New Delhi, (PTI) In a bonanza, one crore government employees and pensioners will get a 2.5 times hike in basic pay and pensions under the 7th Pay Commission recommendations that will cost the exchequer annually Rs 1.02 lakh crore, which the government says will have a multiplier effect on economy.

The new scales of pay provide for entry-level basic pay going up from Rs 7,000 per month to Rs 18,000, while at the highest level i.e. Secretary, it would go up from Rs 90,000 to Rs 2.5 lakh. For Class 1 officers, the starting salary will be Rs 56,100.

The Union Cabinet on Wednesday accepted the recommendation of Justice A K Mathur headed panel due to which there would be a recurring burden of Rs 72,800 crore every year, while the current fiscal's burden would be Rs 84,933 crore in view of the fact that they would be implemented from January 1, 2016.

While the Cabinet in its meeting, chaired by Prime Minister Narendra Modi, accepted the recommendations in respect of the hike in basic pay and pension, a decision on its suggestions relating to allowances has been referred to a Committee headed by Finance Secretary.

Announcing the government's decision, Finance Minister Arun Jaitley said government salaries have to be respectable in comparison to private sector, for which the Commission had engaged IIM-Ahmedabad for making a comparison.

"The recommendations of the Pay Commission with respect to pay and pension, have been accepted by and large by the government. And those recommendations will be implemented with effect from January 1, 2016, and the arrears would also be paid in this year," he said.

The recommendations cover 47 lakh central government employees and 53 lakh pensioners. This include 14 lakh serving employees and 18 lakh pensioners in defence forces.

Allaying fears of government's fiscal maths going wrong, Jaitley said the budget has provided for the anticipated expenditure and it did not come as a surprise.

Concerns have also been expressed over the extra money in the economy pushing up inflation. The minister admitted that there will be some inflationary pressure.

Maintaining that government cannot grudge a hike in salary for government staff after 10 years, he said, "when people get more money, it comes back in the system in the form of taxation. Savings will increase ... spending will go up".