Kerala and Uttar Pradesh have made the highest allocation towards salaries and wages in their expenditure budgets. This is revealed in businessline analysis of the FY24 budget numbers of some of the major States.

Kerala has allocated ₹68,282 crore towards salaries, wages and pension payments for FY24. This accounts for 39 per cent of the State’s total expenditure of ₹1.76-lakh crore for the current fiscal. In simple terms, nearly ₹40 out of every ₹100 spent by Kerala goes towards the wage and pension expenses. 

Salaries, pensions and interest payments fall under the committed expenditures of the State. A larger proportion of budget allocated for committed expenditures means the State will have lesser flexibility to spend on other productive expenditure especially capital expenditure. 

Salary/pension details of Karnataka, Telangana and Andhra Pradesh were unavailable for one or both of these years and hence could not be used for comparison. 

Kerala was followed by the country’s populous State Uttar Pradesh, which has projected 38 per cent of its total expenditure towards salaries and pension payments. Uttar Pradesh also tops the list of States in absolute salary and pension payment projections at ₹1.66-lakh crore and ₹82,422 crore, respectively, for FY24. 

“The wage burden (salaries, wages and pensions) is largely determined by the administrative capacity in the state,” said Paras Jasrai, Senior Analyst, India Ratings and Research.

“As a result, Uttar Pradesh stands highest amongst all the States in wage burden due to the highest administrative capacity in terms of numbers of employees/pensioners,” he added. 

UP has the highest number of government employees and pensioners estimated to be at 27 lakh followed by Maharashtra (17 lakh), and Tamil Nadu (16 lakh). Kerala is estimated to have only 5 lakh government employees and pensioners. 

Administrative capacity

Jasrai, however, said another way is to look at the wage burden in relation to the administrative capacity. In this way, he says, UP’s wage burden stands at ₹9.1 lakhs per employee/pensioner, which is lower than Kerala’s (₹13.3 lakh), Madhya Pradesh (₹12.1 lakh) and Maharashtra (₹11.7 lakh), as per FY24 budget estimates. 

Uttar Pradesh also recorded the highest growth in salary and pension payments as per FY24 budget estimates against revised estimates of FY23. The State’s pension payment is projected to grow by 38 per cent while salaries/wages are projected to grow by 28 per cent during this period. 

However, Jasrai said the actual expenditure of States tends to fall quite short of the budget estimates in UP (in comparison to the other States). “For instance, in FY22, the State had budgeted ₹2.13-lakh crore as the wage burden and the actuals turned out to be ₹1.57-lakh crore,” he added. 

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