8th Pay Commission set to reshape FY28 finances, may add Rs 4–9 lakh cr burden: Neelkanth Mishra
According to Neelkanth Mishra, Member of the Prime Minister’s Economic Advisory Council (EAC-PM), the implementation of the 8th CPC is likely to exert substantial pressure on India’s public finances, both at the Centre and in the states.
- Dec 4, 2025,
- Updated Dec 4, 2025 1:52 PM IST
The upcoming 8th Pay Commission, scheduled for rollout in FY28, is emerging as one of the biggest fiscal events on the government’s horizon. According to Neelkanth Mishra, Member of the Prime Minister’s Economic Advisory Council (EAC-PM), the implementation of the 8th CPC is likely to exert substantial pressure on India’s public finances, both at the Centre and in the states.
Mishra estimated that the combined payout for revised salaries and pensions under the 8th CPC could cross Rs 4 lakh crore. Once arrears for five quarters are factored in — a typical feature in past pay panel implementations — the total impact could climb to nearly Rs 9 lakh crore.
He noted that policymakers will need to weigh this burden carefully while preparing for FY28. “With the Pay Commission due, the fiscal strain will be significant. Managing this while adhering to the debt-to-GDP commitments will require careful adjustments,” he said at the CII IndiaEdge 2025 Summit in New Delhi.
The warning comes at a time when India is preparing to transition to a five-year debt-GDP fiscal framework from FY27, with details expected in the upcoming Union Budget. Mishra pointed out that India has already been an outlier in its fiscal consolidation efforts, and the current low-inflation environment signals spare capacity in the economy. This, combined with the heavy cost of the 8th CPC, may limit the government’s room for a sharp fiscal tightening cycle.
Mishra emphasised the need to balance pay revision commitments with long-term fiscal stability.
8th Pay Commission update
The Finance Ministry has issued a clarification addressing concerns raised by labour unions and employee groups over the 8th Pay Commission’s Terms of Reference (ToR). Ever since the ToR was notified, unions had flagged a significant omission — the absence of any explicit reference to pension revision. This was seen as a sharp deviation from past practice, as all previous Pay Commissions clearly stated that both pay and pension would be revised.
The silence triggered worry that the government might be planning to keep pension corrections outside the 8th CPC’s mandate. With over 69 lakh pensioners depending on revisions to maintain parity with serving staff, the issue quickly escalated into a major concern. Several associations wrote to the government, warning that excluding pension revision would set an unwelcome precedent and adversely impact retirees.
The government has now clarified its position in the Rajya Sabha. Responding to an Unstarred Question, Minister of State for Finance Pankaj Chaudhary said the 8th CPC will make recommendations on “Pay, Allowances, Pension, etc.” for central government employees. This makes it clear that pension revision remains very much within the Commission’s scope, just as in earlier cycles. The clarification is expected to ease the anxiety that has persisted since November.
However, the Finance Ministry has also confirmed that there is no proposal at present to merge Dearness Allowance (DA) or Dearness Relief (DR) with basic pay — a long-standing demand that usually receives attention once DA crosses 50%. Any such move is now likely to be considered only after the 8th CPC submits its report in 2027.
The upcoming 8th Pay Commission, scheduled for rollout in FY28, is emerging as one of the biggest fiscal events on the government’s horizon. According to Neelkanth Mishra, Member of the Prime Minister’s Economic Advisory Council (EAC-PM), the implementation of the 8th CPC is likely to exert substantial pressure on India’s public finances, both at the Centre and in the states.
Mishra estimated that the combined payout for revised salaries and pensions under the 8th CPC could cross Rs 4 lakh crore. Once arrears for five quarters are factored in — a typical feature in past pay panel implementations — the total impact could climb to nearly Rs 9 lakh crore.
He noted that policymakers will need to weigh this burden carefully while preparing for FY28. “With the Pay Commission due, the fiscal strain will be significant. Managing this while adhering to the debt-to-GDP commitments will require careful adjustments,” he said at the CII IndiaEdge 2025 Summit in New Delhi.
The warning comes at a time when India is preparing to transition to a five-year debt-GDP fiscal framework from FY27, with details expected in the upcoming Union Budget. Mishra pointed out that India has already been an outlier in its fiscal consolidation efforts, and the current low-inflation environment signals spare capacity in the economy. This, combined with the heavy cost of the 8th CPC, may limit the government’s room for a sharp fiscal tightening cycle.
Mishra emphasised the need to balance pay revision commitments with long-term fiscal stability.
8th Pay Commission update
The Finance Ministry has issued a clarification addressing concerns raised by labour unions and employee groups over the 8th Pay Commission’s Terms of Reference (ToR). Ever since the ToR was notified, unions had flagged a significant omission — the absence of any explicit reference to pension revision. This was seen as a sharp deviation from past practice, as all previous Pay Commissions clearly stated that both pay and pension would be revised.
The silence triggered worry that the government might be planning to keep pension corrections outside the 8th CPC’s mandate. With over 69 lakh pensioners depending on revisions to maintain parity with serving staff, the issue quickly escalated into a major concern. Several associations wrote to the government, warning that excluding pension revision would set an unwelcome precedent and adversely impact retirees.
The government has now clarified its position in the Rajya Sabha. Responding to an Unstarred Question, Minister of State for Finance Pankaj Chaudhary said the 8th CPC will make recommendations on “Pay, Allowances, Pension, etc.” for central government employees. This makes it clear that pension revision remains very much within the Commission’s scope, just as in earlier cycles. The clarification is expected to ease the anxiety that has persisted since November.
However, the Finance Ministry has also confirmed that there is no proposal at present to merge Dearness Allowance (DA) or Dearness Relief (DR) with basic pay — a long-standing demand that usually receives attention once DA crosses 50%. Any such move is now likely to be considered only after the 8th CPC submits its report in 2027.