Saturday, September 6, 2008

Sixth Pay Commission New Pay Scales To Burden State Finances

Posted by Steve Benn at 6:29 AM

Sixth Pay commission report may be good news for the government employees but not so fine when it comes into play for a bigger cause. The recent survey by the Economic Advisory Council to the Prime minister revealed that the Sixth Central Pay Commission would have been an adverse affect in immediate future.
The last pay revision levied an additional expenditure of about 1.5 per cent of GDP at the State level. It is expected that this year, the reasonably healthy state finances would absorb the effect with much tenderly compared to a decade ago. Unlike in 1990, when the state own resources were stagnant, central transfers were declining and interest payments steadily increasing, the states is now running a revenue surplus of about 0.5 per cent. The states have now more central transfers, floating revenues and lower interest payments.
According to the report, the incredible improvement of states finances since 2003-2004 is due to high central transfer to the states, higher revenue collection from the sales tax and lower interest payments. It is expected that floating revenue is likely to continue for the medium term.
The own tax revenue of the State Government also increased by about 0.7 per cent during the period from 2003-2004 to 2008-2009. It has been assumed that increasing revenue is the result of reforms of the Sales Tax system through introduction of the Value Added Tax (VAT)

 

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