Finance Ministry
Finance Minister Arun Jaitley sits inside his office at the finance ministry in New Delhi 27 May, 2014.Reuters

The Union finance ministry said on Monday that the Seventh Pay Commission will be aware of the government's fiscal problems while making recommendations on salary hikes to about 48 lakh Central government employees and 55 lakh pensioners.

In August, the Union cabinet had extended the deadline for the Seventh Pay Commission to submit its recommendations by four months, to 31 December.

The 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.

"We have communicated our concerns with regard to sustainability of public expenditure to Pay Commission. I am sure the members and chairman of the commission are aware of and will be sensitive to our concerns," PTI quoted, Finance secretary Ratan Watal, as saying.

Watal said that the report submitted by the Commission would be "scrutinised by a secretariat to be set up in the Finance Ministry." The fiscal burden for the government from implementing the recommendations will be felt from the next financial year, he added.

In August, the Finance Ministry estimated that the Central government's expenditure on employees' salaries to rise by nearly 16% to Rs 1.16 lakh crore in the financial year 2016-17 upon the implementation of the recommendations of Seventh Pay Commission. He added that the recommendations would not have much on the government's fiscal position in the current financial year although they will be implemented from January 1, 2016.

Earlier in August, an official with the Commission told Livemint that the Commission would like to keep the retirement age of Central government employees unchanged at 60 years. "If we lower the age limit, the pension burden will bust the government's medium-term fiscal targets," he had said.

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