India needs a skill-based wage system of govt employees, not a 1:12 ratio between lowest and highest paid ones
Why donít governments learn from experience/mistakes; why are they prisoners of precedent; why do vote bank considerations invariably override national/economic interests? The governmentís announcement of setting up the Seventh Pay Commission throws up these very thoughts. The government has blindly followed the past practice of successive governments since 1947 when the First Pay Commission was set up. The Indian economy has undergone a sea change since thenóstructural transformation of the economy, technological revolution, global integration, rising governance, skill and knowledge deficits and, above all, transformation from a public-sector-led growth model to a private-sector-led growth model. Should the wage policies for government employees not capture these changes and address the challenges that we are facing?
For an objective analysis of the governmentís decision we need to understand the political, fiscal, governance and economic dimensions.
Much has been commented upon on the timing of the announcement and its political ramifications. Political leaders have lost no time in claiming credit for the announcement to curry favour with their perceived vote bank. Pay commissions, in the past, have been set up after every 10 years and the 10-year period after the Sixth Pay Commission would be over by 2015. The hurry shown at this juncture needs to be contrasted with the thinking in the NDA government in 2002-03 to delay the announcement because of the grave fiscal situation facing the government. One can only wish that the alacrity shown by the government to make this announcement were matched by similar urgency in dealing with other problems facing the economy. I remember that in 1998 when the recommendations of the Fifth Pay Commission were being considered, the then finance minister was opposed to the large pay-outs involved without ensuring staff rationalisation and, as a protest, he went to the extent of missing the Cabinet meeting in which the decision to accept the recommendations was taken. Given the impending elections it would perhaps have been prudent that the government that seeks to reap the political benefits of the decision should also be the government that has to deal with its fiscal and economic consequences.
It is unfortunate that political expediency considerations have prevailed over the governmentís commitment towards fiscal consolidation. The governmentís five-year fiscal consolidation roadmap aims to bring down the fiscal deficit in 2016-17 to 3% of GDP. How can