Number Theory: Is Centre spending more money on pensions than salaries?

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Among the documents released every year with the budget is something called Budget Profile. It is to be found in the Budget at a Glance section on the budget website. The Budget Profile is a summary statement of the sources where the government gets its money from and heads where it spends it.

Auhona Mukherjee and Abhishek Jha contributed to the data work for this story.

Representational image (REUTERS)

Is Centre spending more money on pensions than salaries?

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  Budget Profile documents suggest that salary spending has been lower than pension spending since 2023-24

  The 2025-26 Union Budget is expected to spend ₹1.66 lakh crore on salaries and ₹2.77 lakh crore on pensions. While ‘Salary’ and ‘Pension’ allocations have remained largely unchanged in the last three years, ‘Salary’ spending used to be significantly higher than ‘Pension’ in the period before 2023-24. In fact, the fall in ‘Salary’ spending between 2022-23 and 2023-24; the trend is largely the same after 2023-24, is a massive ₹1 lakh crore. This would suggest a massive reduction in salary spending and therefore head count of the government.
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  However, the Centre’s overall establishment expenditure has not fallen

  ‘Salary’ and ‘Pension’ spending is a part of the center’s Establishment Expenditure head in the Budget Profile document. Apart from these two heads, Establishment Expenditure also includes a head called ‘Others’. Reading the overall trend in Establishment Expenditure from 2017-18, the earliest period for which we have comparable data, shows that this has been rising continuously even after 2022-23, despite a sharp fall in ‘Salary’ expenditure. This is largely on account of an increase in the allocation for ‘Others’ category.
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  Digging deeper into the expenditure budget solves the puzzle

  Thankfully, Budget at a Glance is not the only place where salary spending break-up is given in the budget. Statement 22 – Estimated Strength of Establishment and Provisions Therefor – in the Expenditure Profile part of Union Budget gives a detailed, ministry-wise break-up of provisions for payments to government employees. These allocations are given under three heads: Pay, Allowances (other than Travel Expenses) and Travel Expenses. A comparison of these numbers from 2017-18 does not show a fall in total allocations. Even the number of people employed by the central government, described as “Strength as on 1st March” has been largely consistent between 3.2 and 3.7 million between 2017-18 and 2025-26. However, what this document does show is a stalling of the allocation for ‘Pay’ head and a significant rise in allocations for ‘Allowances (other than Travel Expenses)’ head from 2023-24 onwards. The reason – it took a careful look at various budget documents for the HT data team to figure out this methodological change – is given as a footnote in the Expenditure Profile of the 2023-24 Budget. “The decrease in provision under ‘Pay’ in BE 2023-24 as compared to RE 2022-23 is because ‘Pay’ as per revised list of Object Heads does not include allowances like Dearness Allowance (DA), House Rent Allowance (HRA), etc. which have been subsumed under ‘Allowances (other than Travel Expenses)’ from BE 2023-24”, the document says.
• This also means another wild change in salary spending is in the works

  The government has announced the formation of the Eighth Pay Commission for central government employees which will probably come into effect from 2027. Among the many things a pay commission does to government salaries is a subsuming of the Dearness Allowance (DA) into the Basic Pay for the commencement of the period, following which the DA increases every year in keeping with inflation. This also means that the longer a government takes to institute a pay commission, the greater the share of DA and other allowances will become vis-a-vis basic pay or what the budget counts as salary spending. As and when the Eight Pay Commission’s recommendations take effect, the ‘Pay’ head in the Expenditure Profile document of the budget, and ‘Salary’ head of Budget Profile – these two numbers are the same for 2025-26 Budget Estimate numbers – will increase wildly in that year because a large amount of DA and other payments will move back to the ‘Pay’ or ‘Salary’ category. It will probably send journalists and economists down the rabbit hole of government spending documents and their shifting classifications once again.