New Delhi: Eighteen months after the Seventh Pay Commission’s award hiked the allowances of central government employees, over 4.9 million of them are likely to start receiving the revised payment from July.
The revised allowance also includes their house rent allowance (HRAs). The hiked payment is likely to firm up private consumption growth which had tanked a little in the final quarter of last fiscal. Corroborating with Reserve Bank of India’s second bi-monthly Monetary Policy Committee statement that the revised payout could pose an upside risk to inflation, analysts have predicted an “incipient pick-up in spending”, reported the Financial Express. The RBI projected retail inflation to be 2-3.5 per cent in the first half and 3.5-4.5 per cent in the second half of the year.
The 18 month delay in disbursal of the revised allowances has saved the exchequer Rs 2,200 crore a month ( roughly Rs 40,000 crore cumulatively) since January 1, 2016. However, according to sources, the government is likely to compensate the delay with a higher HRA than recommended by the panel. The more generous HRA could be 27 per cent of the basic pay in cities with population above five million, as opposed to the commission’s proposal of 24 per cent.
Earlier the HRA was 30 per cent of the old basic pay in such cities. However, post the SPC hiking the basic pay by 23.55 per cent (weighted average), these revised allowances will account for about 60 per cent of the total allowances bill. The Cabinet is likely to take up proposals related to allowances later this month, the sources confirmed.
The Ashok Lavasa-led panel on allowances was constituted to look into the CPC recommendations. The panel had submitted its report on April 27 and suggested modifications in some allowances applicable universally to all employees and also to those in specific categories, like railways and defence. The report was later presented before the committee of secretaries led by the Cabinet secretary for approval.