April 13, 2008

Salary rise for the rich, price rise for the poor! Can you think of anything more shameful?

My dear readers must first be told a little about the country they live in, to understand the story I am about to tell in the right perspective. India is the land where we have defined the poverty line at a shameful level of about Rs 450 per person per month (shame we don’t call it the destitution line)! And below this shameful definition of poverty line lies 29% of our population. When we give a reasonably respectable definition of Rs 750 per capita per month (though the worldwide accepted definition of poverty line is a dollar a day ie Rs 1,200 per capita per month), we find roughly 65% of our population falling below the poverty line! That means in India, more than 65% of the people earn less than Rs 750 per head per month! Given that definition of poor, the definition of rich would definitely be those earning more than Rs 3,000 per capita (i.e Rs 15,000 per month for a family of 5) in the context of the country we are talking about. If it shocks you, then for your comfort, let me call them the middle class of today.

Given this new and logic-proof definition, let’s take a look at what’s happening in India right now. In the last issue itself, The Sunday Indian undertook a survey in the metros with the help of the Indian Council for Market Research (ICMR) to find out who will India vote for during elections. The results were totally clear... The budget bonanza had failed to work. People – the middle class and poor – are fed up with rising prices (and corruption). Ironically, this comes at a time when leading financial dailies are going upbeat about corporate salaries in India. They are rising faster than anywhere in the world and this April, India Inc. is expected to give the highest average increments in the world! Not just that, it’s party time for the top 15% workforce in India. Literally at the cost of the rest of the country, their wages are all set to increase by up to 40% this year, thanks to the Pay Commission Report! About six million people have been given hikes up to 40% (with even retrospective effect) costing the government an immediate outflow of an estimated Rs 40,000 crores this year! But this should not be looked at in isolation – going by past trends and the already generated demand, a similar raise is on cards at the state government level, which will take the total number of people getting hike to about 15 million. That will further lead to a rise in salaries up to the municipality levels, as well as in the public sector, and finally amongst the unionised private sector workforce too! Finally, the number of people getting an out-of-turn extraordinary salary hike will settle around a figure of 60 million i.e. about 15% of our total workforce. Not that the people for whom the new Pay Commission comes, were not given yearly salary adjustments and hikes.

But this is a special election year!!! During this budget session itself, this same workforce population (15%) was given a neat Rs 40,000 crores through an increase in the income tax limit!! And where do you think these increases get diverted on to? To increasing prices! Because those who are a part of the market system – read the rich – will immediately pass on the burden to the others. And never ever forget that these rising prices – which we call inflation – have a double negative effect on the poor. Their salary doesn’t grow at the same pace as the prices; so they invariably have to buy more expensive things with lesser money in hand. So in effect, in countries like India, inflation invariably leaves the poor poorer (read 65% of the masses at the least). It further leaves the middle class where they were. And it is beneficial only for those whose salaries have grown more in proportion to the price rise, the reason in effect for the price rise!

So what am I left to conclude with? Well, as the heading clearly says, we are living in an era where we are creating a system that is giving a systematic salary rise to the rich and price rise to the poor (because the rich are being more than compensated for for the price rise). It is so unfortunate that the government of some of the best people at heart in Indian politics – Dr Manmohan Singh is undoubtedly one of our cleanest PMs; Sonia Gandhi, one of our most dignified leaders – is being misled into this unbelievable bitter truth by their close advisors. It’s a shame really. The biggest shame actually is that this same government launched one of the most laudable rural employment schemes in the history of independent India – NREGA – but thanks to the lack of coordinated focus and commitment beyond announcements, that programme, which has the power to change the plight of poor in India, lies in a shambles, while thousands of crores of rupees get looted away by the rich at the cost of rising prices for the poor.

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