Cabinet approves Sixth Pay Commission recommendations

NEW DELHI: The Union Cabinet on Thursday approved the recommendations of the Sixth Pay Commission thereby paving the way for higher wages for government employees.

"The cabinet has approved the pay commission report," Law Minister Hansraj Bhardwaj told reporters after a cabinet meeting.

The pay panel made its recommendations earlier in 2008 for salary increases for central government workers costing Rs 12561 crore ($2.9 billion) for the fiscal year 2008/09, plus Rs 18060 crore rupees in backpay to January 2006.

The cabinet set up a team of top civil servants to examine the recommendations.

Some analysts say the wage increases could derail govt's moves to tidy up its public finances and widen the federal fiscal deficit, which the government aims to limit to 2.5 per cent of gross domestic product in 2008/09, down from 3.1 per cent in 2007/08.

Another government panel said on Wednesday the budget deficit target for 2008/09 would be exceeded and serious fiscal risks were arising from growing off-budget liabilities estimated at 5 per cent of GDP.

The pay round comes roughly once a decade and the previous one in 1997 raised salaries for federal employees by nearly 40 percent, prompting many state governments to follow suit and blowing the combined state and federal deficit to nearly 10 per cent of GDP.

India is battling inflation of 12 per cent but economists said the pay round was unlikely to give prices a significant boost.

Highlights

1. Minimum wages to be Rs 10,000 per month.

2. 45 lakh employees to benefit from this hike which would take effect from January 2006

3 It will be paid in two installments: 40 % in FY 09 and rest 60% in FY 10.