The Hindu Business Line : Not the time for a pay hike

Out of evil cometh good, they say. All the hullabaloo over the perceptibly climbing inflation has at least done one good: It has inhibited the various organisations of government employees and their champions from creating a country-wide commotion demanding the instant implementation of the recommendations of the Sixth Pay Commission.

Until a few such Commissions ago, their recommendations were taken as applicable only to the Central Government employees. But since the last two Commissions, the implementation by the Central Government of the recommendations for its employees automatically becomes the signal for the State Governments too to give the same salaries to various grades of their employees, although there is no comparison between the duties and responsibilities of both sets of employees.

An idea of the impact of the Fifth Pay Commission can be had from the fact that the Centre’s and States’ wage bills saw astronomical increases of 99 and 74 per cent respectively from Rs 21,885 crore to Rs 43,568 crore, in the case of the Centre, and from Rs 51,548 crore to Rs 89,813 crore, in the case of the States.

These increases had a devastating effect on public finance, with no commensurate increase in productivity or improvement in service delivery as far as the aam aadmi was concerned. Nearly 90 per cent of the States’ revenues are drained by salaries, with only a minuscule portion left for fulfilling the people’s needs.

As regards the Sixth Pay Commission, assuming a real GDP growth rate of 8.5 per cent and an annual inflation rate of 4.5 per cent in 2008-09, the official spokespersons have put the impact at around 0.4 per cent (or Rs 21,215 crore) of the GDP estimated at Rs 53,03,770 crore.

Such projections invariably go awry when one does a reality check. Since both the GDP growth and inflation rate do not look like conforming to the spokespersons’ optimistic, some would say, smug, projections, there is every reason to fear that massive handouts on the magnitudes envisaged across the board both at the Centre and the States would cause a situation tantamount to financial emergency.

Fervent call

The prospect is not far-fetched given that in the aftermath of sweeping giveaways following the Fifth Pay Commission, nearly half the number of States almost went bankrupt without the money even to pay salaries.

Indeed, many States such as Assam, Bihar, Manipur, Meghalaya, Mizoram, Orissa and West Bengal demanded that the Centre should not go for a pay revision without prior consultation with the States They also wanted a national wage policy which would obviate the need for periodically setting up Pay Commissions. The Twelfth Finance Commission too came down heavily on the practice of appointing Pay Commissions every 10 years.

Look how the British Chancellor of Exchequer, Mr Alistair Darling, of a Labour Government traditionally of the under-class, has handled the situation in Britain when inflation there is a mere 3.3 per cent, set to peak to only 4 per cent. He has firmly stated that he would not take the ‘disastrous’ course of letting pay rises fuel inflation and has called upon workers to show restraint.

India is in a worse plight. This is the time for employees to keep the well-being of the country at heart, and contribute to the nation’s wealth by increasing their productivity and demonstrating their concern for the crores of people below the poverty line. Just as the Chancellor did in Britain, the Prime Minister and the Finance Minister here should make a fervent call for the employees and their associations to forgo any pay rise until the economy stabilises.

B. S. RAGHAVAN

More Stories on : Economy | Human Resources | Offhand

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
‘Eco-rating’ as a social leveller

Inflation antidotes

Not the time for a pay hike

Has a cheaper US dollar led to costlier oil and food?

Oil price and elections

When a scarf becomes a subversive weapon

Entrepreneurs of different kinds

Higher MSP