The Hindu Business Line : Mess of our making

The article “Tackling a mess of our making” (Business Line, April 14) clearly explained how the government has allowedg inflation to grow in an uncontrolled manner. It did not consider pension reforms, and the present pension system, which is mostly unearned in the case of bureaucracy, has also fuelled inflation.

Salary hikes granted from time to time on the basis of Pay Commission recommendations without there being commensurate increase in work efficiency and productivity is also responsible for growth of inflation. The incremental portion of salary represents unearned salary and is inflationary in nature.

During the Vajapayee government, the retirement age of all government staff and public sector bank officers was increased to 60. Most of such staff who would have retired at 58 did not contribute by way of completion of work and results after their earlier retirement age of 58 and their salary, being not wholly earned, contributed to inflation.

The corporate sector has also played a significant role in cultivating and “growing” inflation. Huge hikes in salary and incentives to officers who are engineers or MBAs and limitless pay to senior executives and CEOs has also contributed much to inflation, as it led to a culture of unwanted consumption.

To control inflation the government must eliminate all kinds of compensation that is, in effect, ‘unearned’ and all hikes of salary must be accompanied by commensurate increase in work efficiency and productivity.

Instead of hikes in pay scales it is better to consider productivity linked incentives to government staff also. It is also advisable to implement pension reforms and employee contributory pensions must be introduced forthwith.

Alongside reforms on salary and compensation front as above the government must initiate its significant interventions on production side and the RBI may also be involved in such efforts.

What is required today is substantial augmentation of supplies of all commodities —- food and non-food — through increase in production and through expansion of capacities in the manufacturing sector.

K. K. Ammannaya Udupi