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The Union Cabinet has approved the terms of reference for the Eighth Central Pay Commission. The commission will review salaries, allowances and pensions for around 50 lakh central government employees and 69 lakh pensioners, with recommendations expected in 2027 but to be implemented retrospectively from 1 January 2026.
Background
India sets up a pay commission roughly every ten years to examine the remuneration and service conditions of central government employees. The seventh commission submitted its report in 2015. The eighth commission will be a temporary body comprising a chairperson, a part‑time member and a member‑secretary. It must submit its recommendations within 18 months of constitution.
Mandate
- Salary and allowances: Review pay structures, allowances and pension benefits for civilian and defence personnel.
- Pension scheme evaluation: Assess the unfunded cost of the Old Pension Scheme and examine the National Pension System for possible improvements.
- Fiscal impact: Consider overall economic conditions, fiscal prudence and the impact on state governments that usually adopt central recommendations.
- Comparative study: Analyse emolument structures in central public sector undertakings and the private sector to ensure parity.
Significance
- Income boost: Revised pay scales will increase disposable income for millions of employees and pensioners, potentially stimulating consumption.
- Fiscal implications: Salaries and pensions already consume about 18 percent of the Centre’s revenue expenditure; higher payouts will require careful budgeting and could strain state finances.
- Pension policy debate: The commission’s review of old versus new pension schemes may shape the future of public‑sector retirement benefits.
Sources: Economic Times