7th pay commission: RBI worried about price rise as employees wait for HRA

IndiaToday.in  | New Delhi, April 7, 2017 |

Highlights

• 1 - The RBI is concerned about inflationary impact of 7th pay panel recommendations.
• 2 - The allowances are likely to push up prices, the RBI said.
• 3 - The Centre is yet to give HRA to its employees.

While nearly 1 crore Central government employees and pensioners wait for Centre's nod for allowances as recommended by the seventh pay commission, the Reserve Bank of India is worried about the consequent inflationary trend.

The RBI senses that once the allowances were given to the employees, the graph would go up on the consumer price index. The seventh pay commission has recommended 8-24 per cent HRA to the Central and state government employees.

Presenting the first monetary policy review for 2017-18 yesterday, the  RBI said that the housing sector would feel the impact almost immediately.

HOW HRA WILL IMPACT PRICES

According to the RBI, once the central government decides to give allowances to its employees, the state governments will follow the suit. The combined effect will push the inflation figures by 1-1.5 per cent than the estimates of the RBI.

The RBI also believes that inflationary impact of the HRA allowances to employees will continue to distort the markets for 18-24 months. The first three to four quarters will see the highest levels of inflation.

The Union cabinet approved implementation of the seventh pay commission's recommendation last year. But, the Centre has not yet decided to give the HRA to its employees.

WHERE HRA BUCK HAS STOPPED

The Lavasa committee, set up by the Modi government for the implementation, has missed the deadline of February 22 to submit its report.

Earlier, it was being speculated that the committee on allowances under Union Finance secretary Ashok Lavasa would submit the report by March. But, the committee has not yet given its recommendations.

However, further reports suggest that the government is likely to take a decision soon to give HRA to its employees retrospectively from April 1, 2017.