The 8th Central Pay Commission (CPC), approved in October 2025, is expected to propose a 20–25% raise in salaries and pensions for about 2.5 crore government employees and pensioners. While this will significantly improve the financial well-being of public servants, it also brings serious fiscal risks. 

Economists estimate the annual additional cost for the Centre and states could reach ₹3.7–3.9 lakh crore, equal to 1.1–1.2% of India’s GDP. Such a burden may swell the central fiscal deficit from 4.4% to 5%, and states’ deficits could rise to nearly 3.7% of their GSDP. 

To fund this, governments may resort to raising taxes, increased borrowing, or cutting capital expenditure on critical sectors like health or education — each of which has long-term trade-offs. Moreover, while higher wages promote equity, there's a risk of widening wage disparity: past pay hikes haven’t always translated to equivalent increases in the private sector. 

The authors argue the 8th CPC could be more than a salary revision — if handled wisely, it might push reforms linking pay to productivity, and encourage fairer pay practices across sectors.