An Indian panel recommended on Monday a pay rise for federal workers that would cost 125.61 billion rupees ($3.1 billion) in the next fiscal year, which analysts said would undermine a drive to repair public finances.
The panel's report posted on a government Web site said pay rises back-dated to January 2006 would cost a one-off 180.60 billion Indian rupees ($4.47 billion) if the recommendations for about three million central government workers were taken up.
It suggested the minimum wage for government workers should be 6,660 rupees ($165) a month, and the maximum salary should be 80,000 rupees a month for senior most civil servants. An economist at ICICI Securities in Mumbai, A. Prasanna, said the figures for the financial year to end-March 2009 were in line with expectations.
"Along with the farm loan debt waiver, this means higher market borrowing in the second half of 2008/09, though the first half numbers are likely to be on the lower side," Prasanna said. "The government is going to overshoot its fiscal deficit target of 2.5 percent for (fiscal 2008/09) and we may even see it rising above 3 percent."
In February's budget, Finance Minister Palaniappan Chidambaram revised the federal fiscal deficit estimate to 3.1 percent of gross domestic product for the 2007/08 financial year, and said he aimed to bring it down to 2.5 percent in 2008/09.
The budget included a $15 billion scheme to write off the debts of small farmers, which many saw as a populist move ahead of general elections which must be held by May 2009.
The report said in fixing the minimum salary it had taken into account the inflationary impact, the knock-on effect on state government pay scales and the government's ability to pay. It suggested a consolidation of pay bands and a 77 percent rise in basic salary for a new lowest rung on the central government's pay scales. When annual cost of living increments and other allowances handed out over the years are included the pay rise will be around 40 percent for this and most other groups of state employees.