7th Pay Commission: To bump up inflation temporarily, says HSBC report

The Seventh Pay Commission and implementation of GST has put inflation in an uncertain zone, and prices are expected to rise temporarily, says an HSBC report. Both GST and HRA increase have kicked in from July 1 and though the pay commission allowances are likely to bump up inflation, the Reserve Bank is expected to cut repo rate by 25 bps in its August meeting. The HSBC report said as the centre implements HRA increase, headline inflation is likely to rise by about 65 bps for a year and if the states follow suit and implement the increase as one block, inflation would rise by another 65 bps.