8th Pay Commission: Major Pay Boost Likely; But, Can Govt Handle the Cost?

The 8th Pay Commission might kick in from January 2026, boosting the salaries of government employees and pensioners by 20-25%. However, this huge salary hike could put an extra financial burden of about Rs 3.9 lakh crore annually on Centre.

The new pay system will be implemented

Millions of government employees are awaiting the 8th Pay Commission. The report is expected in 18 months, with a new pay system likely from Jan 2026, but it will cost a lot.

Salary could increase by up to 25%

The good news: a 20-25% hike in basic pay and pension is expected with the 8th Pay Commission. This will directly benefit about 25 million people, boosting their spending power.

Where will ₹3.9 lakh crore come from?

The government is worried about the cost. Implementing the pay commission will add an annual burden of ₹1.4 lakh crore for the center and ₹2.5 lakh crore for states, totaling ₹3.9 lakh crore.

How will it impact the GDP?

When government spending increases, it affects the whole economy. The central government's deficit might rise to 5% of GDP, and states will have less money for development.

The government will have less 'fiscal space'

The 8th Pay Commission isn't just about salaries; it's about the economy. The government will have less 'fiscal space,' or freedom to spend, possibly leading to tax hikes or more debt.