Author: M R Venkatesh
Publication: Rediff.com
Date: March 31, 2008
URL: http://www.rediff.com/money/2008/mar/31mrv.htm
'Till 1947, we were ruled by the aliens. Since
1947 we are ruled by the alienated.' -- Arun Shourie
The 6th Pay Commission report was submitted
to the government on March 24. It has once again brought the issue of a grand
design to keep India poor by subsequent governments back to the fore.
The issue does not merely concern the finances
of the government, as it is being argued in many quarters. In fact, it is
much more than that.
To explain what is stated above let me at
the outset seek the indulgence of the reader to some personal experiences.
My father was posted in the mid-seventies
in interior West Bengal. Accompanying my father to the local market, I distinctly
recall that rice then would cost approximately two-and-a-half rupees a kilo.
The same quality of rice today costs approximately Rs 20. That implies an
eight-fold increase in three decades.
Our family got our first colour television
in the mid-eighties for Rs 10,000. That was replaced in mid-nineties by another
one at virtually the same price. This in turn was replaced this year at approximately
the same.
The point I am trying to make is that the
prices of manufacturing items have been falling steadily in the last two decades.
I am sure that readers would recall that the
prices of cars, refrigerators, computers or for that matter any other consumer
durable item have either been stagnant or have registered a fall. This is
due to the opening of the Indian economy, arrival of newer manufacturing technologies
and, of course, the need to be cost conscious and competitive in a globalised
world.
No wonder, when compared with the manufacturing
sector, the prices of farm products have risen consistently. And this particular
piece of statistics is often held against our farmers to tell them that their
farm produce is more than adequately remunerated by our governments.
But what is the truth of the matter?
To understand the bluff of the government,
one must compare the price of rice with something more stable, reliable and
more comparable -- like, say gold. Elders in my family tell me that that the
value of one quintal of rice in mid-sixties was equivalent to one sovereign
(8 grams) of gold.
Today the price of gold is highly skewed for
various reasons. To that extent it may distort comparison. So let me take
the price of gold in 2006 and compare its price with that of rice. Experts
point out that one sovereign of gold was six times the value of a quintal
of rice in 2006.
Crucially, the salaries of government officials
have gone up about 12 to 16 times in the same period. The impact of this increase
on the Indian economy has never been the part of any substantive debate.
This fall in the value of rice to a sixth
when compared to gold and one-twelfth when compared to the salary of a government
officer in this period is central to the issue at hand.
Naturally, all these have their side effects.
In most states, farmers complain that today they do not get farm workers as
most of them have migrated to cities to seek some employment.
But the worst is yet to come. Farmers complain
that today they are unable to get brides for their sons. Young girls do not
want to marry farmers and face the prospect of penury.
It is natural for farmers to want their sons
to be educated and then migrate to cities. In effect, education is a means
in India to get away from the farm sector -- not get into it. And this proposed
hike in the pay of the government officials would only act as an incentive
to the farmers to become employees in government offices.
In the process it would convert employers
into mere employees. But crucially, who would man our farms? What would happen
to our food security? Who would produce food for the nation of a billion plus?
All these problems stated above repeatedly
point out to the de-legitimisation of the entire farm sector in India in the
past four decades. And as explained above this is not an issue that concerns
the economics of the farm sector or the finances of the government. Rather
this is a socio-economic-employment problem.
What is farcical to note here is that governments
have put in place an elaborate charade of subsidies, successive loan waivers
and grand promises to the farm sector. And on a superficial examination of
the issues at hand the media, analysts and economists have been pointing out
to the fact that we are excessively subsidising our farmers, without fully
understanding the crux of the issue -- farming is a losing economic proposition
in India.
And our meagre subsidies (including free colour
TVs [Get Quote] and the Rs 60,000-crore loan waiver) keep farmers in a subsistence
mode -- neither can they quit nor can they continue farming. And that is the
tragedy of the farm sector in India.
And this pay panel is part of this grand design
Ever since India as an economic entity was
designed, our polity has been under a belief that India cannot be a viable,
vibrant and prosperous nation for her entire population. It would seem that
we had come to the conclusion that India had to be built for a small set of
elite, with the rest kept in mere survival mode.
In fact, this is the extension of the idea
of the British who thought that the nation had to be kept poor for the British
Raj to be economically viable. The Pay Commission falls in this genre -- keep
rural India poor to sustain the India of the elite.
Readers may note that the net impact of the
Pay Commission recommendations for a full financial year is approximately
Rs 8,000 crore (Rs 80 billion). This is not a paltry sum as it seems.
In contrast to the 4.5 million beneficiaries,
this amount is equivalent to the amount budgeted for the mid day meal scheme
for 140 million students all across India for the entire academic year of
2008-09. 140 millions students versus 4.5 million government employees! And
that puts things in the correct perspective.
But if experts are to be believed, the net
impact on the economy would be anywhere between Rs 60,000 croe and Rs 100,000
crore (Rs 600 billion and Rs 1,000 billion) because the increase in the net
pay for our central government officials would translate into a concomitant
increase in the wages for state government, PSU sector, teachers, banks and
other related sectors.
The net beneficiaries would be a mere 2 percent
of the population while the rest have to foot the bill.
What has the relevance of the combined failure
of the farm sector got to do with this 6th Pay Commission? That requires explaining
the other part of the grand design.
Obviously, all this increase in pay artificially
distorts the availability of talent. The low earning potential in the farm
sector when compared to that of artificially high earnings of a government
officer significantly influences the flow of talent from the villages to the
cities, from the farm sector to the others.
In effect, that is a subsidy by the farm sector
not to it. And that is the complete grand design for you -- our farm sector
has to be made uneconomical and unviable to make India politically unstable.
A case for decrease not increase
Remember the oft quoted cliche -- our IAS
officers are the best. And the logic of recommending this pay hike has been
by pointing out to the fact that in comparison the pay packet in the private
sector is significantly higher.
If that were the case why are there no largescale
migrations from the government to the private sector? The answer to that is
simple -- power and pelf available to our government officers are a huge incentive
to remain in the government. Yet, we seek to provide them higher salaries.
Naturally all these have turned India into
a country of shortages, especially on the rural side. A country with a substantial
section of her population caged, hungry and in abject poverty cannot be fancied
to become an economic superpower. Yet this is what we believe little realising
that we are sitting on a time-bomb that is waiting to explode.
In short, a farmer's son can become a chartered
accountant or for that matter a government officer, but why is it that a chartered
accountant's son or a government officer's never becomes a farmer? The answer
to this question is crucial. And we, being a democracy, cannot force our people
to work in farms. Needless to emphasise, the only solution is to make our
farms economically viable, implicitly and explicitly.
And that means that the government needs to
reverse it policy of creating India for the elite. Ideally, the government
needs to lower pay packets for her employees while simultaneously looking
at appropriate policies to make the farm sector economically viable.
And that would at once explicitly and implicitly
make farming economically viable. That would also address the issue of urban-rural
disparity, which is fast challenging the very political viability of the country.
But by suggesting a substantial hike for government
employees, the 6th Pay Commission, like many before it, has indeed been an
honest attempt at destabilising the nation. And for that reason the nation
need to consign it to the dustbin.
The author is a Chennai-based chartered accountant.
He can be contacted at mrv1000@rediffmail.com