Central Government Pension expenditure more than Salary Expenditure

The central government’s pension burden will be more than ten thousand crore rupees. According to the mid-term expenditure framework presented on Tuesday in the Lok Sabha, the government may have to face the same situation by March 2021. Subsidy and interest payments will also increase the pressure on the treasury.

It is estimated that the salaries of the Central Government will be 1.66 lakh crores this year. At the same time, pension expenditure is expected to increase from 1.45 lakh crores last year to 1.68 lakh crores this year. The Food Subsidy Bill is estimated to reach 1.69 lakh crore in the current financial year.

a) Salaries: 
The salaries mentioned in the MTEF statement relate to salary, and Grant-in-Aid salary, paid by the Union Government. This category of Revenue expenditure does not include the salary paid to the Military personnel under Defence Ministry. The growth rate in salary 2018-19 over the Revised Estimates of 2017-18 is just under 5 percent.
It is anticipated that salaries, and Grants-in-Aid salaries, will increase by about 5 percent over Budgeted Estimates of the year 2018-19. Same rate of growth is also expected in the year 2020-21. This assumes that an increment of 3 per cent and a Dearness Allowance increase of 2 percent will have to be provided to all employees under both Salaries and Grant-in-Aid Salaries. The projection in absolute terms is ₹1,66,470.90 crore and ₹1,74,797.72 crore for the years 2019-20 and 2020-21 respectively.

b) Pension: 
Another major component of Revenue expenditure is Pensions. For the purpose of MTEF projections, the expenditure on pension payments includes civil pensions and Defence pensions.
For the purpose of calculation of Pensions, it is assumed that pension commitments will increase by around 7 percent over the budgeted estimates on 2018-19 in the year 2019-20 and 7 percent over that in the year 2020-21 The Pension commitments have been budgeted at ₹1,68,518.02 crore in 2018-19. In absolute terms, they are expected to increase to ₹1,79,746.50 crore in the year 2019 – 20 and to ₹1,84,814.36 crore in the year 2020-21.
c) Defence:
The revenue component of Defence expenditure comprises salaries of Defence personnel, and other establishment expenditure. It may be noted that Defence pension is not a part of this component in the MTEF statement. Defence pension is included in the Pension category of Revenue for the purpose of preparing this Statement. The Budgeted expenditure under revenue component of defence expenditure is ₹1,92,434 crore in 2018-19. This is projected to increase to ₹2,05,975 crore in 2019-20 and ₹2,20,467 crore in 2020-21. This suggests an increase of 7 percent over previous year for 2019-20 and 2020-21.
As The Pay Research Unit (PRU) of the Department of Expenditure, Ministry of Finance brings out an “Annual Report on Pay and Allowances of Central Government Civilian Employees” for each financial year, provides statistical information on expenditure incurred by different Ministries/Departments of the Central Government on Pay and Allowances including Dearness Allowance, House Rent Allowance, Transport Allowance, Overtime Allowance, etc. in respect of its regular employees.

The central government periodically constitutes a Pay Commission, to evaluate and recommend revisions of salaries and pensions, for its employees. Recently, the Seventh Central Pay Commission has made recommendations that will apply to 33 lakh central government employees in addition to 14 lakh armed forces and 52 lakh pensioners.

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