Over 4.9 million central government employees will likely start receiving revised allowances, including for house rents, from July, 18 months after their pays were hiked as per the Seventh Pay Commission’s award.
Over 4.9 million central government employees will likely start receiving revised allowances, including for house rents (HRA), from July, 18 months after their pays were hiked as per the Seventh Pay Commission’s (SPC) award. While the payout will help consumption — private consumption growth had decelerated a bit in the final quarter of last fiscal and analysts see an incipient pick-up in spending — as the Reserve Bank of India observed in its second bimonthly monetary policy statement for FY18 on Wednesday, it could pose an upside risk to inflation. The RBI has projected retail inflation to be 2-3.5% in the first half and 3.5-4.5% in the second half of the year. The delay in disbursal of the revised allowances has saved the exchequer rs 2,200 crore a month or Rs 40,000 crore cumulatively since January 1, 2016, but the government might partly compensate employees for this with a more generous HRA than recommended by the panel, say sources.
HRA in cities with population above 5 million could be 27% of the basic pay, against the commission’s proposal of 24%, the sources said. The existing HRA in such cities is 30% of the old basic pay — since the SPC hiked the basic pay by an overall 23.55% (weighted average), these allowances will see a big increase in absolute terms. HRA accounts for about 60% of the total allowances bill. The Cabinet would take up the proposals related to allowances later this month, the sources confirmed.
The Ashok Lavasa-led committee on allowances, which was constituted by the government to examine the CPC recommendations, had submitted its report on April 27. The panel has suggested modifications in some allowances applicable universally to all employees and also for those in specific categories, including railways and defence. The report was later placed before the empowered committee of secretaries headed by the Cabinet secretary to firm up the proposals for approval by the Cabinet.