7th Pay Commission: Salary hike to central government employees affects economic growth

7th Pay Commission: Salary hike to central government employees affects economic growth

New Delhi, Dec 8: Prime Minister Narendra Modi led government on July 29 announced to implement the 7th Pay Commission’s recommendations on salary hike of central government employees. The announcement of implementation of the 7th Pay Commission recommendations made impact of country’s economic growth, said Reserve Bank of India (RBI). The central bank mentioned the 7th Pay Commission in the Monetary Policy Committee (MPC) meeting statement announced on Wednesday that lowered the country’s growth forecast for 2016-17.

The RBI’s Monetary Policy Committee (MPC), during its second bi-monthly monetary policy review – the fifth of the fiscal – lowered the country’s growth forecast for 2016-17 to 7.1 per cent from 7.6 per cent. In its statement, the MPC also revealed the impact of the 7th Pay Commission on the GDP.
“Incorporating the expected loss of growth momentum in Q3 and waning effects in Q4 alongside the boost to consumption demand from higher agricultural output and the implementation of the 7th Central Pay Commission award, gross value added (GVA) growth for 2016-17 is revised down from 7.6 per cent to 7.1 per cent, with evenly balanced risks,” the MPC said in its monetary policy statement.

As estimated by the 7th Pay Commission, the additional financial impact on account of implementation of all its recommendations in 2016-17 will be Rs. 1,02,100 crore. There will be an additional implication of Rs. 12,133 crore on account of payments of arrears of pay and pension for two months of 2015-16. These figures are significant.

According to the 7th Pay Commission notification, central government employees will get 14.27 per cent hike in basic pay at junior levels, which is the lowest in 70 years. It had proposed 138.71 percent hike in HRA and 49.79 percent for other allowances. The government is yet to take final call on raising allowances. If the government decides to implement the recommendations of the 7th Pay Commission on allowances, there is a risk of inflation going up.

“The fuller effects of the house rent allowances under the 7th CPC award are yet to be assessed, pending implementation, and have not been reckoned in this baseline inflation path,” the MPC statement of Wednesday said

Source: www.india.com