Pay panel to have bearing on state finances: Bibek Debroy

Says once the Centre implements the recommendations, it's 'impossible' for the states to hold back a hike

Pay panel to have bearing  on state finances: Bibek Debroy

Over the years, most states have improved their finances on the back of faster growth and are better-placed than the Centre on the fiscal front. He added that the Railways, which is already reeling under financial constraints, will also suffer as wages go up.

The Pay Commission last week recommended a 23.55 per cent increase in salaries, allowances and pension, along with a virtual one-rank-one-pension for civilians, involving an additional outgo of Rs 1.02 lakh crore per annum. The proposals, if accepted, will come into effect from January 1, 2016.

Elaborating, he said news reports go only by the increase in the basic pay, but do not take into consideration the dearness allowance for employees. Debroy is optimistic that the government will be able to meet the 3.9 per cent fiscal deficit target despite slim chances of meeting the divestment target this financial year.

The fiscal deficit scene for 2016-17 would have been better without the recommendations of the pay panel, he said, pegging the additional load at 0.6% of GDP.

A host of analysts, including those from rating agencies, have flagged concerns on implementation of the new wage report.