Jun 30, 2016

7th Pay Commission is welcome, but is the government's largesse only limited to employees?

The implementation of the Seventh Pay commission will turn out to be the real game changer for the Indian economy. Forget about rate cuts, policy paralysis and opening the floodgates to the 2nd phase of FDI wave, it is the much awaited salary hike for government employees that in reality is expected to act as a stimulus for the slogging economy.

No wonder, the Union Cabinet has hinted of a substantial pay hike, more than the recommendations of the 7th Pay Commission. Against the recommended minimum basic salary of Rs 18,000 and a maximum of Rs 2,50,000 as per the Pay Commission, the Empowered Committee of Secretaries is expected to ask for a 24 per cent jump, which translates into a minimum basic pay of Rs 23,500 and a maximum of Rs 3,25,000.

The bonanza for the government employees, coming at a time when the economy is showing no signs of tiding over the continuing crisis, hides the real intentions – it is an indirect rescue plan to bail out the industry.

It is like hitting two birds with one stone.

A report in LiveMint (Oct 29, 2015) says: “A historical analysis of auto sales shows that arrears and pay hikes of government employees have led to immediate spike in the purchase of two-wheelers and passenger vehicles in the country”. Although the wait has been long but the automobile sector is not the only exception. Take the case of the realty sector. Says a report in Indian Express (Dec 5, 2015) based on an analysis by Credit Suisse: “While the Centre’s easing of FDI norms last month was a positive development on the supply front, a new report says that the pay panel’s recommendations will provide a much-needed boost to the demand side.” 

In another report in Forbes India (Jan 18, 2016) all hopes for the revival of FMCG prospects hinged on the expected pay hikes: “Very recently, the Seventh Pay Commission has recommended an average 23.55 per cent hike in salaries and pensions, which could see an additional $15 billion in the hands of consumers, starting 2016. This could give a very good fillip to consumer spending across sectors such as automobiles, consumer durables and non-durables.”

That day has now arrived. As the Financial Express (June 29, 2016) rightly states: “Stocks of FMCG and auto companies will be in focus as the cabinet is likely to approve on Wednesday higher increases in basic pay for over 1-crore government employees and pensioners.” You will see the Chamber of Commerce welcoming it with a glee, and the markets giving a big Thums Up.

It is not only the 45-lakh central government employees and about 50-lakh pensioners who will be the only recipient of the government’s largesse, but as a Credit Suisse report tells us the recommendations will be followed by State governments and Central PSU besides colleges and universities. This means a total of 3.4-crore employees and pensioners will in reality see surplus cash flowing into their pockets. The annual additional burden on account of pay hike alone, for both the Central and the State governments put together, will therefore grow to Rs 4.5 to 4.8 lakh crore every year.

Although the PMO is believed to have directed the Empowered Committee of Secretaries to ensure that the pay hike is ‘sufficient to provide for the life and health of central government employees’, I fail to wonder why the concern is only limited to employees. I have nothing against the government employees being bestowed with huge salary hikes plus allowances but I thought the mandate of the PMO runs beyond the Central and State employees. But it appears as if the country’s economy only revolves around India Inc and the government employees. The rest don’t matter.

Take a look. At the time of economic meltdown in 2008-09, Rs 3-lakh crore bailout package was given to the industry. In addition, since 20104-05, tax concessions to the tune of Rs 48-lakh crore have been doled out for the India Inc. Similarly, for the employees, the 7th pay Commission is going to translate into Rs 4.5 to 4.8 lakh crore bonanza despite the economy not showing signs of any recovery. Exports are down, industrial output refuses to pick up, and job creation remains subdued.

But when it comes to 60-crore farmers, reeling under a back-to-back drought for two years, the government has never been so forthcoming. If it were not for a Supreme Court drubbing, the government was not even willing to acknowledge that a severe drought prevailed in 13 States. I had expected an economic bailout package of at least Rs 3-lakh crore for the drought affected areas, in line with the stimulus package for the industry, but then agriculture continues to remain outside the economic radar screen of the country.

Government employees all across the country work for not more than 150-160 days in a year. Farmers have to work 24x7 bit still have been denied a legitimate income by successive governments. They are being deliberately kept impoverished, penalized for keeping food inflation in control. 

For several years now, the rise in the minimum support price of wheat and paddy has remained at a paltry Rs 50 per quintal. Economic Survey 2016 tells us that the average income of farming household in 17 States has been computed at Rs 20,000 a year. Add to it the farm incomes in the rest of the country; the average a farmer earns from agriculture comes to Rs 3,000 a month. But I never heard the PMO express the same concerns about the plight of farmers as it does for government employees, directing the Finance Ministry to ascertain whether it is sufficient for the life and survival of the farming community. #

Source: 7th Pay Commission is welcome, but is the government's largesse only limited to employees? ABPLive.in June 29, 2016. http://www.abplive.in/blog/7th-pay-commission-is-welcome-but-is-the-governments-largesse-only-limited-to-employees

No comments: