When compared to countries like the US, the Indian government is understaffed and it affects the service delivery, says retired revenue secretary M.R. Sivaraman. He says the Indian government has only 257 people serving every 100,000 population against 840 in the US federal government.
With the Seventh Pay Commission on the anvil and increasing digitization of services, both the size of the government bureaucracy and its expenditure can be expected to come under public debate very soon, all over again, said M R Sivaraman, former Revenue Secretary to the Government of India.
Initiating a discussion on ‘Pay, Perks and Pensions of Public Servants’ at the Chennai Chapter of Observer Research Foundation on 26 September 2015, Sivaraman said “public expenditure has always been a topic of debate. In the neo-liberal era, the bureaucracy is expected to be lean, agile, and efficient and cost-less or cost-effective to the government. It is also expected that the government spend less, thereby giving enough space for private investments in the economy.”
He pointed out that government expenditure is a major policy instrument that aids and directs social and economic transformation in the country. And public expenditure has always been a topic of debate.
Sivaraman said the government expenditure on salaries, perks and pensions for its employees has been an area of scrutiny in the recent past, more so in the developed nations where the pension liability has started to skyrocket. In India, there has been an increasing debate on the pay and perks for government officials and its burden on the budget, particularly since the days of the Sixth Pay Commission.
He said government expenditure as a proportion of GDP varies among nations. France spends 57.08% of their GDP on public expenditure and India allocates 26.96% of its GDP, while the world average stands at 34.2%. Going by the facts and figures, it is clear that India’s public expenditure is well within limits, Sivaraman said.
Criticism on outflow
Defining government expenditure, Sivaraman said public expenditure includes expenditure incurred by the union government, state governments, local governments (panchayats, municipalities), government-owned enterprises, departmental enterprises and also the expenditure on general services (economic and social). Expenditure is further categorised into revenue and capital heads. A significant portion of the revenue expenditure includes salaries, perks, pensions and transfer payments.
Commenting on government’s salary and wage expenditure, Sivaraman said that while there has been criticism on this outflow, people have failed to understand and estimate the value-addition created by these public services. Further, it is hard to quantify the value addition created by government services since they have wide reaching impact on the economy and the society.
Services such as external relations deliver value in promotion of trade and commerce, defence strategy, bilateral relations and several other areas. The value addition of defence and space technology is not directly quantifiable, nor can they be purely measured in monetary terms. He noted that when salaries go up, the value addition also undergoes transformation and increases.
Speaking on perks and salaries, Sivaraman said that the government being the largest employer in the country has an unwritten obligation to be the model employer and serve as a beacon to the private sector. Donning the role of a model employer, the government is transparent in its recruitment process, payments, promotions and wage policies. Additionally, the government has also established wage parity between equivalent positions in civil and military ranks.
Quoting figures, Sivaraman said that the employee strength of the union government stood at 30.87 lakhs (as of December 2011), down from 30.99 lakhs (as of December 2009). He estimated the total employee strength of the government (including state, centre and local bodies) to be around 10 million, which is just one percent of the population and far below that of the US, where 10 percent of the population is staffed in government and quasi-government services. While certain services in the government are bloated, looking at the larger canvas, the Indian government is severely understaffed, he said.
Sivaraman said India has 1,622.8 government servants for every 100,000 residents while the US has 7,681 employees. The Indian government has 257 people serving every 100,000 population against 840 in the US federal government. The figure drops even further to 125 when we remove railway employees from the central government category. This is definitely a cause for concern as it severely hindered service quality and delivery.
Speaking on perks and pension, Mr Sivaraman said pension liability of the government of India is now nearly equal to the payout on salaries. The pension reform instituted in 2004 introduced the concept of contributory pensions, which to an extent is expected to reduce the pension burden in the future.
Perks provided to government employees (both civilian and military) include car pool, petrol allowance, subsidised rent, ration allowance etc. While these allowances are provided to employees to render their duties effectively, there are miscreants who misuse these services, leading to loss to the exchequer and public animosity. Another major concern is the element of non-functional promotions in certain sections of the government. These promotions result in additional payout for the exchequer while adding negligible value addition. Non-functional promotions are more prominent in state governments due to political interference and influence, observed Sivaraman.
Nearly 30 percent of IAS/IPS officers serving in the state governments are from the state cadre. There is an urgent need to review the services, department size, and the officers. Regular evaluation of senior government officials and the services will help in checking non-functional promotions, Mr Sivaraman.
Commenting on the Pay Commission, Sivaraman said that the concept of pay bands laid out by the Sixth Pay Commission was not well received among government servants. Moreover, there were issues in establishing pay parity between civilian and military ranks. The Seventh Pay Commission is expected to iron out the misgivings created by the previous commission report, opined Sivaraman.
Report prepared by Deepak Vijayaraghavan, ORF Chennai