RBI cautions states against blindly following 6th Pay panel
State governments should not adopt pay panel recommendations unmindful of their capacity to bear the additional burden. Full Pre-Budget coverage
By PTI |
MUMBAI: Ahead of the Sixth Pay Commission report, the Reserve Bank of India (RBI) has sounded a word of caution by suggesting that the state governments should not adopt the pay panel recommendations unmindful of their capacity to bear the additional burden.
RBI's suggestion comes about a month and a half before the Sixth Pay Commission is scheduled to submit its report on a new pay structure for the central government employees and pensioners.
The states need to base their decisions relating to salary levels after due consideration to their fiscal capacity, employee strength, size of population and the required complementary expenditure for productive employment, the RBI said in its recent analysis of the state government finances.
Referring to the general tendency of states to by and large follow the central pay commissions, the report by the apex bank has pointed out that the state finances experienced deterioration in the latter part of 1990s subsequent to adopting the recommendations of the Fifth Pay Commission for their employees.
RBI's suggestion comes about a month and a half before the Sixth Pay Commission is scheduled to submit its report on a new pay structure for the central government employees and pensioners.
The states need to base their decisions relating to salary levels after due consideration to their fiscal capacity, employee strength, size of population and the required complementary expenditure for productive employment, the RBI said in its recent analysis of the state government finances.
Referring to the general tendency of states to by and large follow the central pay commissions, the report by the apex bank has pointed out that the state finances experienced deterioration in the latter part of 1990s subsequent to adopting the recommendations of the Fifth Pay Commission for their employees.
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The central government had appointed the Sixth Pay Commission in October 2006 under the chairmanship of justice B N Srikrishna to revise the salary structure of central government employees and pensioners.
Having completed the consultation process with associations of employees and got impact studies done by experts, the pay panel will be submitting its report to the the Centre before April 4 next, the last day of the commission.
Attributing the improvement in fiscal position of the states to buoyancy in tax revenues and higher transfer of funds from the central government, RBI said the states would have to devise strategies for augmenting resource mobilisation from non-tax sources of revenue.
The RBI's recommendation assumes significance as subsequent to the central pay panel award, the state governments would be under pressure to hike salary of their employees imposing additional burden on the exchequer.
The central bank has also advised the states to make continuous efforts towards channelization resources to meet their development needs in line with the priorities laid down in the Eleventh Five Year Plan, while initiating steps to bring down the levels of non-developmental expenditure.
The RBI also asked the states to improve budget estimation process and methodology to reduce deviation between the budget estimates and revised estimates, especially with regard to revenue data.
The state governments, the RBI report said, should also endeavour to contain their debts at sustainable levels through fiscal restructuring.
The RBI report also noted that as many as 26 states have adopted fiscal responsibility legislations to introduce fiscal prudence and a rule-based regime.
Having completed the consultation process with associations of employees and got impact studies done by experts, the pay panel will be submitting its report to the the Centre before April 4 next, the last day of the commission.
Attributing the improvement in fiscal position of the states to buoyancy in tax revenues and higher transfer of funds from the central government, RBI said the states would have to devise strategies for augmenting resource mobilisation from non-tax sources of revenue.
The RBI's recommendation assumes significance as subsequent to the central pay panel award, the state governments would be under pressure to hike salary of their employees imposing additional burden on the exchequer.
The central bank has also advised the states to make continuous efforts towards channelization resources to meet their development needs in line with the priorities laid down in the Eleventh Five Year Plan, while initiating steps to bring down the levels of non-developmental expenditure.
The RBI also asked the states to improve budget estimation process and methodology to reduce deviation between the budget estimates and revised estimates, especially with regard to revenue data.
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The state governments, the RBI report said, should also endeavour to contain their debts at sustainable levels through fiscal restructuring.
The RBI report also noted that as many as 26 states have adopted fiscal responsibility legislations to introduce fiscal prudence and a rule-based regime.
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