This is the placeholder for updating the macroeconomics situation which may prevail at the point when the 8th Central Pay commission will be constituted.
Overall considerations while preparing for 8th Pay commission
- The economic conditions in the country and the need for fiscal prudence;
- The need to ensure that adequate resources are available for development 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.
Placeholder for updating the latest The Government of India (GoI), Economic Survey
General Economic Situation and Financial Resources of the Central Government
In 2025, the Government of India (GoI) is expected to remain optimistic and bullish about the future, as they believe that a political mandate for reform and a favorable external environment will create a historic opportunity to propel India onto a double-digit growth trajectory. The GoI expects that decisive shifts in policies controlled by the Centre, combined with persistent, encompassing, and creative incrementalism in other areas, will lead to Big Bang reforms.
The GoI is likely to believe that the macroeconomic fundamentals have dramatically improved for the better, reflected in both temporal and cross-country comparisons. This improvement in macroeconomic performance is expected to impact the fortunes of the economy, principally through a sustained higher rate of growth of GDP.
In this context, the two implications of the positive future growth and macroeconomic scenario that are of direct interest to the Commission are:
- The incremental fiscal space that will be secured through such improved macro performance.
- The constraints imposed by the macro fiscal framework that the government will adopt through to 2027-28, which will be underpinned by its FRBM legislation.
- The government is expected to continue to have two instruments to secure resources for the expenditures that they must undertake: Revenue Mobilisation and Borrowing.
Government spending (like for all other economic agents) can be divided into consumption (revenue) and investment spending. The fiscal deficit conceptually measures the difference between total government spending and total non-debt receipts, thereby indicating the total amount the government needs to borrow to finance its projected expenditure. The revenue deficit measures the difference between the government’s total revenues and its consumption (revenue) expenditure. The core focus of the Commission is on Pay, Allowances, and Pensions (PAP), which is fully revenue expenditure.