While making recommendations for Armed forces the CPC had held consultations with the Ministry of Defence, the Defence Services, the Department of Ex-Servicemen Welfare, the Controller General of Defence Accounts. It has taken note of the demand from The Defence Services, in their Joint Services Memorandum, that the emoluments in the Defence Services should stand a fair comparison with the emoluments in Civil Services, in order to ensure legitimate share of the available talent pool. The CPC also commissioned a study with the Institute for Defence Studies and Analyses (IDSA) as an independent expert agency dedicated to research and policy in defence and security on “Nature, Quantum and Components of Defence Expenditure and Defence Pensions. The study covered pattern of defence expenditure in India (1995-96 to 2013-14) and other important countries.
Comparing the defence expenditure as a percentage of GDP it was noted that Defence Expenditure as a percentage of GDP has declined from 2.19 percent in 1995- 96 to 1.80 percent in 2012-13. Also as a percentage of Central Government expenditure it has declined from 14.50 percent in 1995-96 to 12.89 percent in 2012-13. However Defence capital expenditure as a percentage of total defence expenditure has shown an increase from around 25 percent in later half of the 1990s to over 40 percent in the recent years.
The report indicated that considering expenditure on procurement and infrastructure as percentage of defence expenditure India ranks at the first place among the ten countries covered by the study. Unlike some European countries Russia, India (from 27.55 percent in 2007 to 41.12 percent in 2012), and Pakistan witnessed the sharpest increase in share of expenditure on personnel as a percentage of defence expenditure between 2007 and 2012. The hike has been explained by the fact that Indian Armed forces are labour intensive and the increase in pay scales by VIth CPC is the major influencing factor.The Commission has stated that it has tried to strike a balance between capital and revenue expenses for the defence forces.
Besides ensuring pay structure comparable to Civil Services the CPC has also attempted to compensate for the hardships involved in Military Service by recommending continuation of Military Service Pay upto rank of Brigadier and equivalent and other allowances to compensate for risk and hardship borne by defence service personnel.It has also recommended a defined benefit pension scheme, which entails no contribution as distinct from a defined contribution scheme which entails a monthly contribution by each official as applies to all other Central Government personnel.
The Commission has asserted that the Military Service Pay, which is a compensation for the various aspects of role performed by Armed Forces and has historically provided the edge to the Defence Forces over the civilian scales, will be admissible to the Defence Forces personnel only. The Commission has reiterated that the intangible aspects linked to the special conditions of military service set the Armed Forces apart from civilian employees.