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Premature welfare state PDF Print E-mail
Monday, 04 January 2016 01:08
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Pay Panel, OROP, subsidies have to be affordable

 

It is not clear if finance minister Arun Jaitley’s comments on the Seventh Pay Commission (SPC) and one-rank-one-pension (OROP) last week will be reflected in the next budget, but what he said cannot be over-emphasised. Speaking at a function held by the Bhartiya Mazdoor Sangh, the labour union affiliated to the Sangh parivar, Jaitley said the burden of the SPC and OROP could be sustained only when there was an increase in economic activity since this is what would result in greater government revenue generation. At the same function, the finance minister said India’s GDP needed to grow by another 1-1.5 percentage points to sustain wage hikes and benefits given to workers and to the poor. This is something every government knows. You cannot, at the central level, have a tax-to-GDP ratio of a mere 10.3% and then go and spend as much as India does on expensive welfare schemes that, if you please, aim to give vastly subsidised foodgrain to two-thirds of the population or cooking gas subsidies to even the top 20% of the population.

Indeed, while it appears SPC has been less generous than its predecessors, it is worth keeping in mind—as a study commissioned by SPC shows—government nurses with up to 5 years of experience get paid an average of Rs 62,500 per month as compared to R20,500 in the private sector; it is Rs 27,100 for government drivers with the same experience versus R15,250 in the private sector. Take any category you like—engineers, doctors, teachers—and those in the government get paid several times more; in the case of doctors, the private sector starts paying more when it comes to those with MD/MS and higher degrees. To this salary, add a lifetime pension equal to half the last salary drawn with an indexation for inflation and a correction every decade. Indeed, in an act of extraordinary generosity, the impact of which the SPC has not calculated, pension payments are to be equalised for all babus —the OROP that the defence forces have been fighting for decades has been handed over to all government employees on a platter, and there has hardly been any protest from anyone on its financial implications.

It would be a pity if, like the Congress and Janata governments, the BJP too decided to go along with this premature welfare state. Chances are, it will since, despite all the talk of the BJP opposing major Congress initiatives like the GST, it went along on all the Bills that dramatically raised subsidies (National Food Security Act) or the ones that were populist (Land Acquisition Rehabilitation and Resettlement) and slowed economic development. Prime minister Narendra Modi, though, would do well to keep in mind that had it not been for the dramatically higher government salaries—where quality of work doesn’t really seem to be a criterion—the Hardik Patel agitation for reservations for government jobs would never have acquired the kind of momentum it did.

 

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