When citizens are braving a failing economy, the Government has announced another wage hike to its employees. The exercise may be more for scoring political points than for benefitting Government servants

Is the Government least concerned about inflation and growing fiscal deficitIJ That appears to be the message it has sent aloud with the announcement to set up the Seventh Pay Commission for 50 lakh employees and 30 lakh pensioners. This will saddle the Government with an additional expenditure of one lakh crore rupees.

The Government has stopped new recruitments officially, though it employs people on contract in every department at one-fourth of the wages given to a regular staffer, or outsources these to private agencies, opening up avenues for exploitation (and possible corruption). Instead of having a new pay panel, the Government should have opened up the suspended recruitment process.

With spiralling inflation, sagging economy, falling industrial production, rising fiscal and current account deficits and shrinking tax collection, the Government has taken a most imprudent decision. The people want a check on prices as their wages are being eroded.

Since it is at the fag end of its term, the Congress-led regime is least worried about the adverse impact such decisions have on the economy. The Union and the State Governments employ the largest chunk of people. So, in its calculation, the largest number of voters has one or the other connection to the pay panel. The Government feels it has done enough to get the votes.

It is almost a scorch-earth policy followed by retreating armies. Had it had some concern for the economy, it would have heeded the call given by Reserve Bank of India Governor Raghuram Rajan. Mr Rajan has given a strong message to contain inflation and termed the latter as a grave malaise that grips the economy.

The Government has done just the opposite. A pay commission is known to fuel inflation as it increases the circulation of money — something the RBI has been trying to contain. It may be bad news for the recovery of Indian industry, because industry too would be forced to give hikes despite poor performances. The Opposition, though it may disagree with the Government, will not risk raising its voice against higher wages for  Government employees.

The pay commission was not the demand now. Never before has a pay panel been approved before the 10-year period. The Government says that it would be implemented from January 1, 2016 — that is by a new regime which takes over in 2014.

The Government has a reason to hurry. The move is a blatant admission of its failure to contain inflation. The ruling UPA wants to go to the polls to tell the employees that even if the Government has failed in taming inflation, it is compensating them through a wage hike.

But it is deceiving the employees too. Normally, when employees’ organisations plead for wage hike before the pay panel, they draw up the changes in prices, cost of living and other conditions that take place during a decade. This time they would find it difficult to shape up their case, as the last pay commission recommendations were implemented only in 2010. The gains of employees would be minimal and restricted to the fitment in the new pay scale.

The exercise is designed to score political points. Food inflation has been in the range of over 18 per cent during the past one year, 40 per cent during the last three years and over 300 per cent since 2004. Can the Government list one step it has taken to curb the menaceIJ

The disparity between Government wages and private wages are rising. More people are being thrown out of jobs. This is what the official National Sample Survey Organisation figures are telling. The Union Ministry of labour and Employment and its offices are mute spectators.

The Government has not taken a step to curb the facilities of either its bureaucrats or Ministers. Why should a Government officer in Delhi have an official car to ferry himIJ Why cannot he travel by public mode or in his own car, for which he is paid a transport allowanceIJ In most cases, the officials are pocketing their transport allowance and travelling by official vehicles, the fleet of which is bleeding the Government dry.

There are many other such unwanted expenses. This adds to inflation, but the Government remains unmoved.

Mr Rajan, in his monetary review, has pointed out that public money kept in banks could not be put to risk till inflation is brought below five per cent in a period of six to 12 months. He raised bank rates to save public money. He says this could not be compromised by lowering rates. Higher inflation and low rates are a dangerous concoction. The bank losses of over Rs 450 lakh crore has posed severe problems for lending. Mr Rajan could not have risked a lower rate unless steps are taken to contain inflation.

At a time when growth is trailing, announcement of steps that have mere cosmetic value needs to be shunned. Many other aspects of the economy have to be corrected. The setting up of the new pay commission must be shelved if the economy is to come back on track.