Press Esc to close

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

More from this section
Most trending stories
Photo Gallery
BJP supporters during a BJP campaign rally attended by Prime Minister Narendra Modi...

BJP supporters during a BJP campaign rally attended by Prime Minister Narendra Modi...

Canadian Prime Minister Justin Trudeau with his son Hardien walks towards...

Canadian Prime Minister Justin Trudeau with his son Hardien walks towards...

Rolls-Royce Asia Pacific Regional Director Paul Harris at the launch of eight generation...

Rolls-Royce Asia Pacific Regional Director Paul Harris at the launch of eight generation...

Pigeons fly over the historical Jama Masjid in New Delhi...

Pigeons fly over the historical Jama Masjid in New Delhi...

BJP MP Hema Malini addresses a press conference regarding Braj Holi Rasotsav...

BJP MP Hema Malini addresses a press conference regarding Braj Holi Rasotsav...

Inmates of Netaji Subhash Chandra Bose central jail perform a tribal dance...

Inmates of Netaji Subhash Chandra Bose central jail perform a tribal dance...

A view of Sunder Nursery at Hazrat Nizamuddin in...

A view of Sunder Nursery at Hazrat Nizamuddin in...

Mahila Congress activists make 'pakodas' to protest against alleged unemployement...

Mahila Congress activists make 'pakodas' to protest against alleged unemployement...

Canadian Prime Minister Justin Trudeau and First Lady Sophie Grgoire greet visitors...

Canadian Prime Minister Justin Trudeau and First Lady Sophie Grgoire greet visitors...

Gold medalist Mariama Jamanka of Germany gets lifted by silver medal winner Lauren Gibbs...

Gold medalist Mariama Jamanka of Germany gets lifted by silver medal winner Lauren Gibbs...

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.