Details of funds allocated for Establishment of 7th CPC
Speech of Arun Jaitley Minister of Finance
February 28, 2015.
Finance Minister Shri Arun Jaitley while presenting the general budget for the year 2015-16 in Parliament on 28/02/2015, has mentioned about the allotment of funds allocated to 7th Central Pay Commission….
I want to underscore that my government still remains firm on achieving the medium term target of 3% of GDP. But that journey has to take account of the need to increase public investment. The total additional public investment over and above the RE is planned to be `1.25 lakh crore out of which `70,000 crore would be capital expenditure from budgetary outlays. We also have to take into account the drastically reduced fiscal space; uncertainties that implementation of GST will create; and the likely burden from the report of the 7th Pay Commission. Rushing into, or insisting on, a pre-set time-table for fiscal consolidation procyclically would, in my opinion, not be pro-growth. With the economy improving, the pressure for accelerated fiscal consolidation too has decreased. In these circumstances, I will complete the journey to a fiscal deficit of 3% in 3 years, rather than the two years envisaged previously. Thus, for the next three years, my targets are: 3.9%, for 2015-16; 3.5% for 2016-17; and, 3.0% for 2017-18. The additional fiscal space will go towards funding infrastructure investment.
However, it is pertinent to note that the resource base of the Centre will be constrained following the implementation of the FFC. With steep jump in the sharing pattern of tax the revenues of the States, which is surplus in most of the cases, will be further augmented on one side and the Centre will face resource crunch in one of the difficult phases of consolidation underway. While, the revenues are constrained in the FY 2015-16, it would continue over the medium term framework in FY 2016-17 and 2017-18. Moreover, the 7th Pay Commission impact may have to be absorbed in 2016-17. The phase of consolidation, extended by one year, will be also be spanning out in the period. Thus, in the medium term framework the fiscal position will continue to be stressed. However, with necessary corrections on the Plan side under the new paradigm of Centre-State fiscal relationship and reforms on the subsidies, with better targeting and policy initiatives, it is expected that over the medium framework much of the fiscal correction would have taken shape, leaving room for building up better fiscal management thereupon. The change is monumental; and needs dextrous manoeuvring in this initial phase.
The expenditure on pension payments of the Central Government includes both defence as well as civil pensions. Pension payment, in nominal terms was estimated at 74,076 crore in RE 2013-14 and at the year-end it was accounted at 74,896 crore. In BE 2014-15, pension payment in nominal terms was estimated at ` 81,983 crore. In RE 2014-15, it has been revised at ` 81,705 crore. The pension payment of Central Government for the past few years has been growing faster than the salary expenditure. The main reason for this is that there is an increase in number of pensioners due to higher retirements and increased life expectancy. In view of the likely impact of VII Pay Commission, Pension payment of the Government likely to be about 0.7 per cent of GDP in FY 2016-17 and FY 2017-18 respectively.