Seventh Pay Commission must rationalise India’s obese and unwieldy bureaucracy

The Seventh Pay Panel report should press for the rationalisation of government salaries and making bureaucracy leaner and more efficient.

The four-member Seventh Central Pay Commission, led by former Supreme Court Justice Ashok Kumar Mathur, will soon come up with its recommendations to determine a salary structure for central government employees. As always, the salary structure is supposed to be linked to “the need to attract the most suitable talent to government service, promote efficiency, accountability and responsibility in the work culture, and foster excellence in the public governance system”.

Salaries in government must perforce be benchmarked to the income of the general population as also those of private sector employees. According to a World Bank survey, the average salary of a government employee in the UK during 1995-2000 was £19,000 per year – 1.4 times the average income of British citizens. This ratio was 1.0 in Indonesia, 1.2 in China, 1.4 in the US, 1.5 in South Korea and so on. The average annual income of government employees in India on the other hand was as much as 4.8 times the average income of the Indian citizen.

A disproportionately liberal remuneration package in comparison with the private sector generates an unhealthy clamour for government jobs and distorts the labour market. The bureaucracy also enjoys a plethora of perks such as residential bungalows, cars, a retinue of personal staff and so on, all of which put additional burden on the state exchequer.

An obese and unwieldy bureaucracy is the single most pernicious malady afflicting governance. It clogs the channels of communication, leads to delays, diffusion of responsibility, and spiralling costs. Foreign investors find it harrowing to do business in India on account of what Arun Shourie calls multiple silos in which ministries function, thereby creating a sclerotic system.

Thanks to regular cadre restructures and inter-service competition, the bureaucracy has seen a steady expansion. In 1947 the number of secretariat departments at the Centre was 18. Today, the number of Secretary level officials is over 150. There are as many Additional Secretaries or equivalent, not to speak of a battalion of Joint Secretaries. The authorised IAS cadre strength now exceeds 6,150 – up from 1,230 in 1951.

In the corporate world slimming a workforce by a tenth of its size is standard practice. Why shouldn’t governments do it too if needed? Sweden and Canada have done it and yet managed to retain effective public services. In 1993 then US President Bill Clinton had laid out a blueprint aiming at reducing the federal work force by 2,52,000, designed to bring about a savings of $108 billion over a five-year period.

Recommendations of the Fifth Central Pay Commission (CPC-V) had included a 30% reduction in government jobs over a period of 10 years; reduction of the number of Secretary level posts from 90 to 30; abolishing 3,50,000 vacant posts; pruning the current five to six administrative layers to not more than two; functional multi-tasking and so on. But these recommendations got a quiet burial.

The Indian state today has a lopsided staff structure. Ninety-five per cent of its employees belong to categories ‘C’ and ‘D’. In most states, almost three-fourths of all government employees are parasitical support staff such as peons, chowkidars, drivers and clerks. Nothing has really happened on CPC-VI’s recommendation to phase out Group ‘D’ staff, most of whom are unskilled and sometimes even illiterate.

Government today needs more specialists, fewer generalists. Several senior positions can be better filled by short-term contracts, enabling lateral entry of technocrats, professionals and entrepreneurs to supplement and strengthen a system dominated by the general elite.

Pay panels impose no small burden on the country’s finances. The central fiscal deficit under the impact of CPC-VI jumped from 2.5% in 2007-08 to 6.5% in 2009-10. Post-CPC-V, the annual wage bill of central government employees rose from Rs 21,885 crore in 1996-97 to Rs 43,568 crore in 1999-2000. Likewise, state governments’ expenditure on salaries increased from Rs 51,548 crore to Rs 89,813 crore during the same period, compelling 13 states to seek central help to pay staff salaries.

Again, post CPC-VI, and between 2007-08 and 2013-14, the annual wage bill of central employees more than doubled to Rs 1,15,000 crore. The wage bill of government staff in the states jumped to Rs 2,86,000 crore from Rs 1,36,000 crore. A World Bank study revealed that “employees have effectively captured control over state spending in health and education, and diverted most of it to themselves through salaries, with negative consequences for service delivery”.

While the aam admi – the peasant, the stone breaker, the daily wage earner, the rural landless, the urban slum dweller – toils, these entitled babus take their place in government for granted. No hearts should bleed for privileged government employees battening on their inflation-indexed dearness allowance installments.

Is the Seventh Central Pay Commission listening?

The writer is former Managing Director, Container Corporation of India