, the pay increase in real terms for government staff has been much higher than that of per capita net national income. Though this might have been needed to adequately compensate them and provide incentive for performance, the burden on the exchequer has risen, with “salaries and pensions” now accounting for 18% of the Centre’s revenue expenditure.
Rising pension burden
With the increased life span, the Centre’s pension expenses have marginally surpassed that on salaries. With the market-linked National Pension System yielding its fiscal dividends, the expenses on government staff compensation might peak by 2040s. A control being exercised on new government employees would also help.
8th Pay Commission faces tough balancing act
As it restructures the pay matrix for 11.9 million Union government employees and pensioners, the 8th Pay Commission would do well to do a fine balancing act, between the twin objectives of rewarding employees for better governance, and meeting the equally pressing demand on taxpayer funds for other development needs.
