MERGE DA WITH BASIC THIS YEAR AND DEFER INCREMENTS: PAY PANEL MEMBER

Member of the Seventh Central Pay Commission Rathin Roy has suggested that to meet its fiscal deficit target the Government should merge the basic pay and dearness allowance (DA) of central government employees in the current year and defer implementing any real increases in pay and pensions. This, the member has said, could be done by compensating those who would have to bear the burden of the deferred effect by giving them a “more generous award distributed over several years”.

“I am saying that the increment need not all be given at one go... It can be staggered and made more generous… So this could be done for pay and for pension,” Dr. Roy told The Hindu in an exclusive interview. “Now I am not competent to say whether this is politically feasible or not,” he, however, added.

Last month, the Union Cabinet set up an empowered committee of secretaries under the Cabinet Secretary for processing the recommendations of the Commission.

The pay and pension revision recommendations of the Commission are scheduled to take effect from January 1, 2016, but Dr. Roy, who is also the National Institute of Public Finance and Policy’s Director, has suggested that the implementation should be pushed to April 1.

What they should get, from April 1, 2016, is what they would get if we merge the basic pay and the DA, which is more or less what they are already getting, he said. “That will mean some increase in allowances but other than house rent allowance the burden of that [on the government budget] will not be very high.” He has also recommended that the Government defer allowances, principally the house rent allowance. “The case for that is strong because we are in the midst of fairly flat growth in consumption expenditure and rents are not going up much.”

Ahead of the presentation of Union Budget 2016-17, the Government is considering options for keeping the fiscal deficit for the next year within the Fiscal Responsibility and Budget Management target. The Government’s fiscal deficit in 2008-09, the year the Sixth Central Pay Commission award was implemented, doubled to 6 per cent, though not all of the increase was on account of the pay and pension hikes. Currently, Central government pay and allowances account for 1 per cent of the country’s GDP.

The Seventh Pay Commission, which submitted its report in November 2015, estimated that the total financial impact due to the hike in pay and allowances of central government employees recommended by it would be Rs 1,02,100 crore. Of this, Rs 73,650 crore will be borne by the General Budget and Rs. 28,450 crore by the Railway Budget. The Commission was set up by the UPA government in February 2014 to recommend revisions of remuneration for 48 lakh central government employees and 55 lakh pensioners.

PARLIAMENTARY PANEL SEEKS REPORT FROM INDIA POST ON PAYMENTS BANK

New Delhi: The Parliamentary Standing Committee on IT has sought a report from India Post with regard to the progress made by the department for starting payments bank, setting up of ATMs and real estate management.

The committee, headed by BJP MP Anurag Thakur, is scheduled to discuss all issues in this regard during its meeting tomorrow, an official source said.

The pilot for payments bank is set to start from January 2017 while full-fledged operations may start by March 2017.

As many as 40 international financial conglomerates, including World Bank and Barclays, have shown interest to partner with Postal Department for the payments bank.

The Reserve Bank of India has granted payments bank permit to the postal department, which has 1.55 lakh branches across country and already provides financial services.

The Public Investment Board (PIB) is soon likely to approve the Rs 800-crore proposal from Postal Department for setting up payments bank.

As part of the modernisation project, the postal department also plans to open 1000 ATMs by March this year

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RBI ON WAIT AND WATCH MODE ON 7TH PAY COMMISSION

The RBI is in ‘wait n watch’ mode as to what government does in the Union Budget and what big states are doing with their own state pay commissions

RBI Governor Raghuram Rajan on Tuesday announced its monetary policy review and left the key policy rate unchanged. However, it indicated at a accommodative stance on inflation and further rate cut. Rajan said with “inflation moving closer to the target” there would be more room for rate cut to support growth.

However, the RBI also mentioned about Seventh Central Pay Commission risks to the fiscal deficit, which was not factored in the central bank’s inflation trajectory. Therefore, the RBI is in ‘wait n watch’ mode as to what government does in the Union Budget and what big states are doing with their own state pay commissions (Punjab, UP, WB, Kerala and Tamil Nadu – all election bound – and HP have already announced setting up of their respective Pay Commissions, and likely to be followed by the remaining).

“Inflation has evolved closely along the trajectory set by the monetary policy stance. With unfavourable base effects on the ebb and benign prices of fruits and vegetables and crude oil, the January 2016 target of 6 per cent should be met,” Rajan said but added a caveat on the impact of the seventh pay commission implementation on the price index.

“Going forward, under the assumption of a normal monsoon and the current level of international crude oil prices and exchange rates, inflation is expected to be inertial and be around 5 per cent by the end of fiscal 2017, ” RBI said.

“However, the implementation of the Seventh Central Pay Commission award, which has not been factored into these projections, will impart upward momentum to this trajectory for a period of one to two years. The Reserve Bank will adjust the forecast path as and when more clarity emerges on the timing of implementation,” Rajan said.

“As per our estimate, the Pay Commission implementation by the Centre and state governments would lead to a $50 bn fiscal stimulus over the next two years. The downside risks emanate from softer global commodity prices and a normal monsoon. However, the RBI would like to wait and watch as these factors play out over the next few months before being in a position to recalibrate the glide path of inflation and respond accordingly. We believe that the upside risks are marginally higher than the downside risks as of now, and hence we do not see any policy rate cuts in FY17,” said Jay Shankar, chief India economist & director, Religare Capital Markets.

Source:- Financial Express