Indian government’s wage bill to zoom by Rs.79 bn

March 24th, 2008 - 7:41 pm ICT by admin  

A file-photo of P. Chidambaram

New Delhi, March 24 (IANS) India’s central government may have to provide for an additional Rs.79.75 billion ($2 billion) towards wages and bear a one-time burden of Rs.180 billion if it accepts the suggestions of the Sixth Pay Commission. The suggestions made the panel, headed by Justice B.N. Srikrishna and presented to Finance Minister P. Chidambaram Monday, take effect from January 2006, and accordingly account for the additional burden towards arrears.

“The gross financial implication on account of the recommendations made in this report will need to be reduced by the savings which will accrue on account of various recommendations,” says the report.

The panel says such recommendations include the change in pension formulae, a revision in the payment of advances to employees and the provision for lateral movement of defence personnel.

The pay panel says that out of the one-time expenditure on account of arrears to be paid for 2006 and 2007, an estimated Rs.126.42 billion will have to be borne in the national budget and the remaining by the Indian Railways.

“An imperative, urgent need exists to harmonize the functioning of the central government organisations with the demands of the emerging global economic scenario,” the pay panel report said.

“The government machinery has to learn to adapt to these changes and to leverage knowledge and technology for better performance under stricter fiscal discipline and better delivery mechanisms.”

Industry bodies like the Associated Chambers of Commerce and Industry (Assocham) welcomed the pay hikes, and said the extra fiscal burden can easily be absorbed on account of higher tax revenues

“But I hope the central government employees will inspire themselves to be more accountable and much more productive, efficient and responsive while serving the government,” chamber president V.N. Dhoot said.

For the government, the recommendations come at a time when the finance ministry has announced a whopping Rs.600 billion ($15 billion) programme to waive loans taken by farmers.

“I have left headroom for myself,” the finance minister said after presenting the budget Feb 29, when asked how he intended to finance the recommendations of the Pay Commission, which was then expected to suggest hefty salary hikes.

Chidambaram’s reference was to keep the fiscal deficit low at 2.5 percent of India’s gross domestic product so as to allow the government to borrow money to finance the pay hikes if required.

“If my additional revenues are buoyant that will pay for the increment, failing which I will fall back upon the headroom I have left for myself,” the minister had said.

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