03/05/2016
Financial impact due to 7th Pay
Commission: Details of Rajya Sabha Q&A
GOVERNMENT
OF INDIA
MINISTRY
OF FINANCE
RAJYA
SABHA
QUESTION NO 241
ANSWERED
ON 26.04.2016
Requirement of growth in economy for
sustaining the burden of wage increase
241 Shri A. K. Selvaraj
Will the Minister of FINANCE be
pleased to satate :-
(a) whether it is a fact that India
needs to grow by an additional 1-1.5 percentage points so that it can sustain
the burden of wage increases and pass on more benefits to workers;
(b) if so, the details thereof;
(c) whether it is also a fact that
there would be a burden of Rs. 1.02 lakh crore on account of implementation of
the Seventh Pay Commission; and
(d) if so, the details thereof?
ANSWER
MINISTER OF STATE IN THE MINISTRY OF
FINANCE (SHRI JAYANT SINHA)
(a) and (b): The Gross Value Added
(GVA) at basic prices is the sum of compensation of employees including social
contributions made by the employer (CE), operating Surplus and mixed income of
the self-employed (OS/MI), consumption of fixed capital (CFC) and taxes net of
subsidies on production. The share of compensation of employees stood at 33.6
per cent in the year 2014-15 (the latest year for which information is
available), increasing from 32.9 per cent in 2012-13. Simultaneously, the
growth rate of GVA at constant basic prices increased from 5.4 per cent in
2012-13 to 7.1 per cent in 2014-15.
Among the broad sectors, public
administration & defence had the highest share of compensation of
employees, i.e., 85.0 per cent of the GVA at basic prices, in 2014-15. Higher
wages/compensation of employees may have an impact on private final consumption
and hence on GDP growth. At the same time, higher wages in public
administration & defence may place added demand on the budgetary resources
of the Government. On account of this possible two-way relationship, it is
difficult to exactly calculate the GDP growth required to sustain the higher
wage bill.
(c) and (d): The Seventh Pay
Commission, in its Report, has projected an additional financial implication on
implementation of its recommendations, of Rs. 1,02,100 crore, which is about
0.7 per cent of the GDP at current market prices of Rs. 1,50,65,010 crore
projected in the Budget 2016-17. The details are given below:
2016-17
(Without
7th Central Pay Commission)
|
2016-17
(With
7th Central Pay Commission)
|
Financial
impact
|
|
(Figures
in rupees crore)
|
|||
Pay
|
244300.0
|
283400.0
|
39100.0
|
Allowances
|
|||
HRA
|
12400.0
|
29600.0
|
17200.0
|
Transport Allowance
|
9900.0
|
9900.0
|
0.0
|
Other Allowance
|
24300.0
|
36400.0
|
12100.0
|
Pension
|
142600.0
|
176300.0
|
33700.0
|
Total
|
433500.0
|
535600.0
|
102100.0
|