Finmin reject claims of inflation due to 7th Pay Commission award

Finmin reject claims of inflation due to 7th Pay Commission award

A salary hike is likely proposed by the Empowered Committee of Secretaries, which has been constituted to look into the recommendations of the 7th Pay Commission for cabinet nod, will not fuel inflation, says Finance Ministry top officials.

“The implementation of these recommendations will not affect inflation. The recommended pay scale has been hiked in line with the increasing size of the budget of government of India,” they told our reporter.

The 13-member body of Empowered Committee of Secretaries, headed by the Cabinet Secretary P K Sinha, who is processing the recommendations of the 7th Pay Commission decided to hand over soon its possible proposal to the the Finance Minister Arun Jaitley for cabinet nod. It is likely to propose a substantial pay hike which could be up to 30 per cent or even more, said officials.

the 7th Pay Commission had recommended a minimum monthly basic salary of Rs. 18,000 and maximum Rs. 2,50,000. A 30 percent increase would translate into minimum basic salary of Rs. 23,400 and maximum at Rs. 3,25,000, respectively.

However, The Empowered Committee is likely to purpose Rs 2,70,000 as highest basic pay and Rs 24,000 as the lowest, they also likely to recommend for doubling of existing rates of allowances and advances, the officials added.

The government in its annual budget has provisioned Rs 70,000 crore to meet the demand for implementation of 7th Pay Commission for central government employees which will take effect from January 1, 2016, while the allowances would be paid from the date of implementation.

“Central government employees could get the revised pay and allowances from their August salaries and arrears are to be paid ahead of festive season of Dussehra in one installment,” the officials confirmed.

The Economists fear that the 30 percent salary hike would fuel inflation as the pay commission recommendations will also have a bearing on the salaries of the state government staff.

So quite understandably, the government employees are happy as pay increase will enable them to increase their consumption and meet some of their unmet demand.

At the same time, there is a widespread fear that the pay commission recommendations are likely to increase inflation which will reduce the purchasing power of money.

RBI Governor Raghuram Rajan earlier said the 7th Pay Commission recommendations will not upset fiscal maths as additional expenditures will be offset by either surplus revenues or expenditure cuts.

Finance Minister Arun Jaitley earlier also said hat he was not worried about fiscal deficit on implementation of the pay commission’s recommendations. He said that the Pay commission award increase government expenses by Rs 1.02 lakh crore but that would not be a problem.

“The government has sufficient resources. Implementing the 7th Pay commission award will not affect inflation.” the official told our reporter.

The officials said that apart from hiking pay, the government is also likely to propose some administrative reforms, to be implemented in phases.

TST