Minister of State for Finance Jayant Sinha
India's Minister of Finance for State Jayant Sinha gestures during an interview with Reuters in New Delhi, India, April 27, 2015.Reuters

Minister of State for Finance Jayant Sinha said on Monday that the government's fiscal position will not be impacted by the implementation of One Rank One Pension (OROP) and Seventh Pay Commission recommendations.

The implementation of OROP is expected to cost around Rs 8,000-10,000 crore for the government in the current fiscal while the recommendations of the Seventh Pay Commission are expected to increase the government's salary expenditure of over Rs 1 lakh crore projected for this fiscal year.

"I think we are in a very good shape as far as fiscal management is concerned. That was appreciated by all economists," PTI quoted Sinha, as saying.

Sinha, who also attended a meeting of economists chaired by Finance Minister Arun Jaitley at NITI Aayog, said that the government's fiscal situation is robust enough to weather the impact from the implementation of the OROP and the Pay Commission recommendations on salary hikes of Central government employees.

However, analysts expect the implementation of OROP scheme for ex-servicemen will cost the Modi government much more than the estimated figure of about Rs 10,000 crore.

"We estimate the overall cost to be Rs 16,000 crore or 0.1 per cent of GDP in FY16... The existing defense pension bill will go up by Rs 10,000 crore, while arrears totalling Rs 12,000 crore will be paid out over two years," Pranjul Bhandari, chief India economist of HSBC Global Research, had said last month.

Besides, the Seventh Pay Commission, headed by Justice AK Mathur, is expected to recommend a 40% hike in salaries, according to an analyst at global financial services firm Credit Suisse.

The Central government's salary bill is projected to rise by 9.56% to Rs 1,00,619 crore in FY16 and the implementation of the 7th Pay Commission recommendations is expected to lead to a  further rise in government expenditure.

Earlier this month, the Union finance ministry had said that the Pay Commission would be aware of the government's fiscal issues while making recommendations on salary hike to about 48 lakh Central government employees and 55 lakh pensioners.

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