7th Pay Commission: How HRA hikes for government staff led to this major threat; should they worry?

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New Delhi | Published: February 7, 2018 5:12:56 PM

7th Pay Commission has brought great news for government staff and the same was greeted with jubilation. The same good news has been added to for other government servants from time to time in various states too.

7th Pay Commission, 7th Pay Commission news, 7th Pay Commission latest news, 7th Pay Commission updates, 7th cpc, 7th Pay Commission rbi, rbi monetray policy, 7th cpc latest news, 7th cpc news, 7th cpc updates, 7th cpc latest updates7th Pay Commission: expressed major concern over the hike in house rent allowances (HRA). (Source: PTI)

7th Pay Commission has brought great news for government staff and the same was greeted with jubilation. The same good news has been added to for other government servants from time to time in various states too. Today, the Reserve Bank of India, in the sixth and last bi-monthly monetary policy meeting on Wednesday afternoon, has had something to say about the sea of money that is now sloshing around in the markets as a result, especially one aspect. RBI expressed major concern over the 7th Pay Commission related hike in house rent allowances (HRA) by various state governments. The RBI said that recent hike in HRA rates by various state governments under the 7th Pay Commission (CPC) report is likely to push housing inflation further in 2018. “CPI inflation excluding food and fuel increased further in November and December, largely on account of increase in housing inflation following the implementation of higher house rent allowances (HRA) for government employees under the 7th central pay commission (CPC) award,” RBI said in its report. This has had an effect on RBI policy too. However, government servants do not have to worry about it as no backsteps are likely to be taken by any government.

RBI kept the repo rate unchanged today in its policy review meet and raised inflation forecast for the the fourth quarter of the current fiscal to 5.1% and for the first six months of the next fiscal year in the range of 5.1% and 5.6% on the concerns of rising crude oil price and house rent allowance impact.

The Reserve Bank of India further added that inflation also picked up in health and personal care and effects. “Reflecting incomplete pass-through to domestic petroleum product prices, inflation in transport and communication remained muted in December. Inflation also slowed down in clothing and footwear, household goods and services, recreation, and education,” it said.

This isn’t the first time when RBI has expressed concern over HRA rate hike. In December, the Reserve Bank of India has said that HRA hike will impact inflation. “The staggering impact of HRA increases by various state governments may push up housing inflation further in 2018, with attendant second-order effects,” the RBI had predicted back then.

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