7th Pay Commission HRA allowance: even as most central government employees are focussed on when the Centre will clear their demands for a hike in fitment factor and the related salary hikes, the latest news in this rapidly changing space is revolving around the Reserve Bank of India (RBI) and its concerns about 7th CPC linked HRA allowances' impact on CPI inflation. 7th CPC HRA is one of the reasons that is forcing RBI to keep a tight policy and it is refusing to cut interest rates because of runaway inflation ris, but this policy is hitting economic growth.
7th Pay Commission and CPI: Inflation figure is used by the Reserve Bank of India (RBI) to conduct its monetary policy. The target headline inflation for RBI is 4 per cent with a tolerance band of plus or minus 2 per cent. If this is threatened, RBI takes action to ensure inflation does not rise any further as it will hurt everyone concerned. 7th pay commission HRA is one of the factors that carries this threat. (IANS)
7th pay commission HRA effect: RBI said, "The current experience is not one off. Such large increases have in past too pushed up inflation significantly. Since the housing index in CPI-IW is adjusted once in every six months, unlike headline CPI, the impact was not gradual but came as steep increases – first in January 2018 and then July when the housing index is reset. Due to higher weight of housing, the impact of HRA revision was much higher in CPI-IW." (Reuters)
Even as this argument is raging, central government employees are not too focussed on 7th Pay Commission based HRA, instead they are getting increasingly restive about their demands for pay hike not being met as this issue has been dragging for years. The ball is now squarely in Centre's court and it needs to decide what should be done. (PTI)