New Delhi, May 28 : Prime Minister's Economic Advisory Council (EAC) has recommended payment to government employees in a phased manner and favoured deposition of part of the estimated arrear of 18,000 crore in their Provident Fund while implementing the Sixth Pay panel report to minimise its impact on inflation.
"Since the payment of arrears in cash could result in marginal rise in inflation rate due to spurt in demand for various products, EAC has said that government should consider depositing part of the arrears due to employees in provident fund and pay the remaining amount in a phased manner," official sources said.
The council headed by noted economist and former Reserve Bank governor C Rangarajan, opined that the payment of arrears in one go may further increase the prices, especially of manufactured goods and consumer products.
"The government had paid the arrears in a phased manner while implementing the report of previous Pay Commissions, so it can consider it again," Rangarajan had earlier said.
The council had earlier stated that the inflation could come down to 5 to 5.5 per cent after four months following good monsoon and measures taken by the government.
But it has already crossed 8 per cent mark, and analysts fear that it may soon reach 10 per cent mark if the hike in international crude oil prices is partly passed on to the consumers.