Govt warns of impact of 7th Pay Commission

The government on Friday warned that the fiscal outlook for next fiscal year (2016-17) remains challenging. In its mid-term economic review, the government said that the impact of the recommendations of the Seventh Pay Commission will be seen next fiscal year.

The government will have to take a hit of over Rs 1 lakh crore per year if the recommendations of the Seventh Pay Commission are accepted. Economists said that the pay panel proposals are likely to be implemented next fiscal.

 

The government also lowered its growth forecast for the fiscal year ending in March 2016 to 7-7.5 per cent from 8.1-8.5 per cent estimated in February. The revision came after Asia’s third-largest economy grew 7.2 per cent in the first half of the 2015/16 fiscal year.

 

In its mid-year economic review presented in Parliament, the Finance Ministry said though the economy has made considerable progress, yet challenges remain.

 

The government said that it will stick to its budgeted fiscal deficit target of 3.9 per cent of GDP for the fiscal year ending in March 2016.

 

The government hopes to hit the target without cutting expenditure or deferring tax refunds, Finance Minister Arun Jaitley had said earlier this week.

 

In the budget in February, Jaitley had pledged to narrow the deficit to 3.9 per cent of GDP in this fiscal year from 4.0 per cent in 2014/15.

 

For this fiscal (2015-16), the government has reiterated GDP growth rate of between 7 per cent and 7.5 per cent and fiscal deficit target 3.9 per cent.

 

For the next fiscal, the government had a fiscal deficit target of 3.9 per cent.

 

DK Joshi, Senior Director & Chief Economist at Crisil, the next fiscal year could be challenging for the government in view of the Seventh Pay Commission’s payouts. The government may have to revise its fiscal deficit target or curb capital spending, he added. (With Agency Inputs)
[ NDTV ]