7th Pay Commission HRA allowance impact: In RBI's own words, horrific facts revealed!

Allocation of Arab Enterprise 7th pay commission: Indian Reserve Bank (RBI) always remember its concerns when it came to salary increases based on 7TH CPC and its impact on CPI inflation affect all of India. The fear of human rights law was the seventh task of the payments committee so that RBI maintained the status quo for some time until the central bank was forced to raise the interest rate between June and August 2018, which is not considered good for the public or the industrialists because it makes loans more expensive. However, many analysts believe that the impact of human resource allocation will not be significant, and will help RBI to overcome the problems of inflation.

At present, the policy replacement rate in India remains at 6.50% and the CPI inflation increased by 3.77% in September 2018, slightly up from 3.69% the previous month. In addition, the last figure was higher than 3.28% in the same month last year. In a recent study, RBI showed evidence of how HRA allowance impact.

CPI inflation is the main measure used by the Reserve Bank of India (RBI) to conduct monetary policy. In terms of the provisions of the RBI Act, the target for general inflation is 4 percent with a tolerance range of percent. Once threatened, the Seventh Repayment Committee is one of the factors bearing the threat, and RBI is taking measures to ensure that inflation does not rise further because it will hurt all concerned.

How does the Seventh Committee affect inflation? Starting from the influence of the Seventh Party of the HRA, inflation in the housing group in the CPI rose 4.7% in June 2017 to 8.2% in December, around this level in 2018 until July, before falling in August and September when the impact of HRA started In decline..

In addition, for those who monitor the impact of human rights law of the Seventh Wages Committee, together with an increase in inflation and housing, inflation-led housing shares in general inflation and gradually increased 0.5 percentage points in June 2017 at 35 basis points to 0.85 percentage points During the period from January to July 2018.

"The current experience is not unique such large increases in the past also greatly increase the recent impact of the HRA awards of the seventh wage committee on inflation are only available in the CPI of industrial workers (CPI-IW) produced by the" Office work since the IPC in the CSO did not exist at that time. To assess this effect, CPI-IW is being reconstructed by replacing the housing index with an estimated housing index that uses the housing impulse before CPC for the previous three years. "

"Since the CPI-IW house price index is adjusted once every six months, unlike the overall CPI, the effect was not gradual but increased," he said, first in January 2018 and then in July when he returns the housing index. The higher the weight of a house, the greater the impact of the HRA audit in CPI-IW. "

After the seventh CPC HRA, the proportion of households in CPI-IW inflation rose in January 2018 and won a significant proportion between July and August 2018. By adjusting the effects of human rights law, the impression July and August inflation was CPI-IW 5.6 percent. Was significantly below 1.7 percent.

In the past, using this approach, inflation appears to increase CPI-IW 200 and 400 basis points after the fifth and sixth CPC respectively.

Therefore, RBI believes that the risk of HRA Committee 7th pay commission must be addressed for the following reasons:

First, the CPI is now the main gauge of inflation used in monetary policy. Such ripples in the IPC series create analytical and interactive challenges, which can be avoided.

Second, the government provides partially subsidized housing for its employees with less litigation than market rents. While for most ICF items, the price paid by the consumer is the price of the commodity; in the case of government housing, a change in the level of support (derived from annual increases and promotions or changes in staff wages) as well as the market price.

Thirdly, when payments and allowances are reviewed by the CPC, it is observed that the use of human rights law is not seen as an alternative to government housing rental leads to: an increase in housing inflation that leaks through general inflation. blip statistics and not a real change in the monthly price; widening the gap between rural and urban inflation, housing also becomes an important driver of the CPI and CPI-IP, while the rural inflation component has not remained (Annex 2, Figure 2). And the interest of the MPC to assess their impact carefully and monitor such events.

Fourth, in the years following the revisions of the CPC, the above forces are working in the opposite direction: increase the impact of HRA allowance impact is low and commensurate with the increase in basic salary (annual increase of about 3% in 7 CPC), maintain moderate inflation housing and suppress overall inflation: The statistical impact does not reflect the continuous change in rental rates provided by the market; a greater challenge is being created for policymakers to measure pent-up inflation and measure basic inflation.

Finally, the Reserve Bank of India said. "Therefore, the human rights law as a measure of rent price creates distortions in CPI inflation by increasing inflation for years near the CPC revisions and keeping suppressed at other times although on average more than a decade ago Sounds good, it may still be wise to address such prejudices, with reasonable solutions. "

So, with respect to central government employees, now that all know this about the 7th pay commission of the HRC, next time the RBI procedure, the central bank's statement must be understood and decoded so that the way inflation is affected.

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