Austerity - Economic Emergency to curb financial profligacy

Modi’s initiative to announce 30% cut in pay scales of MPs and MPLAD funds for 2-years is just the beginning of ushering austerity measures for COVID-19. However, Modi must act decisively with utmost expedition to mercilessly curb the financial profligacy of the government machinery at all levels through implementation of aggressive “Austerity” measures.

 

If Modi means business, he must start with his residence – 7 Lok Kalyan Marg (formerly Race Course Road) expenditure cuts. Next, Rashtrapathi Nilayam should also be directed to implement austerity. It must start with reduction of large security contingent and cavalcade of cars. So also, discontinue the grand ‘award’ ceremonies in recognition of gallantry awards and distinguished services rendered to the nation in the name of Vir Chakras and Padma series.

 

 

Left to the SPG and NSG authorities, they would conjure “threat perceptions” to the very highest degree for any VIP anywhere else in the world to justify additional accretions to their force levels and modernization requirements. Also, the latest pay scales, perks and privileges of elected representatives need a dramatic reduction until the GDP growth rallies towards 8%. Let me highlight the current basic pay scales at the Central and State governments at the Apex levels. The President of India receives a pay scale of Rs. 5 lakh followed by Vice-President with Rs. 4 lakh. Governors of States get a pay pack of Rs.3.5 lakh. The Prime Minister gets Rs. 2 lakh salary. And, the Lieutenant Governors Rs.1.10 lakh. The Chief Justice of India gets Rs.2.8 lakh; Cabinet Secretary, Supreme Court Judges, Chief Justices of High Courts, Chiefs of Army, Navy, Air Force, CEC, CAG, and Chairman of Union Public Service Commission get Rs.2.5 lakh.

 

The Judges of High Court, Secretaries to Government of India, Special Secretaries to Government of India, Chief Secretaries of State Governments, Additional Chief/Special Chief Secretaries to State Governments, Lieutenant Generals Rs.2.25 lakh. In contrast, the pay of Chief Ministers vary from state to state. Interestingly Telangana CM receiving Rs.4.1 lac, while the biggest state like UP CM gets just Rs 3.35 lac. But, another privileged CM is Delhi, who draws Rs 3.90 lac salary. This is followed by Maharashtra CM’s 3.4 lac package, Andhra’s 3.35 lac, Gujarat Rs 3.21 lac, Himachal Rs 3.10 lac, Madhya Pradesh 2.5 lac, Haryana Rs 2.2 lac, Bihar 2.15 lac, West Bengal 2.10 lac, Tamil Nadu Rs 2.05 lac, Karnataka 2 lac, Sikkim Rs 1.90 lac, Tripura Rs 1.85 lac, Mizoram Rs 1.84 lac, Kerala Rs 1.8 lac, Rajasthan 1.75 lac, Uttarakhand Ts 1.75 lac, Odisha Rs 1.60 lac, Meghalaya Rs 1.5 lac, Arunachal Pradesh Rs 1.33 lac, Assam Rs 1.25 lac, Manipur Rs 1.2 lac, Puducherry Rs 1.2 lac, Nagaland Rs 1.10 lac.

 

 

In contrast, MLAs (Ranging from a high of Rs.2,50,000 in Telangana to low of Rs. 17,500 in Tripura) may be worth pondering. And, they get whopping perks and allowances, besides pensions too. Surely, it is highly thoughtless and highly imaginative for states like Telangana, Delhi and other states to indulge in such extravaganza wherein the Chief Minister and his MLAs draw salary and allowances more than the Prime Minister of India. As per media reports, a whopping Rs.20 to 30 crores have been spent to meet KCRs grandiose personal projects like the “Yagam”, Special Mercedes Bus, Bullet Proof Escort Vehicles, Hiring private Jet for China tour (returns so far appears negligible) etc. And, the tax payers bear the burden of expenditure of KCRs weekly sojourn’s to his farm house.

 

At Delhi, all of them enjoy ‘fair price vegetable shops’ in their residential areas fully subsidized. In contrast, the ‘Aam Admi’ is forced to bear the burden of inflation. What about the subsidized ‘Canteen” facilities in the Parliament. Why should they enjoy such subsidies? Most ironic, quite a few reasons are being given to justify the recent hikes. One, since majority of MPs/MLAs hail from the middle class, they cannot bear the financial burden of meeting the extra expenditure incurred by them to fulfill their responsibilities on account of their jobs. Two, they do not have other businesses and industries to earn incomes. Three, enhancement of pay scales is also considered vital to eliminate political corruption.

 

Due to such extravaganza, there is hardly any revenue surpluses left for undertaking development projects. Either the government has to take loans or depend on FDIs to promote development thereby leaving the future generations with a heavy dose of repayments and interest load. The lesson of economics is simple: debt-laden economies would suffer dramatic collapses. Ipso facto, the Central Government cannot go on allowing overdrafts to States since the banks health is already in poor state. After all, the Central Government is already facing a challenge to bail out SBI and other public sector banks which have accumulated huge bad debts.

 

Ban all foreign tours by all and sundry for frivolous reasons. Wasteful expenditure on account of surplus staff, “Five Star” Seminars, Advisers, endless constitution of Commissions and Committees and so on are surely a massive drain on the exchequer. Their perks and privileges are massive. Is there a need for frequent visits to various parts of the country by the political masters accompanied by their aides and Secretaries? After all, we are today living in “IT Age”. “Video” conferencing facility is available through which all official businesses can be transacted thereby precluding absence from post due to proceeding outstation on duty.

