Cabinet approves higher allowances as per 7th Pay Commission's recommendation

The cabinet approved higher allowances for central government employees on Wednesday. The approval for higher allowances was based on the recommendations of the Seventh Pay Commission.

The increase in allowances that will become effective on July 1 will cost the government Rs 30,748 crore and will benefit at least 48 lakh central government employees.

The HRA revision after approval from cabinet stands as follows :- House rent allowance of employees at 27 percent for Tier I cities, 18 percent for Tier II cities and 9 percent for Tier III cities.

The higher allowance will benefit 34 lakh government employees and 14 lakh pensioners. The higher allowance comes at an opportune time when GST is being implemented starting July 1 as the increase in allowance is expected to potentially boost the demand in the overall economy. It is widely speculated that GST implementation may cause short-term disruptions and higher disposable income in the hands of consumers might thereby help mitigate some of the resultant slump in the economy.