Monday, April 7, 2008

The Pay Commission Recommendations

bandho, hari OM,

I am writing this post with the recent Pay Commission recommendations as the background. Please read the article of M. R. Venkatesh on the Pay panel recommendations:
M. R. Venkatesh on rediff

I just wanted to add to the above by adding the following:

Who foots the bill?
Ans: 1.
Me and you, who pay income tax at 1000 different slabs, and out of the taxed income, we pay service tax at 12.36 %, VAT at 4%, Excise, Customs, and God knows how many flavours of taxes. By the way we (men) also subsidize the lower tax slab that exist for women! [women!, all offence intended! :-)]. In the money that we save out of the multiple taxed income, if we save in banks, we accrue tax on interest, if we invest in stock market, we pay securities transaction tax and capital gains tax with its 100 cesses and surcharges.
2. The private sector which has to shell out income tax, service tax, excise, customs, and a thousand other surcharges.

All for what? to feed the humongous white elephant called the "Government". Why does the Government need to be so ubiquitous (more about it later) is one of the questions of M. R. Venkatesh's article.

The pay panel recommendations are a big burden on the exchequer. This, especially considering the pressure it will bring to bear upon the private companies to raise their salaries. The government can any day print money, the miserable private companies can't. Nor can they give bonds to reserve bank to print notes on their behalf. It is a ploy by the communist tainted UPA
government to break the back of private entrepreneurship and break the back of the Indian economy. The government has always failed to meet its fiscal deficit targets in the previous years. With the fiscal deficit hovering at a staggering percentage of the GDP, we are indeed sitting on a powder keg which will lead to hyper inflation and loss of purchasing power to the hungry millions.
You can read an article on Government of India's (mis) management of fiscal deficit here:
Ajay Shah on rediff
and here:
Mythili Bhusnurmath on Economic times
From the second article, it is clear that government actually got out of the jaws of debt last year owing to "bouyant" tax earnings, although it transfered the debt into another form, i.e. Government Bonds (these are non budgetary instruments!!!). Friends, it is we, who are fuelling the populist policies of the government. All for what? To invite more taxes and surcharges on we ourselves! So that Madam Sonia and her cohorts can come back to power with ease.
Does the government's fiscal management sound like a doomsday scenario? It indeed is. Anyone who has followed Indian economic policies will agree that the Indian economic planning is like the proverbial emperor with no clothes.

Argument: The pay hike isn't that big anyway, it will cost the government only 12000 odd crores.
Response: A simple question that one could ask is... is there a company on earth which gives its employees a raise with retrospective effect? The pay panel recommendation does exactly this. The government babus will laugh their way to the banks, while the poor farmer kills himself in mahArAShTra. But then there is where the fun actually starts, who will miss an opportunity to save someone dying? The congressis can laugh their way to the polling booth and back from it,
probably with another loan waiver. All live happily ever after, i.e. until another bout of hyper inflation. Do you think that the inflation we have today, officially 7% (unofficially i think 3 times the number) is any less? (a glass of milk in a darshini hotel used to cost me Rs 4 last year, today it costs Rs. 6, that gives you an inflation of 50%)

Argument for pay hike:
We (Government) need to retain talent in Government Labs and government departments like DRDO, CSIR, etc.
Response: Raise salaries of these white elephants? DRDO??? which has been cheating the public of India
1. on its "achievement" of producing a jet engine after copying GE 404 dimension to dimension, this too with huge time and cost over runs???
2. which decides that it will manufacture every single part that goes into a jet engine
3. which gives the Army a prithvi missile which is liquid propelled. ( i met a soldier on a travel by train, he told me that accidents involving the filling of fuel into prithvi are prone to accidents and the process is extremely slow).
4. Which gives the Army the "Arjun" after 30 years of "development". The same fails field tests and now is not a battle tank but a training tank.
5. Which blatantly lies to the army that it can produce an artillery detection radars and doesn't deliver and kills innocent jawans in kargil.

CSIR is among the better names that have been quoted above. How better would it have been to let a company/consortium of companies to bid for the LCA development. It would reduce the time and cost overruns, and not only that, you will have a flying plane in time. I am sure that by the time there is mass production of LCA, it would have become obsolete.

I have dealt with DRDO first hand (they were the clients of the company where i previously worked). For a very well written article on DRDO and its "achievements", I refer you to:
George Iype on Rediff

The above isn't a malaise that is of a single organization run by the government, it is of all the government departments because there is simply no accountability. Anyone who has dealt with government babus will agree with the above.

The argument about retaining talent is facile, because talent flees the country not only because of lack of money, it flees because of flawed policies in these organizations when it comes to promotions, recognition, etc.. remember that there is reservation in promotions in these organizations.

Argument: Inflation has affected the Government servants also, hence they deserve a pay hike.
Response: Yes, indeed. The government's hyper inflationary policies have affected even the government servants themselves. But the government can afford to give the government servants a pay rise by way of the pay commission, because they are the ones printing the notes. Whereas the private companies will have to pinch paises here and there, the next 2-3 years will be extremely trying times owing to recessionary pressures on the world economy. They might not even be able to pinch paises, and their backs will be broken. This is what the communists want. Isn't the ploy clear? A less malicious finance minister would have dealt with things differently and put his fiscal policies and monetary policies on the path to sanity.

I refer you to an article written by me about the inflationary monetary policy of the indian government, you can read it at:
Shrivathsa on Sulekha

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