Budget Alert: 8th Pay Commission to Hit Centre with ₹1.8 Lakh Crore Salary Bill

Central government employees and pensioners across India are closely watching developments around the upcoming 8th Pay Commission, which is expected to significantly increase salaries and pensions. According to a recent report by Ambit Capital, the new pay structure could lead to a 30–34% hike in overall remuneration, impacting over 1 crore employees and retirees nationwide. If implemented, this revision could come into effect by 2026 or the financial year 2027, and may add a massive Rs 1.8 lakh crore burden on the government exchequer.

The current salary and pension structure is based on the 7th Pay Commission, which came into force in January 2016. A fresh commission is typically set up every ten years to revise pay structures, taking into account cost of living, inflation, and economic shifts. The 8th Pay Commission is expected to continue this tradition, offering revised scales for central government employees, including defence personnel and pensioners.

Fitment Factor to Drive Salary Increases

One of the core components of the expected revision is the fitment factor—a multiplier used to determine the new basic salary. Ambit Capital estimates that the fitment factor for the 8th Pay Commission could be in the range of 1.83 to 2.46. This implies that the minimum salary, currently at Rs 18,000, could increase to Rs 32,940 (at 1.83) or even Rs 44,280 (at 2.46).

For instance, a current base salary of Rs 50,000 could rise to Rs 91,500 on the lower end of the fitment factor and up to Rs 1.23 lakh on the higher end. The revised structure is also expected to align the dearness allowance more accurately with inflation and update pension payouts accordingly.

Boost to Consumption and Economic Growth

Experts believe that the new pay commission will act as a catalyst for economic growth, as increased take-home pay may lead to higher consumption, better access to healthcare, improved housing, and greater spending on leisure. The ripple effect of a pay hike across such a large employee base could have a profound impact on sectors like retail, real estate, and services.