Pay hike unlikely to destabilise prices: Survey

February 26, 2016 15:38

The hike in wages under the Seventh Pay Commission is unlikely to destabilise prices and will have little impact on inflation, the Economic Survey said today.

"For most of the current fiscal year, inflation has remained quiescent, hovering within the RBI's target range of 4-6 per cent. But looming on the horizon is the increase in wages and benefits recommended for government workers by the Seventh Pay Commission (7th PC).

"If the government accepts this recommendation, would it destabilise prices and inflation expectations? Most likely, it will not," the survey, tabled in Parliament, said.

Citing example of implementation of the Sixth Pay Commission, the pre-Budget document said the Commission award barely registered on inflation despite the lumpiness of the award, owing to the grant of arrears.

"If the 6th Pay Commission award barely registered, the 7th Pay Commission is unlikely to either, given the relative magnitudes, even if fully implemented," it said.

The Survey noted expected wage bill (including railways) will go up by around 52 per cent under the Seventh Pay Commission vis-a-vis 70 per cent under the 6th pay commission.

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