NEW DELHI: India’s federal Cabinet yesterday approved a pay panel’s recommendations to raise the wages of government workers, a move that would add expenses of around 221 billion rupees ($5.16 billion) to the budget for the current fiscal year.
The minimum basic pay for a federal government employee would be 7,000 rupees a month, Information and Broadcasting Minister Priya Ranjan Dasmunshi said after the Cabinet meeting. The average increase of 21 percent would be effective retroactively from January 2006. Payment of additional allowances that bump up monthly pay to 10,000 rupees will be effective as of September 1. Employees would get 40 percent of their arrears in the current fiscal year and 60 percent in the next, starting in April 2009. Dasmunshi said Prime Minister Manmohan Singh would announce more details during his Independence Day address today.
Analysts said the salary hike, amounting to about 5 percent of India’s gross domestic product, would lead to a major jump in the budget deficit that could derail attempts to prune a flabby and wasteful public expense system.
It might also increase inflationary pressures on the economy. State governments usually hike their employees’ salaries after a federal hike, which comes once in about every 10 years. The last pay hike for government employees was in 1997.
Meanwhile, India’s inflation raced to a fresh 13-year peak. Annual inflation jumped to 12.44 percent for the week ended August 2, from 12.01 percent for the week ended July 26, according to the Wholesale Price Index yesterday.