Government Progresses Towards Establishment of Eighth Pay Commission

The Government is advancing in its efforts to constitute the Eighth Pay Commission, with the terms of reference anticipated to be submitted for Cabinet approval by early next month. Following Cabinet clearance, a formal notification will be issued, enabling the commission to commence its operations in April, according to a senior government official who spoke with Moneycontrol.

The Ministry of Finance had previously solicited recommendations from the Ministry of Defence, the Ministry of Home Affairs, and the Department of Personnel and Training (DoPT) regarding the specific aspects upon which the Commission should formulate its recommendations.

A highly placed government official informed Moneycontrol that some of the requested suggestions have been received, with the remainder currently pending. The official notification of the Commission will be issued promptly upon receiving the requisite approval from the Cabinet.

Expected Timeline for the Commission's Deliberations

According to an official statement, the Eighth Pay Commission is poised to begin its operational phase once its terms of reference are finalized. Should the establishment of the Commission be concluded by the end of the current month, it is projected to submit its report by March 2026. However, it is noted that the entire process could potentially be concluded within a shorter timeframe of less than one year. Historical precedent indicates that previous pay commissions have typically required a period exceeding one year to finalize their recommendations.

Anticipated Impact of the Eighth Pay Commission

The pay revisions proposed by the Eighth Pay Commission are expected to affect over 5 million central government employees and pensioners, including personnel from the defense services. This will entail a substantial financial impact, comparable to the implementation of the Seventh Pay Commission in 2016, which resulted in an estimated increase of ₹1 lakh crore in government expenditure for the fiscal year 2017. However, the financial implications arising from the Eighth Pay Commission will be realized from the fiscal year 2027 onwards.

The forthcoming pay revisions are also anticipated to stimulate consumption and contribute to economic growth, thereby enhancing the quality of life for government employees. Since independence, seven pay commissions have been established, with the most recent one implemented in 2016. Each commission has played a critical role in shaping the salary structures, allowances, and pension benefits for government employees, significantly influencing public finances.

In a related development, the Government has currently ruled out the merger of 50% of the Dearness Allowance (DA) and Dearness Relief (DR) with basic pay and pensions. This clarification was provided by the Minister of State for Finance, Pankaj Chaudhary, in response to a query raised in the Rajya Sabha on March 20.