The Centre's total expenditure as arrears to its employees, which will be paid along with their salary for August, may amount to Rs 34,600 crore, according to India Ratings and Research agency. The arrears will be paid as per the recommendations of the 7th Pay Commission. "The combined outgo for the Centre on account of arrears for January to July and payments for August will total Rs 34,600 crore," it said in a statement.

According to the ratings agency, paying the amount will not have a "significant systemic liquidity disruption", but it is likely to cut down on spending to make the payments. "The government is likely to go slow on spending as it gears up to meet lumpy payments...Any shortfall arising out of the arrears' payment is likely to be marginal and will not significantly affect the country's fiscal position," the statement said, according to PTI.

On July 29, the central government had announced that employees will be paid their arrears as per the 7th Pay Commission's recommendations in cash in one installment along with their new hiked salary for August. The new pay structure, which includes a hike of 23.6%, will be effective from January 2016. The Finance Ministry had issued a notification on the implementation of the Commission recommendations earlier in July.

The Centre’s total expenditure on salaries and pensions is expected to jump by Rs 1.02 lakh crore, including Rs 28,450 crore in the Railway Budget. The implementation of the recommendations is also expected to have a considerable impact on inflation.