7th Pay commission effect? Pension spend by government to beat salary payment

7th Pay commission: The government's outgo on pension will exceed the expenditure on salaries by nearly Rs 10,000 crore in the current financial year, and the trend will continue for two more years till March 2021, a Finance Ministry document said today.

As per the Medium Term Expenditure Framework, tabled in the Lok Sabha, the outgo towards subsidies and interest payment too will witness substantial increase in the coming years.

However, on the positive side, the government will be able to bring down the fiscal deficit to 3 per cent of GDP by 2020-21, from a projected 3.3 per cent in the current fiscal and 3.1 per cent in 2019-20.

As per the projections, the salary bill of the government will go up from Rs 1.50 lakh crore in last fiscal to Rs 1.58 lakh crore this year. It will further rise to Rs 1.66 lakh crore in 2019-20 and Rs 1.74 lakh crore in 2020-21.

However, the pension outgo with outpace the salary expenditure going up from Rs 1.45 lakh crore in last fiscal to Rs 1.68 lakh crore in current fiscal, Rs 1.79 lakh crore in 2019-20 and Rs 1.84 lakh crore in 2020-21.

The capital expenditure, a reflection of asset creation, is likely to rise from budgeted Rs 3 lakh crore in the current fiscal to Rs 3.27 lakh crore in 2019-20 and further to Rs 3.76 lakh crore.

The MTEF, which sets out a three-year rolling target for expenditure, has assumed that GDP growth of 7.3 per cent in current fiscal, going up to 7.5 per cent in 2019-20 and going up to 7.8 per cent in 2020-21.

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Notably, central government employees and pensioners are waiting for an announcement by the Centre accepting their demands for a pay hike by increasing the fitment factor from the current 2.57 times to 3.68 times.