Press Esc to close
Sunday 30 April 2017
News updated at 9:57 PM IST

New HRA, GST to up inflation in FY18

DH News Service, New Delhi, Apr 21 2017, 22:51 IST
Urjit Patel

Urjit Patel

The implementation of house rent allowances (HRA) recommended as part of the 7th pay commission and the Goods and Services Tax (GST) rollout may accelerate inflation in 2017-18 by 1% to 1.5%, top Reserve Bank of India officials have said.

“The implementation of the HRA allowances recommended as part of the 7th CPC and the GST are risks, which could alter the inflation outturn in 2017-18,” the RBI Governor Urjit Patel said, according to the minutes of the Monetary Policy Committee meeting.

The outlook of the meeting said that a prominent risk could emanate from managing the implementation of the allowances recommended by the 7th CPC.

“In case the increase in house rent allowance as recommended by the 7th CPC is awarded, it will push up the baseline trajectory by an estimated 100-150 basis points over a period of 12 to18 months, with this initial statistical impact on the CPI, followed by second-order effects,” it said, adding the another upside risk arises from the one-off effects of the GST.

Another member of the six-member MPC, Michael Debabrata Patra, said the most important cost push will emanate from the 7th pay commission’s house rent allowance.

“The first order statistical impact on the CPI may take headline inflation to or beyond the upper tolerance band. Second order effects will work through expectations and ‘Deusenberry effects’ as it spreads to states, PSUs, universities, and onwards. These effects will occur on top of the first order effect and 6% plus inflation could be here to stay for some time,” Patra said.

He said the second factor impacting inflation could be one-off effect of the GST. He, however, said that it would be small relative to the 7th pay commission and short lived, but could still last a year and push up inflation.

Go to Top

Photo Gallery
Laborers carrying bricks at a brick factory on the eve of International labour day on the outskirts.

Laborers carrying bricks at a brick factory on the eve of International labour day on the outskirts.

A laborer carries a sack of grain at a market on the eve of International labour day, in Bikaner...

A laborer carries a sack of grain at a market on the eve of International labour day, in Bikaner...

Roger Federer, of Switzerland, left, and Microsoft founder Bill Gates, right, celebrate...

Roger Federer, of Switzerland, left, and Microsoft founder Bill Gates, right, celebrate...

A decorated home at Bhilar village, India's first 'village of books' where Around 15,000 books...

A decorated home at Bhilar village, India's first 'village of books' where Around 15,000 books...

Bollywood actor Ranveer Singh during a promotional event, in Mumbai on Saturday...

Bollywood actor Ranveer Singh during a promotional event, in Mumbai on Saturday...

An elephant calf gets a shower on a hot summer day at Anna National Zoological Park, in Chennai...

An elephant calf gets a shower on a hot summer day at Anna National Zoological Park, in Chennai...

Indian team celebrates their win over New Zealand in their second match at the 26th Sultan Azlan...

Indian team celebrates their win over New Zealand in their second match at the 26th Sultan Azlan...

An albino peacock displays its feathers on a hot summer day at Anna National Zoological Park...

An albino peacock displays its feathers on a hot summer day at Anna National Zoological Park...

A helicopter carrying the body of famed Swiss climber Ueli Steck arrives at Teaching Hospital...

A helicopter carrying the body of famed Swiss climber Ueli Steck arrives at Teaching Hospital...

A security person keeps tight vigil as the vehicles loaded with official documents moving toward...

A security person keeps tight vigil as the vehicles loaded with official documents moving toward...

Like us on Facebook

Copyright 2017, The Printers (Mysore) Private Ltd., 75, M.G Road, Post Box 5331, Bengaluru - 560001
Tel: +91 (80) 25880000 Fax No. +91 (80) 25880523
Powered by Yodasoft Technologies Pvt. Ltd.