April 22, 2018

Pitfalls of implementing 7th Pay commission Recommendations

The Modi Government has accepted the recommendations of the 7th pay commission and a huge bonanza awaits the government employees in India. It is estimated that annually over Rs 1 lac crores is required to meet these payment requirements which is expected to be released in the next few months. This huge expenditure is justified by various government spokesmen who go around touting that the additional expense is very small since it is less than 1% of India’a budget and hence it is an insignificant burden on the country. There are two things to be considered about this canard.   If Rs 1 lac crores is an insignificant amount, why is there hue and cry about micro scams like the Commonwealth scam of Rs 40000 crores or even the 2G scam of just Rs 1.8 lac crores. They should be dismissed forthright.

Actually, this expenditure is about 7-8% of the total annual tax collection (about Rs 15 lac crores), which is the correct way of looking at it. In order to meet this increased expenditure, a tax increase of 4-5% has to be imposed which will burden every citizen of India. The government does not want to talk about it.

Now, the next story being put out to justify this expenditure is that it will lead to more consumption and hence creation of more jobs. Both points are correct but the unanswered question is “jobs for whom”. The government employees are already leading a comfortable life since the normal inflation is taken care of by increases in monthly DA. This additional money will be used mainly to purchase gadgets like smart phones, tablets, PCs, bigger TVs, cars, washing machines and other such items. Are these high quality items made in India ? The big answer is NO. That means that the extra money will be used to buy imported goods and hence the jobs will be created for workers abroad !! Unwittingly, the common man will be paying increased taxes to fund imports and create jobs abroad.

I feel a better way to compensate the government employees is to make the payment to them by GOI vouchers which can be exchanged for shares in new companies being set-up in India. This will encourage setting up new industries, create jobs locally and also keep the money in India.

Pic Credit:  newsworld.in

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Atul_Gupta About the Author: 
Atul Gupta did his Mechanical Engg from IIT-Bombay in 1979, Qualified cost accountant (ICWA) and Software Technology from NCSDCT-TIFR.

Over 35 years experience in software and automation.

Author of National best seller ‘The Power of Vedic Maths’.

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