7th Pay Commission report windfall for government employees is having an impact inflation and it is expected to go up in December. Aside from 7th Pay Commission, there are other reasons too, like rising oil prices and GST pass-through effect too. The immediate reason about role of 7th Pay Commission is that the housing rent allowance has been adjusted upward by the government. In the previous monetary policy review held in October, RBI had projected inflation to be in range of 4.2%-4.6% for October-March (second half) period of this fiscal. “On the whole, inflation is estimated in the range 4.3%- 4.7% in third quarter and fourth quarter of this year, including the HRA effect of up to 35 basis points (0.35%), with risks evenly balanced,” RBI had said. The RBI had further said that HRA increases by various state governments may push up housing inflation further in 2018. “The staggered impact of HRA increases by various state governments may push up housing inflation further in 2018. The recent rise in international crude oil prices may sustain, especially on account of the OPEC’s decision to maintain production cuts through next year,” RBI said.
In November, inflation climbed up even breaching the Reserve Bank of India (RBI) of 4% target, experts say that the central bank is going to take a long pause in 2018. Firming crude oil prices in the global market is likely to cast its shadow on retail inflation, which has begun to move northwards after hitting a low of 1.46% in June, and may prompt the RBI to hold interest rates in 2018.
Implementation of new pay scales recommended by the Seventh Pay Commission is estimated to put an additional burden of Rs 1.02 lakh cr, or 0.7 per cent of GDP, on the exchequer in 2016-17, government said today.
The implementation of recommendations of the 7th Pay Commission report, however, would be after approval of the Cabinet on completion of screening of suggestions by a high-level panel of secretaries, the Rajya Sabha was informed today.
The implementation of the new 7th Pay Commission pay scales is estimated to put an additional burden of Rs 1.02 lakh crore (or 0.7 per cent of GDP at current market prices) on the exchequer in 2016-17. Subject to acceptance by the government, they will take effect from January 1, 2016.
In a written reply, Minister of State for Finance Jayant Sinha also said that the announcement of Dearness Allowance has no impact on the recommendations of the Pay Commission.
Giving details of financial implications of the recommendations, Sinha said the burden on pay head would increase by Rs 39,100 crore to about Rs 2.83 lakh crore in the current fiscal. Without the 7th Pay Commission recommendations, the outgo would have been Rs 2.44 lakh crore.