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Fitch, S&P doubt 7th pay panel payout

Last Updated 20 November 2015, 17:39 IST

 A day after the seventh Pay Commission report, rating agencies S&P and  Fitch and other brokerages cast doubt on the quality of government finances if the recommendations were implemented fully.

The recommended 23.55 per cent hike in remuneration for central government employees, if fully implemented, will add to the challenges the government faces in achieving its fiscal consolidation target, the rating agency said.

“On its own, the pay rises would increase the central government’s wage bill by around 0.5 per cent of GDP. “It is important to note that this would also likely affect state government finances as they would be inclined to follow suit,” Fitch said.  Standard & Poor’s said the implementation of Pay panel recommendations will “put pressure on the fiscal position of the government and would act as a constraint to stick to the roadmap for fiscal consolidation.”

According to Religare, the fiscal consolidation roadmap will be pushed by one more year, if the pay panel recommendations were accepted.

Rating agency CRISIL said that the pay, allowances and pension were a tad more than what were expected. The government, however, maintained that the sacrosanct target of fiscal deficit will be adhered to this year and the next.

Minister of State for Finance Jayant Sinha said he was confident that the government will stick to fiscal consolidation laid out in the Budget.

Economic Affairs Secretary Shaktikanta Das said the government expected the Commission’s report to come out and accordingly a risk matrix was prepared internally.  The recommendations that will benefit 47 lakh central government employees and 52 lakh pensioners, will lead to an additional Rs 1,02,100 crore burden on the central exchequer.


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(Published 20 November 2015, 17:39 IST)

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