After Effects of 7th Pay Commission Recommendations on Inflation | Will 2018 Soothe Rising Inflation?

Alongside the rising oil prices and GST implementation, 7th Pay commission is also a factor affecting the inflation in the country. Where the analysis suggested that the inflation range went up in the second half of the fiscal year (October – March) to 4.2% – 4.6%, there the housing rent allowance was raised by the Union cabinet. If we go by the verdicts and assumptions made by RBI, the inflation is expected to rise between 4.3% – 4.7% in the 3rd and 4th quarter of the year along with the HRA effect up to 35 basis points. If the HRA effects increase as per the expectation, the housing inflation will also rise in 2018. As per the sources, the price inflation of the international crude oils will sustain in 2018 for the maintenance of the production cuts through next year.

7th Pay Commission & Inflation 

Where 7th pay commission has been pushing the government to increase the salaries of the central government employees there, it has been adversely affecting the inflation in the country. According to the reports suggested by many reliable sources, the inflation has climbed up beyond the limit expected by the RBI that is 4%. The increasing price of the crude oil in the global market has become of the major reasons of retail inflation.

7th Pay Commission Recommendation to Increase Salaries Puts Additional Burden on Government

In this scenario of rising inflation, the recommendation of 7th CPC to increase the minimum pay scale of the central government employees and pensions of pensioners will enforce additional burden on the government of Rs. 1.02 Lakh Crores that is around 0.7 percent of the total GDP on the exchequer in the year 2016-17. There have been misconceptions floating around that DA that is Dearness Allowance has the effect on 7th Pay commission. As per the official words of the Minister of State for Finance, the announcement of the DA will have no impact on the Seventh Pay commission recommendations. However, the implementation of the Seventh Pay commission recommendation will impose the additional burden of Rs. 39,100 Crore on the government in the current Fiscal year.

With these expected effects on the implementation of the 7th Pay commission recommendation the decision of increasing the minimum pay might go either way. Let’s see what 2018 will bring for the central government employees and Pensioners waiting for the hike.

Source – OneIndia

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