Business India

7th Pay Commission: Revised HRA may impact inflation in india, RBI says

Written by Abhishek Lohia

After the 7th Pay Commission, the central government’s demand to raise the minimum wage from 18,000 rupees to 26000 rupees is under consideration. Media reports claim that Prime Minister Narendra Modi can announce the increase of minimum pay scale on August 15, 2018. If this happens then it will benefit 10 million central employees and pensioners. However, a warning from the RBI could turn the hopes back on. The RBI had reviewed monetary policy earlier this month. Again, it is feared again that the amendment in HRA (House Rent Alliance) is in danger of increasing inflation. Experts believe that if the government runs the concern of the RBI then the expectations of increasing the salary can be impaired. The central bank had earlier said that the implementation of the 7th Pay Commission has affected the inflation rate. The revised HRA structure came into effect in July 2017.

The central government has rejected the possibility of an increase in salaries in Parliament. In the Lok Sabha, Minister of State for Finance P Radhakrishnan had also said that Prime Minister Narendra Modi was not ready for an increase in the minimum pay scale other than the 7th Pay Commission. According to a report, in view of the 2019 Lok Sabha elections, the government can make such a declaration.

RBI has said that the rate of inflation in the first half of 2018-19 will be between 4.8 and 4.9 percent and in the second half, it is estimated to be 4.7 percent. It includes HRA Impact of Central Staff. It is also estimated to go above and above this inflation rate. If the HRA effect is removed, then the rate of inflation is estimated to be 0.1 percent.

During the review of the monetary policy, the RBI increased the repo rate by 25 basis points to 6.5%. The reverse repo rate was increased to 6.25%. Now the central staff is getting the basic pay fitment factor. The fitment factor was used in the recommendation of the 7th Pay Commission, i.e. multiplying the fitment factor from the basic pay during the 6th Pay Commission. On this basis, the 7th Pay Commission is made to the Basic Pay.

About the author

Abhishek Lohia

Abhishek Lohia was a Sports and Political Writer working for Newsfolo and is no longer associated with the organization.

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