Seventh pay commission, which is likely to raise the salaries of government employees, may pose a risk to public finances leaving it with less money to spend on building capital assets. Sounding a word of caution finance minister Arun Jaitley said that government's salary expenditure will exceed Rs 1 lakh crore in the current fiscal and is projected to increase further.

What is seventhh pay commission and what are its objectives?

The seventh pay commission was constituted by the government to make recommendations regarding changes in the pay structure of specified categories of employees. The key objectives of the commission are to examine, review, evolve, and recommend changes that are desirable and feasible regarding the principles that should govern the emoluments structure including pay, allowances and other facilities/benefits, in cash or kind.

When was the seventh pay commission constituted and when is it expected to make its recommendations?

The commission was constituted by a resolution of UPA government on February 28, 2014 and was given a time frame of eighteen months to frame its recommendations. The commission is expected to submit its report by end of August or September, this year. 

When would the recommendations of the commission be implemented?

The recommendations of the commission are likely to be implemented by January 1, 2016.

Where is the commission headquartered and who chairs it?

The seventh pay commission is headquartered in Delhi. It has been set up under the chairmanship of justice Ashok Kumar Mathur.

Is there any basis on which the commission makes its recommendations?

The commission would make its recommendations keeping in view the following:

• The economic conditions of India and the need for fiscal prudence;
  
• The need to ensure that adequate resources are available for developmental expenditures and welfare measures;
  
• The likely impact of the recommendations on the finances of the state governments, which usually adopt the recommendations with some modifications;
  
• The prevailing emolument structure and retirement benefits available to employees of the central public sector undertakings; and
  
• The best global practices and their adaptability and relevance in Indian conditions.
  

Who would benefit from it once it is implemented?

The following categories of employees would be benefited after the seventh pay commission is implemented:

• Central government employees - industrial and non-industrial;
  
• Personnel belonging to all India services;
  
• Personnel of the union territories;
  
• Officers and employees of the Indian audit and accounts department;
  
• Members of the regulatory bodies (excluding RBI) set up under the Acts of the parliament;
  
• Officers and employees of the supreme court;
  
• Retired personnel from defence forces;
  
• Pensioners from aforesaid services.
  

 
What is the expected benefit (in percentage terms) in pursuance to the recommendations of the seventh pay commission?

According to a media reports, as of now, there is no consensus on how much would be the hike in salaries in pursuance to the recommendations of the commission. The Bank of America expects a 15 percent increase, while Religare expects salaries to go up by 28-30 percent. Credit Suisse, however, expects that the salaries may be hiked by 30-40 percent.

How will it affect government’s expenditure?

According to the medium-term expenditure framework statement by finance minister Arun Jaitley, the salary expenditure would rise by 9.56 percent to Rs 1,00,619 crore in the current financial year. This would rise to Rs 1,16,000 crore in 2016-17 and further to over Rs 1,28,000 crore in 2017-18 with the implementation of the recommendations of the commission. Also, the pension bill of government employees will rise to Rs 88,521 crore in the current fiscal and is projected to grow to over Rs 102,000 crore in 2016-17, and over Rs 112,000 crore in 2017-18.