Dec 042015

Raghuram Rajans says roadmap of this fiscal year will not get disturbed due to 7th pay commission

Mumbai, December 1, 2015, Raghuram Rajan, Governor of RBI during his interview told that the implementation of 7th pay commission will not have any severe impact on this fiscal year’s expenditure, “the RBI will try to offset the cost either by generating more revenue or by curtailing the expenditure”, he said.

In the bi-monthly monetary policy review for this fiscal year, the RBI told that the proposal of 7th pay commission and their effects on salaries and rents will be discussed soon. Though, there will be an additional burden, but this is totally compensated either by generating additional revenues or by cutting the costs to maintain the annual expenditure without surging or slumping down told the RBI governor, Rajan to the reporters after making monetary policy statement.

The 7th pay commission will hike the salaries of the government employees and the petitioners, but this cause an additional burden on the government treasure by over 1.02 lakh crore for the coming couple of years. However, the pay scales after a hike, will come into effect from January 01, 2016. A Prediction about the implementation of the 7th pay commission has been expected by the governor and he has done his best to maintain the expenditure on beforehand.

However, there would not be any predominant effect on the aggregate demand until and unless the fiscal year’s expenditure is maintained. Undeniably, investments would be pretty high than spending’s, and the RBI would persuade more public investment, which actually are very helpful in the current scenario told, the RBI governor.

During the monetary policy meeting, the RBI made a statement that with the implementation of this 7th pay commission, the aggregate demand will be balanced by tightening the government budget of this fiscal year. A few months ago, the government has revealed the 2015-2016 budget in which the shortage of this fiscal year budget was falling down to 3.9 percent GDP, subsequently, it is slid down to 3.5 percent in 2016-2017, and 3 percent in 2017-2018. It has to be observed that the fiscal deficit for the prior fiscal year 2014-2015 is 4 percent GDP.

According to the statement made by the deputy governor of RBI, Urjit Patel, the hike in the house rental allowance of the central government employees after the release of new pay scale would have high impact on the retail inflation data. However, this impact will be there only once and it may continue depending on the externalities. This impact will be seen from the next fiscal year April for 6 to 8 months. You will notice a slight change in the index, but this is overlooked by the RBI, told the Deputy Governor.

As per the views of the agencies and brokerages, increase of government employees and petitioner salary to 23.6 percent would hit the economy of the government.

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