Hiking Indian bureaucrats' salaries: smart or silly?

Posted by: Manjeet Krpalani on March 25, 2008

Yesterday, a report released by New Delhi’s quaintly-named Sixth Pay Commission, recommended upping the salaries of federal government employees by a whopping 30% to 50%. That’s $7.5 billion added to a an estimated salary bill of $25 billion by 2009.
Agreed, India’s bureaucrats need to be paid better - many are deserving, for they toil selflessly for the country. A large number are not deserving, they have lifetime employment, no performance accountability, don’t show up for work, are lazy, and worst of all, shockingly corrupt.
So yes, a higher salary will certainly persuade the government servant not to seek some ‘mad money’ from the common citizen seeking a passport, for instance, or from a company with a grand plan to set up a much-needed power plant. And it will attract a higher quality of job applicant at the younger levels - with a salary that is not glaringly different from the private sector and a chance to change the country, many young people will find a government job attractive.
The commission has also recommended that the salary hikes should be based on performance - much like Wall Street.
The flaw in this plan, though is enormous. First, this huge increase comes hard on the heels of a $15 billion charitable giveaway in the form of forgiven loans to farmers. That came after Sonia Gandhi decided to expand a leaky and questionable rural employment guarantee scheme from some states to the entire country, increasing the scope for greater corruption.
Finally, according to a March 24 analysis by Morgan Stanley, this central government wage hike will surely prompt other state governments and government enterprises to hike salaries too.
That will lead to a massive load on the exchequer. The total impact of all those salary hikes will be $375 billion over the next three years, writes Chetan Ayha in his report. And the combined deficit of the state and central governments will rise from the admirably-controlled 7% currently to 8.5% by 2009.
It will surely damage the central bank’s carefully controlled anti-inflation policies, and it will leave a huge hole in the Indian government’s pockets. Investors and tax payers, this is where your money is going - to an estimated 18 million government employees. Compare that with over 400 million youthful Indians who will soon be of employable age, and to the 14 million youth who enter the workforce seeking employment every year.
Privilege begets privilege.

Reader Comments

rh mayo

March 26, 2008 10:19 PM

The politicians and kelptocrats have doomed India for ever. When they cannot steal they sell their souls and interests to the devils (especially in the north). India has the misfortune of being burdened with these wolves in sheep clothing,and we even import ones from Italy when we cannot find them at home.

FukaLama

March 26, 2008 10:44 PM

Why complain? India is the "biggest democracy" on earth. Should you be proud of your "democratic" government?

Jan

March 27, 2008 2:42 AM

How can there be any corruption in India.Haven't they already imported the great democracy from the great US of A,a model citizen of the world?

Sri

April 4, 2008 6:26 PM

Can we look at increasing salaries as a fiscal stimulus move? Indian government tax revenues increased by about 40% beating the estimates made just a year ago. Of course, Finance Minister(FM) is confident about government's ability to meet these new spending measures. Considering the slowdown in America, isn't the stimulus move timely?

Recently FM said that 8% growth rate produces 11 million new jobs per year. Considering the black economy in India, I would say - 14 million youth per year, bring them on!

Recently a taxi company couldn't recruit drivers in a city in spite of advertising in a leading daily. Wages ranging from Rs.10,000 to Rs.20,000 per month couldn't help in recruiting(for comparison sake, let me mention, a newly graduated software engineer earns about Rs.25,000 per month). India needs people at every level, in huge numbers. 14 million youth per year ensures a steady supply imo.

People talking about corruption in India - show me a country which has at least 100 million people, which doesn't have corruption. Absence of free press makes official numbers dubious. So, lets talk about countries with free press.

Let's not talk about farmers' loan waiver. Indian government needs to do more to farmers, if it wants to match 'cow subsidies'(~ $1 per cow per day) offered by western governments. Just keep in mind, unlike in west, obesity is not a problem among Indian farmers.

vidya

April 8, 2008 8:57 AM

If hiking salaries once in 10 years calls for such hue and cry, we will have to make peace with corruption.
Do the children of government employees not have the right to access the best facilities in India that come at a fat cost?

pratik chhatbar

May 4, 2008 3:00 PM

Hiking up salary is the best way to speed up the economy. More flow of money = more business.. no matter how much savings oriented you are, once you get little more than you expect to savings, you will start spending the overhead. And once this becomes the trend, you tend to work to earn more in order to spend more! both hands up and full support and encouragement to it!!

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