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As a measure to cushion the inflationary impact of the Sixth Pay Commission, the Prime Minister’s Economic Advisory Council (EAC) has opined that while implements its recommendations, the government should pay the employees in a phased manner and park a part of the estimated Rs.18,000 crore arrears in their provident fund accounts.
The EAC headed by the former Reserve Bank Governor, C.Rangarajan, has suggested staggered payment as a one-time cash payment of arrears could lead to a marginal rise in inflation on account of a sudden surge in demand for various goods, especially manufactured items and consumer products. “The government had paid the arrears in a phased manner while implementing the reports of previous Pay Commissions, so it can consider it again,” Dr.Rangarajan had said earlier.
Speaking to journalists recently, Dr. Rangarajan had projected the rate of inflation to slide to about 5.5-6 per cent after a span of four months in the wake of a good monsoon and the slew of Fiscal and Administrative measures taken by the government.
However, in the event of a partial hike in the prices of petro-products following the runaway surge in global crude oil prices, the current apprehension is that the inflation rate, which has already crossed eight percent, may touch the 10 percent mark. As per the recommendations of the Pay Commission, the increase in salaries of about 40 lakh Central government employees would cost the exchequer an additional Rs.12,000 crore annually, while the payment of arrears with effect from January 1, 2006, would imposer a one time burden of Rs.18,060 crore.
The EAC headed by the former Reserve Bank Governor, C.Rangarajan, has suggested staggered payment as a one-time cash payment of arrears could lead to a marginal rise in inflation on account of a sudden surge in demand for various goods, especially manufactured items and consumer products. “The government had paid the arrears in a phased manner while implementing the reports of previous Pay Commissions, so it can consider it again,” Dr.Rangarajan had said earlier.
Speaking to journalists recently, Dr. Rangarajan had projected the rate of inflation to slide to about 5.5-6 per cent after a span of four months in the wake of a good monsoon and the slew of Fiscal and Administrative measures taken by the government.
However, in the event of a partial hike in the prices of petro-products following the runaway surge in global crude oil prices, the current apprehension is that the inflation rate, which has already crossed eight percent, may touch the 10 percent mark. As per the recommendations of the Pay Commission, the increase in salaries of about 40 lakh Central government employees would cost the exchequer an additional Rs.12,000 crore annually, while the payment of arrears with effect from January 1, 2006, would imposer a one time burden of Rs.18,060 crore.
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