The pay bonanza of about Rs 1 lakh crore to nearly a crore Central government employees and pensioners granted by the Modi government on accepting the Seventh Pay Commission’s recommendations is a milestone for the decisiveness with which it is being implemented. This is the quickest action taken on any pay commission’s proposals even if it leaves many sections of government employees and members of the armed forces somewhat dissatisfied. Considering the sheer number of people getting a raise (from January 1, 2016), any such decision must be thought to be politically timed by the ruling dispensation, though it is also true that such largesse has not been known to lend itself easily to swinging the popular vote.
The impact of the raise on the economy — more spending money boosting consumption, or savings that may also bolster real estate — may be more significant than its implementation. The release of such a quantum of money may lead to inflationary pressures that may affect the government’s long-standing tussle with the RBI India over the easing of rates to facilitate business. The government cannot be in denial about this as much of the argument over the RBI governor’s actions in recent times has been about the country’s high lending rates. However, in comparison to previous pay raises, the percentage is much less and the effect of the quantum as a factor in the PAP-GDP ratio may also be minimal as it is calculated to be only 0.65 per cent as compared to 0.77 per cent of GDP on PAP (pay, allowances and pensions) in the Sixth Pay Commission raise.
The reluctance to link pay and performance, as recommended by the Mathur Committee, means nothing may change the nature of the sarkari bureaucracy behemoth. The average government servant has earned sufficient notoriety for arrogating all the powers possible while remaining least amenable to the public seeking things to be done by the bureaucracy. In theory, better paid civil servants should be less corrupt than needy ones, but greed can never be factored in.
The average civil servant is as aspirational as the rising middle class and may take heart from the new pay and perquisites, but any comparison with the private sector at the higher levels would show up government service for what it is in terms of earnings. The matter would become serious if military and paramilitary personnel are left fuming as their morale is of paramount importance. While it would be impossible for any government to satisfy all segments of one crore personnel, the question is how equitable is the raise across arms of the government and the armed forces.
