New Delhi, January 21: A new economic analysis by rating agency Indian Credit Rating Company (ICRA) has spotlighted a significant fiscal challenge looming for the Indian government regarding the 8th Central Pay Commission (8th CPC). While the commission's recommendations are officially expected to take effect from January 1, 2026, ICRA reports that a substantial delay in the panel's final report is likely to push the actual payout into Financial Year 2027-28 (FY28). This delay is expected to trigger a massive accumulation of arrears, potentially increasing the government's salary and pension expenditure by 40 per cent to 50 per cent in a single year.

The Cost of Delay: A 'Lump Sum' Arrears Burden

According to the ICRA report released as part of its Budget 2026-27 analysis, the 8th Pay Commission’s recommendations are still 15 to 18 months away from being submitted. This timeline suggests that while the salary hike is not cancelled, its implementation will be retrospective. DA Merger Before 8th Pay Commission? Government Rules Out Interim Relief for Central Employees.

By the time the new pay scales are notified in late 2027 or early 2028, the government may owe employees and pensioners arrears for 15 months or more. This concentration of payments is expected to create a "fiscal rigidity", significantly straining the national budget and reducing the government's ability to fund discretionary projects.

Strategic Capital Expenditure Frontloading for Government

Anticipating this future financial crunch, ICRA suggests the government is likely to frontload capital expenditure (capex) in the upcoming FY2026-27 budget.

FY27 Capex Target: Estimated at INR 13.1 lakh crore, a 14 per cent increase over the current year.

Fiscal Deficit Target: Projected to be pegged at 4.3 per cent of GDP for FY27. The strategy appears to be an effort to accelerate infrastructure and development projects now, before the heavy "committed expenditure" of the 8th Pay Commission limits spending flexibility in FY28 and beyond. 8th Pay Commission: How Much Salary Hike Can Group A, B, C and D Employees Expect?

Lessons from the 6th and 7th Pay Commissions

The ICRA report draws parallels to previous pay revisions to illustrate the potential impact:

7th Pay Commission: Implemented with just six months of arrears, it still led to a 20.4 per cent surge in salary expenses.

6th Pay Commission: Suffered a longer delay, resulting in 2.5 years of arrears that put severe pressure on the union budget for two consecutive years.

With over 50 lakh employees and 67 lakh pensioners awaiting the revision, the 8th Pay Commission is evolving into a major fiscal event that will dictate India's budgetary priorities for the next several years.

What This Means for Central Government Employees

For central government staff, the report confirms that while an immediate pay hike in January 2026 is unlikely, the eventual increase remains secure due to the retrospective nature of pay commissions. Employees can likely expect a significant lump-sum payment when the new structure - potentially featuring a fitment factor between 1.83 and 2.46 - is finally rolled out.

TruLY Score by LatestLY
Rating:3

TruLY Score 3 – Believable; Needs Further Research | On a Trust Scale of 0-5 this article has scored 3 on LatestLY, this article appears believable but may need additional verification. It is based on reporting from news websites or verified journalists (ICRA), but lacks supporting official confirmation. Readers are advised to treat the information as credible but continue to follow up for updates or confirmations

(The above story first appeared on LatestLY on Jan 21, 2026 09:20 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).