 

 

Is there a need for the Standing Committees to undertake extravagant study tours both domestically and internationally to prepare their observations and recommendations when with a touch on the mouse one can gain access to whatever information one wants to know the realities? Of course, there is redundancy everywhere. If “Good Governance” is to replace “Poor Governance or Policy Paralysis”, many of the Ministries like the I & B and others must be abandoned. The numbers of Ministry’s/Departments with overlap and corresponding roles and functions must be integrated. By doing so, the size of the Cabinet at the Central Government must be reduced to 25 or so at all costs; and the Cabinet size reduced to NOT more than 40.

 

Similarly, many of the Commissions and Committees and advisors must be given a ceremonial adieu at both Central and State government levels. For example the need for a seven-member disaster management Committee is superfluous. Where is the need also for advisors - super numerous? Why should individuals demitting jobs on attaining retirement ages are elevated to advisors posts? Does it imply that their successors are not first-rate quality professionals – incompetent, inefficient and incapable to formulate policies? Should that be the case, then selection and appointment of officers should be based on merit and not seniority per se.

 

Look at the loss incurred on daily basis by the Indian Railways – a whopping Rs.30 crores on daily basis. Ipso facto, no one is talking about the reasons for losses incurred in the management of the Indian Railways, Indian Airlines and PSUs. Even poor management and financial extravaganza are key contributors to losses. None is concerned about “scrap retrieval” management which can yield large revenue yields. Old rails and coaches can be seen dumped astride the railway tracks all over to be rusted or stolen.

 

Yet another “White Elephant” is the Indian Airlines. In seven years till March 31, 2013, the airline industry reported total accumulated losses of $8.6 billion, and the industry’s debt had climbed to $12.6 billion (12600 crores). Recently, visual media exposed financial extravaganza on account of sustaining perks and privileges of serving and retired top level functionaries of Indian Airlines and even their families to include daughter-in-laws and sons-in-laws and widowed wife.

 

The story of inefficiency or gross mismanagement is a long one. Power utilities are reporting losses from all over the country. Majority of PSUs are a drain on the exchequer. Oil companies are also reportedly running at a loss. Why cannot stem the rot of profligacy within their own houses. Furthermore, the demand for hike in prices of oil products is not justified. Why can’t the GOI reduce excise duties? Can’t the State governments reduce sales tax and other levies at local level? If the Oil Companies cannot manage themselves cost-effectively and provide petrol at affordable prices to the “Am Admi”, their top managers should stop enjoying free petrol as perks and privileges and pay like any other “Am Admi” to feel how it hurts people financially. Similarly, all political leaders and all those in government service including judiciary must stop using government vehicles particularly those enjoying VIP security with long lines of escort vehicles accompanying them. Why should the Delhi people enjoy lower oil prices? In some cases, the prices at Delhi are lower by Rs. 6-7 per liter! How can one justify such an inequality and for how long can the political and bureaucratic leadership fool the “Aam Admi”?

 

The ‘common justification’ given is ‘Oil Companies’ are running at a loss due to subsidies – yet another fraud. Now, the latest ground given is that the “Rupee is Weak”. People are no more fools or gullible. They understand very well that it is one of the “Holy Cow” to milk revenue. They also understand that prices can be controlled by reducing burden of excise duties. Even all the State Road Transport Corporations are running at a loss. So also, Security Forces must stop crying “wolf” with conjured “threat perceptions” and demand for higher budgetary allocations so vital for modernization of combat power without complementary manpower quality, enhancement of leadership capability and doctrines. They must overcome their inherited traditional mindset of superiority in numbers and shift to “lean and thin” high quality combat capability through integration.

 

If people remain insensitive to the issue of ‘extravaganza of governance, the vicious ‘economic overstretch’ spun around the Indian society in the name of providing ‘good governance’ by the few appears intractable and engulf the nation in economic distress. Admittedly, there is financial overstretch in every department of the government both at the Central and State levels. Economy cannot sustain the financial extravaganza of the politico-administrative overstretch even if it grows at 10% GDP for the next 10 years.

 

“Austerity” became the buzzword as the German-dominated European Commission created stringent targets designed to return the straying countries to a sustainable model of living within their means. Bailouts were arranged for Europe's worst-off economies, contingent on stiff reforms designed to drive down wages and increase competitiveness. In the meantime, a bandage was needed to halt the sovereign bond crisis racking the economies of the peripheral states. Of the countries forced to take on the reforms attached to the bailouts, Spain, Portugal, Ireland and Greece have shown remarkable fiscal improvement. Each has returned to growth -- except Greece, which is close behind -- and each has a markedly positive budget.

 

That said, each country continues to experience the severe pain of austerity. For example, unemployment in Spain is at 24 percent, with the International Monetary Fund predicting that joblessness will still be as high as 19 percent in 2019. Meanwhile, a visit to Portugal shows that there are a particularly high number of beggars on the streets and that many of the country's younger workers have left in search of employment in Angola, Mozambique and Northern Europe. Low inflation is particularly problematic in these countries, since it inhibits their ability to combat high debt levels, while outright deflation would further the debt crisis.

 

Austerity economics is thus taking blows from all sides. The ethos of balancing the books and living within one's means is losing supporters by the week. Such a buffeting might have cowed most countries into submission by now, but Germany's attachment to its economic model runs deep. Despite the international pressure, the German mantra remains that increased competitiveness is the solution to most economic problems.

 

Modi, hailed as a strong and decisive leader, may like to impose stringent austerity measures by invoking “Economic Emergency” - Impose a drastic cut of 30 per cent of all non-development or growth expenditure. And, the Chief Ministers of all States must realize sooner than later the nation’s economy can only bear the burden of expenditure up to a limit of say 60 per cent of budget allocations. Beyond such a limit, hardly any surplus will be available for development and growth. And, there is no point in the Chief Ministers laying the blame on Modi and the Central Governments for their financial woes.