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Tuesday, December 27, 2016

7th Pay Commission: Demonetisation a blessing in disguise for central government employees

New Delhi, Dec 27: Central government employees, who have been waiting for higher allowances as the recommendations of the 7th Pay Commission, should not be worried as the government will be in a position to implement the 7th CPC recommendations, thanks to demonetisation. The demonetisation of old Rs 500 and Rs 1000 currency notes that caused cash shortage has made central government employees little anxious, but report by BofA Merrill Lynch Global Research and statement of Reserve Bank of India Governor Urjit Patel will bring smile on their faces.

According to the BofA Merrill Lynch report, Pradhan Mantri Garib Kalyan Yojana, 2016 will bring huge amount in government’s pocket to offset the financial implication of implementing the 7th Pay Commission recommendations. The Pradhan Mantri Garib Kalyan Yojana was announced after demonetisation for declaring unaccounted income.

“The Government announced that the second income disclosure scheme (IDS II) will run till March 31. We continue to estimate that it will net the fisc about Rs1000bn/0.7% of GDP of additional taxes. This should allow Finance Minister Jaitley to hold the FY18 fiscal deficit at 3.5% of GDP – same as FY17’s – and at the same time fund the 7th Pay Commission and recapitalize PSU banks, without cutting back on public capex,” BofA Merrill Lynch said in a note. Earlier, the RBI had made clear that the implementation of the 7th Pay Commission recommendations for central government employees won’t have an inflationary impact.

Earlier we reported that the central government employees will have to wait til March, 2017 to get their higher allowances under the 7th Pay Commission recommendations. Centre is planning to pay higher allowances without arrears. Sources in the Finance Ministry also said the Centre is considering to hike higher allowances for its employees. However there is no report about when the government will start paying higher allowances as recommended by the 7th Central Pay Commission.

The issue of higher allowances has been referred to the ‘Committee on Allowances’. The committee is yet to submit its report. Until acceptance of higher allowances, under 7th Pay Commission, the allowances are now paid according to the 6th Pay Commission recommendations.
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