Thedebate over freezing of dearness allowance for central government employees during the coronavirus crisis is shadow boxing over a much bigger issue that we must confront sooner than later: is privileged India willing to shed and share some of its fortune at the time of this unprecedented economic crisis? The way we tackle this small issue will set the tone for how some of the bigger issues of distribution are going to be handled in the coming weeks and months.
The facts are simple and not under dispute. The Narendra Modi government has taken the unusual decision to withhold the current and the next two instalments of the inflation-linked dearness allowance [DA] of all its employees and pensioners. Till July 2021, the DA will stay at 17 per cent. The government will not pay the already announced 4 per cent DA hike payable from 1 January 2020 and similar raise due from 1 July this year and 1 January next year. On an average, about 48 lakh employees and 65 lakh pensioners stand to lose about 6 per cent of their take-home salary over this period of a year and half.
There is no dispute that this would save substantial money for the government. The Modi government estimates that it will save Rs 37,530 crore. If the state governments follow suit, as they usually do, their combined saving would be to the tune of Rs 82,566 crore. Put together, the central and the state governments could save about Rs 1.2 lakh crore. If this amount is spent on health, it would raise the total public expenditure on health, central and state governments included, by nearly 50 per cent.
Also read: Modi govt telling businesses to pay staff but cutting its own employees’ salary is untenable
Mistaken opposition
What, then, is the dispute? Ask that question to the Congress party that predictably chose a wrong issue to throw all its might in opposing this freeze. Rahul Gandhi wrote a tweet and Manmohan Singh spoke out against this. Priyanka Gandhi and P. Chidambaram also called out move, while Sonia Gandhi wrote to PM Modi to protect MSME workers and their salaries.
To be sure, the Congress made a valid point. It is odd that a government that is yet to put on hold the Tuglaq-style Central vista project or the bullet train project chooses to begin its economy measures with its employees. But then it went on to offer multiple arguments to oppose the freeze: moral argument of hardship for worse-off employees, emotional argument of its effect on frontline workers battling with coronavirus and the economic argument of its consequences on recovery from lockdown. Sadly, even the otherwise reticent and careful Dr Manmohan Singh, lent his authority to this cause.
The emotional argument is a red herring. Yes, the public sector health workers and police force need and deserve support from the country. But no, the presence or absence of an additional instalment of DA is not going to make a difference to them. If the idea is to incentivise them, the government could announce a special bonus for frontline health and sanitation workers, as Haryana government has. Clerks and teachers cannot hide behind this alibi.
The economic argument is factually wrong. The claim is that putting the money in the pocket of this ‘middle class’ is necessary for re-igniting the economic engine, for they would lead the revival of demand. Sure, government employees are more likely to spend what they earn than, say, a business tycoon. But rural poor have the highest propensity to consume. So, the surest way to kick-start demand is to pour money into rural India.
Also read: Pay and pensions of govt employees had risen too high. Covid is forcing welcome cuts
Economic hardships?
The argument about hardship needs to be placed against the ground realities in India. True, salary cut is not welcome. [Full disclosure: My own family would be adversely affected by this decision]. A sudden announcement like this one entails the pain of postponing or forgoing some planned expenditure. But can this really be called hardship?
Let us take the extreme example of the lowest paid central government employee, say a peon, working in Delhi. Let us say he is at the starting point of his salary ladder, that he is the sole earner of his family of five. His basic pay would be Rs 18,000. His current take-home salary including the existing DA (that would remain untouched), house rent allowance, transport allowance and sundry other benefits is about Rs 30,000 per month. We might think of him as lower middle class, if not lower class, because we are innocent of the economic realities of our country. If we place him against the income distribution of urban population, he would be above 85 percentile! (I have used figures for per capita monthly expenditure from NSO’s 75th round of 2017-18, adjusted for inflation up to March 2020. But the picture does not change if you take any other comparable survey.)
We need to remember this before we argue about hardship: the least paid regular employee of the government earns more than 85 per cent Indians. Compare his Rs 30,000 a month with the Delhi government’s recommended minimum wages (observed in breach) of Rs 14,842 for unskilled workers. At any rate, he would be forgoing, on an average, about Rs 1,500 per month of additional income. That does not qualify as hardship at a time when a big chunk of our population is staring at zero income.
