7th Pay Commission Report:
Equitable Pay Hike & Consumption Stimulus
The tabling of the report of the 7th Pay
Commission appointed by the previous UPA government in February 2014, on the 19th of
November just past, has spread good cheer amongst the central government
employees.
It recommends a 23.55% hike in salaries/allowances/pensions
in monetary impact terms over the existing slabs. The Commission, headed by Justice
AK Mathur, has just submitted its report to the finance ministry, for
implementation effective January 1, 2016.
The government, on its part, and in its inimitable
fashion, has immediately decided to set up an implementation secretariat headed
by the expenditure secretary, overseen by the cabinet secretary, who will also,
with the help of another committee, look at further suggestions from
stakeholders.
The report specifically calls for an increase of 16%
in basic salary, 63% in allowances and 24% in pensions. A pay commission is set
up by the government to revise salaries allowances and pensions of its central
government employees, once every 10 years.
Annual increments, between pay
commissions, have been retained by the 7th Pay Commission unchanged,
to a quaint 3% per annum!
Obviously, the government works to a different HRD
rhythm from the private sector, but then its employees can’t be fired, nor held
particularly accountable for lapses, delays and general non-performance.
The only solution that has been effective in other countries
is to hive off all non- essential government activity to the private sector.
But this too, is a veritable can of worms to implement, due to patronage
systems and embedded vested interests.
But as long as one retains these lakhs of sarkari
employees, it is necessary to compensate them, as near as possible, to an
adequate level.
Looking on the bright side, once this set of
enhancements kicks in, there will be a balloon of lump-sum arrears payments as well.
These could go towards the purchase of appliances and consumer durables, of
course. Some of it may well be invested as seed money towards big ticket
purchases such as a primary or secondary home. This, in turn could stimulate
the moribund housing industry, according to some hopeful real estate experts.
Coming on the heels of the long pending OROP
promulgation for soldiers, the 7th Pay Commission recommendations
will probably help the GDP grow by a fraction of one percentage point as well.
The total disbursement against the 7th
Pay Commission is pegged at just over Rs. 1 lakh crores, and this is not
expected to significantly affect the fiscal deficit either.
This government, in an effort to stimulate the
economy, which was struggling out of a low of under 5% GDP towards 6% when it
took over in May 2014, has been pouring
substantial monies into infrastructure, in a classic Keynesian action.
Helped by substantially lower oil prices, reduced
inflation, and some green shoots in terms of the economic revival, this fiscal
is hoping to clock about 7.3% in GDP, and there is every expectation that this
could rise to 8% in 2016.
The government has also been making yeoman efforts
to commission many big ticket projects, stuck for want of government approvals,
or finance. The prime minister personally has been canvassing fresh FDI all
over the world, and this has begun to show results far in excess of the
situation a year ago.
And now, here is an expected boost from the
consumption side, once this extra money starts being spent by lakhs of central
government employees (4.8 million serving plus 5.5 million pensioners). And
also the OROP money from the armed forces veterans, against their own separately
enhanced pension plans, come to fruition after hanging fire for 42 years.
Is the new minimum wage of Rs. 18,000/- applicable
to the junior-most central government employee, a peon, fair for him or her to
live with a modicum of dignity at today’s prices? The answer cannot be other
than yes.
Indian government employees, like most all over the
world, are not paid very well. Some media reports have been distorting the
quantum of the revised pay somewhat, by comparing it to the minimum base of
just Rs. 80/- , all of those 56 years ago.
Even after the revision, a Cabinet Secretary, the highest
ranking central government bureaucrat, will receive 2.5 lakhs per month plus
other perquisites, up from a very modest 90,000/- before the hike.
Interestingly, the 7th Pay Commission
under Justice Mathur has side-stepped the demand for lateral entry of experts
from the private sector to the top positions being held overwhelmingly by the
IAS cadre.
This might have addressed the efficiency issue that
is at the centre of resentment in certain quarters when it comes to pay hikes
for obstructionist, sometimes corrupt, and universally slow moving babus.
It has however recommended the introduction of
performance-linked pay for all categories of central government based on key
indicators, and a performance appraisal system.
This has been suggested before as well, but to
little avail. The bureaucracy, particularly the powerful IAS, is apparently not
interested in being made to work to any plan other than their own. The
bureaucracy therefore, is mostly process driven. And it will not be easy for
any power to change its ways to being focused on productivity and speed of
implementation.
As usual, this quest for productivity and efficiency
will have to be driven, to the maximum extent, by the political over-bosses,
should they think it politic to do so, of course. Meanwhile, the babus have
every reason to be pleased with Justice Mathur’s work.
For: Swarajyamag
(909 words)
November 20th, 2015
Gautam Mukherjee
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