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The
government will require "some enhancement" for spending on
salaries and pensions in 2016/17 to absorb the off-cycle pay
hikes announced in June on the recommendation of a government
pay commission.
The government faces a challenge to achieve its fiscal deficit
target of 3.5 percent of GDP in the current fiscal year, but is
"quite optimistic" of fully achieving the target of 3 percent in
2017/18, the finance ministry said in the Medium-Term
Expenditure report tabled in parliament's lower house.
Rating agencies such as Moody's have said that the increase in
wages would boost consumer demand, leading to inflationary
pressures and making it difficult for the next governor of the
Reserve Bank of India to achieve its inflation target.
Prime Minister Narendra Modi's government has just confirmed a
central inflation target of 4 percent, plus or minus 2
percentage points, that was agreed with departing governor
Raghuram Rajan for the next five years.
Total federal spending on salaries and pensions is estimated to
rise about 10 percent in the next fiscal year to 2.58 trillion
rupees ($38.6 billion) compared with budget estimates for the
current fiscal year.
($1 = 66.8200 Indian rupees)
(Reporting by Manoj Kumar; Editing by Jacqueline Wong)
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