New Delhi: Millions of government employees and pensioners across the country are currently focused on a single piece of news: the 8th Pay Commission. It is expected that the Commission will submit its report within the next 18 months and the new pay system could be implemented from January 2026. This news will certainly bring smiles to employees faces but the other side of the coin is: where will the money for such a massive salary increase come from? An analysis of recent reports and data reveals that the implementation of the 8th Pay Commission could have a big impact on the governments treasury. It is estimated that the central and state governments combined will incur additional expenditures of approximately Rs 3.7 to Rs 3.9 lakh crore per year.
Salaries could increase by up to 25%
If youre a government employee or have a pensioner in your household this is great news for you. According to current estimates after the implementation of the 8th Pay Commission basic salaries and pensions could see a direct increase of 20 to 25 percent. This will directly benefit approximately 25 million people in the country.

Examining this figure it includes approximately 5 million central employees and 6.5 million central pensioners. However the actual number is from the states where approximately 18.5 million employees will fall under this scope. Obviously when the income of such a large population increases by 25 percent their purchasing power or spending capacity will increase which could boost market demand.
Where will Rs 3.9 lakh crore come from?
Now lets turn to the difficult part. In a report published in The Indian Express Pushpendra Singh Assistant Professor at Somaiya Vidyavihar University and Archana Singh Assistant Professor at IIPS have detailed this expenditure. According to their analysis once the Pay Commissions recommendations are implemented the central governments budget will face an additional burden of Rs 1.4 lakh crore annually.

But the states will face a bigger crisis. Since state governments have a much larger number of employees than the central government the impact on them will be even greater. It is estimated that the total additional expenditure for states could reach Rs 2.3 to Rs 2.5 lakh crore annually. When we combine this expenditure between the central and state governments the figure reaches Rs 3.7 to Rs 3.9 lakh crore per year.