7th Pay Commission: As central government employees wait for HRA and higher allowances, RBI worried about inflation

The 7th Pay Commission had recommended 8-24 per cent HRA for both Central as well as state government employees.

New Delhi, April 7: Around 47 lakh central government employees and 53 pensioners have been eagerly waiting for Union Government’s nod on Higher Allowances and House Rent Allowance (HRA) as recommended by the 7th Pay Commission but on the other side the Reserve Bank of India is worried about the inflation which might affect the market after the implementations. To implement 7th Pay Commission’s recommendations there is a burden of Rs 1,02,100 crore on government’s exchequer and once it is implemented there are chances that the inflation figure may rise up to 1 to 1.5 per cent. Recently a government data showed that India’s consumer price inflation (CPI) had inched up to 3.65% in February from 3.17% in January and after the implementation orf 7CPC there are chances that it may go up by 4.65 to 5.15 per cent.

While speaking to India.com, National Joint Council of Action convenor Shiv Gopal Mishra, recalled the allocation of 1,02,100 crore from government’s exchequer in the Budget 2016-17. Out of which, the Union Government has slated to spent Rs 84,933 crore in the past fiscal to implement the 7th Pay Commission.

Some reports suggest that after RBI senses that once the allowances and HRA are given to the employees, the graph of inflation may go up on the consumer price index. The 7th Pay Commission had recommended 8-24 per cent HRA for both Central as well as state government employees. 

On Thursday the RBI presented its first monetary policy review fort 2017-18 and said that the housing sector would feel the heat, immediately after the 7CPC is implemented.

As per the report by RBI, once the central government takes a final call on allowances for its employees, the state governments will follow the suit and a report suggest that the combined effect will push the inflations figures by 1 to 1.5 per cent.

The RBI report further suggests that the inflationary impact of the HRA allowances to employees will continue to distort the markets for 18-24 months. There are chances that first three to four quarters will see the highest levels of inflation.

Last year in June, the Union Cabinet had approved the suggestions of the 7th Pay Commission’s recommendations but the Centre has not yet decided to give the HRA to its employees.

Some reports also claim that the government is most likely to take a decision on the higher allowances and the HRA for its employees retrospectively from April 1, 2017.

A high-level committee under Finance Secretary Ashok Lavasa has been asked to the 7th Pay Commission’s recommendations in respect to allowances. The committee is yet to submit its report to the Finance Ministry.