7th Pay Commission and Service Tax effect on inflation - RBI
THE Reserve bank of India in its Monetary Policy Statement, 2016-17, states:
Excluding petrol and diesel from this category, inflation stayed elevated and persistent at or above 5 per cent, indicating a possible resistance level for further downward movements in the headline. The stubborn underlying inflation momentum is unlikely to be helped by the 7th Pay Commission award and the effects of the one-rank-one-pension (OROP) award, or by the cost-push effect of the increase in the service tax rate.
The persistence of inflation in certain services warrants watching, while the implementation of the 7th Central Pay Commission awards will impart an upside to the baseline through direct and indirect effects.
The uneven recovery in growth in 2015-16 is likely to strengthen gradually into 2016-17, assuming a normal monsoon, the likely boost to consumption demand from the implementation of the 7th Pay Commission recommendations and OROP, and continuing monetary policy accommodation.
Until Tomorrow with more DDT
Have a nice day.
Mail your comments to vijaywrite@tiol.in