No Free Hikes
The fallout of the Seventh Pay Commission’s recommendations, unlike preceding occasions, will not immediately stress govern ment budget. The credit for this should go to the commission which benchmarked pay increase to future economic growth and finance minister Arun Jaitley who provided for most of this increase in his budget. Thus over 10 million employees and pensioners are set to receive an additional Rs 1.02 trillion or 23.5% more by way of pay and pension. Though the relative impact of this increase will be lower than that of the last commission, sectors such as consumer goods and realty should get a boost through additional spending.
Governance is a complex task and it is only fair that government employees get adequate compensation. Pay commission reports, however, are more than recommendations of salaries and pensions.They provide a window to the way India’s massive bureaucracy is organised and attendant challenges. Two aspects which stand out are the high level of average pay in govern ment and the mismatch between skills and job requirement. Government’s average per capita pay in 2012-13 was Rs 3.92 lakh a year, well above the national per capita income. As a group central government employees have no cause for complaint.
The challenge lies in reconciling skills with governance needs. About 89% of employees are in Group C. In other words, most of staff strength is concentrated in relatively unskilled areas. Even income tax had 78% of personnel in Group C. There is a worrisome mismatch between what India today needs and what government can offer. So NDA government should also act on other recommendations of the pay commission that span measures to enhance efficiency and adapt to a changing world. For example, national interests cannot be subservient to parts of the government which obsess about protecting their turf; and government is in dire need of domain specialisation.
Jaitley did hint at some fiscal pressure in the future. Over the last decade, central government salaries have increased in relation to GDP from 1.04% to around 1.3%. What’s worrying today is that central government has little fiscal space to deal with say an oil price rise or a real deterioration in the global economic environment.Therefore, additional spending on account of enhanced salaries must trigger discussion on ways to reduce the fiscal pressure. It is time to revisit plans such as privatisation of government companies as it is not prudent to be running on reserve.
NDA Govt’s woes have increased as its decision of hiking the salaries of central government employees has failed to please the employees. Employee unions are now threatening to go on strike from July 11. Watch the report for more details on this.