The fact is that sarkari salaries are completely out of sync with the prevailing wages in the market. So, if the economic situation of India demands stronger measures than the freeze proposed by the government, the higher-earning employees (say, those with monthly income above Rs 1 lakh) may be given a part of their salary in government bonds. In a country where a majority of families survive on less than Rs 10,000 a month, and at a time when they are staring at zero income, those who earn six-figure salaries cannot grudge a pay cut.
Also read: Liquidate Lutyens’ Delhi. Give the immense wealth locked up there back to Covid-hit Indians
Sharing and shedding
Cutting public sector salaries cannot be the sole or main form of resource mobilisation. These must travel to the private sector, including the CEOs. This is the moment to think afresh about smartly designed inheritance tax, wealth tax, urban vacant land tax and capital gains tax. This is the best occasion to do away with unproductive subsidies (tax foregone) to the well-off and to levy costs of carbon footprint. This is also a moment to rethink our defence budget. Anyone who thinks this is going back to bad-old socialism, Gandhism and the Greens has not been keeping up with mainstream economics in Covid-19 times.
As we move towards a new economic reality with the partial lifting of the lockdown, battle-lines are being drawn for what could be a quiet but intense fight between the rich and the poor, a cold class-war as it were. Faced with the possibility of scarcity, the first instinct of the well-heeled would be to protect their privileges and profits at the cost of lives and livelihoods. Such a response would be fatal for majority of Indians, for our economy and eventually for the elite as well.
In these extraordinary times, the question is not why the privileged should share their fortune with the rest of society. The question is: why not?
The author is the national president of Swaraj India. Views are personal.
Yogendra yadav, coming as it is from him is not unusual. But he should know the constitutional position in regard to freezing arbitrarily salary of an employ and the pensioners who number more than 11 million which means they support a family of 5 on an average means about 6 crores of population. This money is spent to meet the day today expenses and that in turn let the economy keep moving. But that is another issue. A persons salary is his basic and Dearness allowance and that is his property for which he works. Govt. is under legal obligation to pay him his salary unless one is willing to part with part of his salary on a plea by the Govt. Legally it not tenable and talk of under previlleged and previlleged is just rubbish at any stage. Why is the Prime Minister, President, Vice President and many more persons paid and provided for so much which UK,US, Germany, France and many other democratic countries do not provide for . A MLA in various states are paid so much in kind that no one has any idea. Delhi Govt. provides Rs. 10 crores as MLA LAD and what they do with this ? A person in USA elected to Congress is not provided with such facilities and allowances as in India. Yogendra Yadav should ask and agitate for the minimum wages for the labour working in MNREGA . Freezing of DA is an act of loot and abuse of power while Ministers and Prime minister spend on themselves so much. While there is already a PMs residence which has seen expenditures of more than 10 thousand crores in 1990 and more thereafter but Narendra Modi want a new one with Rs. 20000 crores. why a CM needs Helicopter on which they spend hundreds of crores and there is a regular expenses of some thousand corers every year. Prime Minister has his Air Force I plane for his travel still he want a brand new one better than even the President US is provided for and you call us the pensions and petty employees a privileged class? it is a shame to support you.
Do you know that salary of an IAS officer in starting is just 55-65k with 3% annual increment.And as per Finance minister recent statement people with 6-18 lakh per Annum income are lower middle class..So 90% of central govt employees comes under lower middle class category..please have some consideration for a govt employee from next time.
Why do left leaning people are always jealous of well to do people? The lower posts of Government may earn more than 85 percent but it is also a fact that govt servant has a fix annual increment of 3 percent which is meager compare to their private counterparts. The people are selected in Government services, even an Multi Tasking Staff, through merit and their hardwork. There will and always be a hierarchy in society, some people will always more than others. Who has given the right to the author to propose what kind of paycut is good and what kind is bad? It is immoral for anyone to suggest how wealth should be distributed.
Govt salary cuts should be viewed from the perspective of govt finance. Where the account head- salaries constitutes the bulk of govt expenditure, it is only logical that this item be cut to meet other vital expenditures during these troubled times.
The peon in MSME companies earns a fraction of his govt counterpart ( Rs. 8000/; p.m) and manages to survive with his family. How then can we say a govt class 4 employee is poor ?
From the economy point of view the marginal worker is many times more efficient in productivity than his govt counterpart.
