Central government employees are seeing a ray of hope with regard to hike in allowances after RBI Governor Urjit Patel's comment during the post-monetary policy review meeting on December 7, 2016. While the Narendra Modi government has implemented the salary hike as recommended by the 7th Central Pay Commission (CPC), the decision on allowances is pending.
After the second meeting of the Monetary Policy Committee (MPC) last week, Patel said that the payment of arrears and higher salaries did not adversely affect inflation, as was generally expected.
"The disbursement of salaries and arrears under the 7th Pay Commission award has not been disruptive to inflation outcomes," he said. A report by India Ratings had estimated the amount as Rs 34,600 crore.
The subsequent response on the allowances part revealed that the delay in implementation would spread the impact on the government's finances over two financial years.
"The extension of two months given to the Ministry of Finance to receive the notification on higher allowances under the Commission's award could push its fuller effect into the next financial year rather than this financial year," Patel said.
This is seen as an indication that the government could make some announcement on raising allowances in February 2017, coinciding with the budget.
The Confederation of Central Government Employees and Workers felt the RBI governor's comments as a signal for implementation of proposals on allowances.
"The 7th CPC effect on the Government expenditure is minimal and doesn't have any impact on the inflation and prices and there is scope for further improvement in fitment formula provided the Government is ready to consider the staff side demands," the confederation said.
"The allowances will be revised only after February 2017 and come into effect in next financial year. The only struggle is only the solution for the Central Government employees to get our main demands resolved such as revision of fitment formula and allowances," it added.
The recommendations of the 7th CPC cover 47 lakh Central government employees and 53 lakh pensioners, of which 14 lakh employees and 18 lakh pensioners are from the defence forces.
The CPC examined 196 allowances and gave its recommendations on abolishing or raising some of them while recommending others to be subsumed with other perks.
It had proposed 138.71 percent hike in HRA and 49.79 percent for other allowances while submitting its voluminous report last November.
The additional amount on account of hike in HRA and other allowances is about Rs 29,300 crore (Rs 17,200 crore + Rs 12,100 crore) during the current fiscal, as estimated by the 7th CPC.