Mumbai: The fiscal deficit target which rose sharply to 70 per cent of the full-year target, up from 61 per cent in the same period last year in the April-July period, could miss the 2015-16 target when the Seventh Pay Commission recommendations are announced in three months (December 2015).
This will present a fiscal challenge to the Central government and state governments, because historically the pay commission’s rollout has been negative for fiscal balances, the DBS Research cautioned in its latest report on the Indian economy.
When the sixth pay commission was rolled out implementation of the revised salaries/ pensions (plus arrears), along with farm loan waivers and other stimulus measures saw the fiscal deficit balloon from -2.5 per cent of GDP in fiscal 2008 to -6 per cent in fiscal 2009 and stay high for another year before easing off.
