Sunday, April 29, 2018

A comment by Ratnesh Madhur

Ratnesh Mathur India's Haves pay themselves to create a bigger gap with the Have-Nots - Just 34.5 mn of India's 480 mn working population have jobs ( i.e. employment contracts with a tenor in excess of 90 days). Rest of the country works on dehadi/daily-wages. While each of the 29 state governments define the statutory daily wage of their area, the real dehadi across India is quite consistent at approx Rs 120 ( men) & Rs 100 ( women)for 8 hours of work, across the country & it reflects in the India country GDP per capita of Rs 5700 ( per month). Off the 34.5 mn jobs in India, 22.5 mn jobs are in the government ( central, state & public sector), including the world's 3rd largest army. 

The overall pool of Indian Govt. wages of its 22.5 mn workers, along with pension payments for its retirees ( Nearly Rs 3 lac crores ( Rs 1.25 lac govt+ Rs 0.7 lac defence + Rs 0.25 lac govt pension+ Rs 0.5 lac defence pension), is already more than 25% of India's total Annual Revenue ( including all taxes) of approx Rs 10 lac crores, in 2014-15 budget. Now with the 7th Pay Commission, the Central Government folks are getting an additional 23.5% increase, with the minimum wage of a new clerk increased to Rs 18000 ( More than 3 times India's GDP per capita) & maximum to Rs 225000, per month ( 40 times India's GDP per capita). There are more government pensioners than actual government workers & they too will benefit from the increase. (Nearly 80% of the Indian army workers take pre-mature retirement at the age of 36 & join private sector jobs, since they get pension benefits for life after that age). And to top it all, these government folks think of themselves as " Middle Class" & " Lower Middle Class" of India ! All government jobs are based on a one-time entry & are secure for life, unless terminated for fraud. They are the only citizens of India who are healthcare insured for life. Yet lateral recruitment even at the upper echelons is negligible. Meriotcracy is a function of sucking up to elected politicians & the government entrance exam rank/results achieved, after college. 

And if you think shrinking total number of Indian government servants & political positions is the answer, think again. Shrinking needs to happen at the top & middle layers. In absolute numbers, India's total govt. size ( central+state) of 23 mn as a percentage of 480 mn working population is miniscule (5%), compared to western countries. In Germany ( a country without a defence force), Czech Rep & most of central Europe , approx 22 to 25% of the entire working population, works for the government. In Scandinavian countries, it goes up to 30 to 32% of the working population. Indian government needs more foot-soldiers as population increases from 1.2 billion to 1.6 billion in next 30 years. Yet, as %age of GDP, the 22.5 mn sarkari workers already consume as much of the country's GDP in wages, as European countries do. Wage rationalization was needed, across the board, not this increase. Just last month, for UP government peon jobs , more than 370+ PhDs applied, in addition to several lac graduates. The value of the sarkari perks is where the hidden wages, really are. Transparency of wages through monetization of perks into cash compensation, is actually the need of the hour. If you want to see how politician & government servant wage metrics in more details, please see this IMF analysis ( )

Like in banks & private sector, first you have to define the "wage pool" , as a function of the geography/market's " revenue" . Then you have to define the JDs/ Roles. Rationalize the headcount. Only then do you do the basic wage + incentives process, linked to the nature of the job. If you go ahead & create monetary incentives beyond basic wages for all roles, the whole process becomes unmanageable. That is where the Indian government already is. Rationalization of headcount needs to be done in tandem with rationalization of roles.

The above was in a post by Namit Arora linking to an article on big government 

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