The latest budget 2025-26 figures tell just that story! This time, the government will spend way more on pensions than salaries. Shocked, aren’t you? Budget documents reveal that pension expenditure has surpassed salary expenditure since 2023-24. And this trend is not going to stop anytime soon. In the 2025-26 budget, the government will spend only ₹1.66 lakh crore on salaries and pensions.
The salary and pension budgets have been almost the same for the past few years, but earlier, the salary budget was always higher than the pensions. Interestingly, between 2022-23 and 2023-24, there has been a massive drop of ₹1 lakh crore in salary expenditure! And this decline is still ongoing. Does this mean that the government has reduced recruitment of employees? Something to think about!
Don’t worry; government expenses have not decreased!
Salary and pension are included in the ‘Establishment Expenditure’ category in the budget. But not just these two; there is one more category in this, called “Others”. If we look at it from 2017-18, the total ‘Establishment Expenditure’ has been continuously increasing, even though salary expenditure has fallen sharply after 2022-23. This visible increase is due to putting more money in the “Others” category. So, the expense has not decreased; the accounting has changed slightly.
Allowances are more than salaries!
The ‘Expenditure Profile’ of the budget explains in detail the payments made to employees. Employees are paid for three things: Salary, Allowances (such as Dearness Allowance, House Rent Allowance – excluding Travel Allowance), and Travel Allowance. If you look at it from 2017-18, the total expenditure on all these has not decreased.
The number of government employees is also almost the same – 32 to 37 lakhs from 2017 to 18 to 2025-26. But the twist is that the money allocated for salaries is nearly the same, but the money for ‘allowances’ has increased significantly since 2023-24! Since 2023-24, things like dearness allowance and house rent allowance have not been counted in salary, but they have been put in the ‘allowances’ category. Therefore, the total expenditure has not decreased; it is shown in different parts.
8th Pay Commission: Will salaries increase again?
The government has announced the formation of the 8th Pay Commission, which will likely be implemented in 2027. What does the Pay Commission do? It adds the dearness allowance to the basic salary, which happens right at the beginning. Then, dearness allowance keeps increasing every year due to inflation. This means that the more the government delays in implementing the pay commission, the more the share of dearness allowance and other allowances will increase as compared to the salary.
This will directly affect the budget’s salary expenditure. When the 8th Pay Commission recommendations are implemented, a sudden massive increase will be seen in the ‘Salary’ category in the budget. Because then the dearness allowance and other allowances will again be added to the ‘Salary’!
Fact Check: According to government figures for Budget 2025-26, expenditure on pensions is estimated at ₹2.77 lakh crore and spending on salaries is estimated at ₹1.66 lakh crore.