Lastly, govt expenditure transferring money from the savings accrued through DA cuts to the really poor marginal worker will boost consumption more effectively.
Govt servants are privileged class? If Yogendra Yadav thinks all Govt servants are either corrupt and loot public money or ineffective for the money they have been paid for… Privileged are you people who indulge in pseudo social activist who could do nothing better than organising few disoriented youth at a nukkad… But in the name of activism you guys only harm the society
So let me get this right:
1. pvt sector is getting a loan write-off in amount of 68000+ Crores.
2. Vodafone is getting 700+ Crore of tax refund.
3. Thousands of Crores are being deposited in the pvt fund, 6500+ crore was the amount on 4th of april.
Govt employees who are working on the front line risking their lives should also face a salary cut when the inflation is on all-time high. Mind that, only medical staff (& related similar staff) is receiving the PPE. Other office employees on large are themselves responsible for buying their own PPE.
Modi – Matric Shylock Government wroteRs 5.5 lakh cr LOANS WRITE OFF of its ‘blue-eyed’ boys, worst example of Crony Capitalism: Congress spokesperson Abhishek Manu Singhvi accused the government of “favouritism”. …..Happily Freezed DA of Govt Employees for savings of just Rs 38,000 Crore.
One correction – Teachers in the Central Government funded Institutions like the IIM, IITs, NITs are not Central Government Employees. They have separate systems of pay revision.
After hrs,nps cutting some people gets 17,000rs and not everyone lives in delhi
At least they are getting salary.
These are times of existential crisis and poorer sections deserve more attention than bloody DA.
rather than advocating defence cuts author should have asked for doing away with FTII NSD SAHITYA ACADEMY ETC.
Have Amit Shah, Modi, Gadkari and all corrupt politicians donated anything? Why should the honest tax payers, who are already fleeced, pay more? If Chandrababu Naidu, Jaganmohan Reddy, Yeddyurappa donate crores of their loot, then you can write these sermons.
And for your kind information who do you think are the sons who are in govt deptt mainly I bet 70% will be of famers, u would have seen army martyrs being taken to their villages where his father is farmer. Those with no wherewithal for higher technical education and support only vie for govt jobs knowing their success rate is dismal to bag it.
Get the DA freezed but utilise it wisely and transparently.
U are very misplaced lower runng central govt employee earns around 25000/- . And I support the DA freeze but why insistence to donate salary everymonth in PMcares when the govt can forego corporate taxes, NPAs. Why the MPs,MLAs are entitled to pension when they are for service of the nation and not a mere employee. And do you have in mind what it takes to bag a govt job crores apply for mere hundred openings and u surely don’t even know the qualifications they possess. U compare one poor to another poor but not the ones who are sitting on huge public money, and are nowhere to be seen. Everytime the onus is on the poor only. banks recover their bad loans by surcharges on minimum balance rule. When will the have ones take responsibility for the havoc they create on have nots
Absolutely true.
The question here arise that why the private sector is unorganised?
Second, why companies mostly hire contract worker for permanent jobs?
Third, why the director or promoters of companies enjoy all rights and in many cases they fire employees working under them for silly reasons before certain period of time?
The govt should have to form a structure that take unorganised sector under one umbrella so that they can bargain for there share in company’s Profit.
DA cut is equivalent to salary cut which is difficult for bottom level. So, pay cut of central government employees is not a solution to all problems.
In my view, in long run, this step will destroy consumer durable demands in Indian Market and further it will result in closure of mfg units as well as industries.
Though I respect Yogendra-Ji, I never thought we could ever agree! But this virus is a great uniter. Everyone has been hit economically, be it poor or rich. Middle classes in private employment, when not having to face outright job losses, have had to do with pay-cuts, zero bonuses or survive on subsistence level furlough pay-checks. In this time, for govt. officials to insist on business as usual is real crazy. In fact, if necessary, fat should be trimmed from govt. labour force to help balance from budget. Why a government job is for life, when all other employment is fungible, completely beats me.
The conventional wisdom used to be that the private sector is a better paymaster. That still holds for the upper crust. However, for 95% of the jobs in government, apart from security of tenure, they are now more costly to sustain than in the private sector, which must survive in a competitive marketplace. Sooner or later, the armed forces too will begin to feel the cold wind of austerity.
Already health care, education etc are bearing the brunt of bloated salaries.