Should Government Salary be Hiked and why are Kashmiris only Dependent on Government Salaries?

Two reports - one by Arjimand, and the other by the Greater Kashmir - describe the Catch-22 situation in Kashmir where sarkari naukari is the only highway to good life

(Mr. Arjimand Hussain Talib, 34, is from Srinagar and matriculated from Tyndale Biscoe Memorial School in 1991. He subsequently graduated with a Bachelor's degree in Engineering from Bangalore University. He is also an alumni of the International Academy for Leadership, Gummerbach, Germany. Arjimand writes regular weekly columns for the Greater Kashmir and The Kashmir Times since 2000 on diverse issues of political economy, development, environment and social change and has over 450 published articles to his credit. His forthcoming book: "Confronting the Myths: A Critical Analysis of the Political Economy of Jammu & Kashmir" will be published soon.)

Where is the Money?

We seem to be living in some very interesting times. The war of world’s major economic philosophies is perhaps at its crescendo. Market-driven capitalism – largely led by the United States – has been made to look stupid by the on-going global economic downturn. Socialism seems to be grinning, quietly making its way to the bastions of capitalism again, though not in totality.

Today, China seems to be saying: look we told you so always. Europe is saying: see we told you always welfare state is not so outdated. The Americans seem shouting back: OK fine, we agree we were not always so right! Interpret it in whatever way, the fact is that lakhs of people are losing jobs around the world at a rate which is unheard of in recent times.

In these interesting times, what a State like ours – which has lived through one of the most radical forms of socialism - would have to say? Perhaps something like this: see we always said socialism is not that bad. See, we always said jobs in the private sector are not that secure. See, we always said government jobs would ultimately prevail!

The entire debate surrounding the global economic downturn has some unmistakable linkages with the salary hike issue of our government employees. Chief Minister and his finance officials are trying their best to make New Delhi understand why it was important for the latter to fund the hike. They seem to be drawing inferences from the current global fashion of bailouts, right from big banks to multinational corporations. New Delhi looks unimpressed.

So far all that New Delhi has committed to is ‘help’ our State in exploring ways and means in generating greater revenue to fund the hike. To say the least, a salary hike for the government employees is long overdue. The current rate of retail inflation – the official inflation reflects only wholesale inflation – is just impossible to live with. With the kind of salary government officials draw makes meeting of two ends impossible. But the question is wherefrom would the money come for this hike?

Let us try to understand our situation this way. J&K State is akin to a joint family, which is a classic case of aamdani athani, kharcha rupayya. Let us assume our State is a joint family of 30 people: father, mother, three unmarried daughters and ten sons – all with their own set of complex aspirations. Five sons are married and live with their five wives and ten children. Only five of the sons earn – the total monthly income being Rs 25,000. The family’s expenditure is around Rs 2 lakhs. To meet this, we borrow Rs 75,000.

We have assets which could have given us great income – somewhere around Rs 10 lakhs. But a powerful neighbour of ours controls them. So he gives us Rs 1 lakhs to cover our expenses – on grounds of “generosity”. We already have a long-standing debt – at a staggering Rs 20 lakhs. Payment of interest to our creditors every month is a must. So from our total income of Rs 2 lakhs, we end up giving about Rs 40,000 to them. Our debt is never re-paid actually. One big reason for that is that the family spares almost nothing to invest. So income remains static and limited.

There are many other interesting facets to this story. Five of the 30 members of our family are totally jobless. There are another ten, who are employed by the father for taking care of the household issues (read government employees). The family elder has a commitment to the family: ten people in all circumstances would get secure salaries from the family income - Rs 50,000 every month. The irony is not that the other five jobless are hardly asked to move out, earn and contribute to the family’s income.

The family is today faced with a serious problem. Its ten self-employed members are demanding a salary hike, for which the family needs an additional Rs 10,000. If not granted, there might be a rebellion. The problem is that there is no money.

The house is already in a shambles. Repair for the house alone needs Rs 10 lakhs every year, which never come. Five married sons demand face lift to their rooms. New bathrooms need to be built. The roof is damaged and needs urgent care. The family’s approach road to the outside world is in a shambles. So whenever family spends on the house maintenance it does not generate more income for it. The money spent simply goes to the hired service providers.

The family’s children require more money for education. But there is a problem: whatever their education, they have been assured since their birth that they need not to go outside and earn. The family will take care of their salaries; in return of their allegiance to the family head.

The options before the family are limited. It has either to ask the ten unemployed members to go out, earn and make money, or the elder has to demand from the neighbour a return of its assets. If assets are back, funding salary hike won’t be a problem. Or it has to be more creative and invest to make money in the long term, something it has never done. The easiest option is to borrow. More borrowing means more debt. And more debt means more from the family income will go into debt servicing. So would the family finally make a break from the traditions of the past? Send its sons to work? Invest?

Its looks a pity that from building a hospital to implementing Sixth Pay Commission recommendations, our Chief Minister requires to travel to New Delhi to get some money. The Planning Commission of India has given some tough advice to the State: resort to some greater taxation to generate more revenue. But is more taxation really an option? Where are the economic activities which are outside of the tax net? Why not revenue-oriented investment?

For our 4.5 lakh government employees, salary hike would need about Rs 1700 crore annually. Whenever implemented, its retrospective effect from January 2006 would need Rs 3,800 crore. Our annual salary bill today is around Rs 2700 crore. Almost forty per cent of this half goes into paying salaries of police alone.

Today J&K’s total debt stands at Rs 13,000 crore, which is piling up every passing year. We pay about Rs 1500 crore in debt servicing alone. That means our debt/State Domestic Product (SDP) ratio works out to around 75 per cent, which is too bad.

The fact is that we continue to live with a serious development deficit, because our economic philosophy is faulty. We can have two options: either live with lower taxes, smaller government and deregulation, or have a big government, higher taxes and tight State control – something we have now.

For now it seems we have no other option other than to tax further to make salary hike indeed possible. And that would only compound our economic catastrophe

Why is Govt the largest employer in JK?

Srinagar: Jammu and Kashmir government employs nearly 4 lakh persons, a ratio of 34.6 employees for every thousand persons. Every year the government pays Rs 5000 crores as salary to its employees.

Officials say though the present government has not yet chalked out any plan for new creations and employment, the previous government had promised some 70,000 more jobs.

“The present government has not stated anything about new creations and we don’t know its mind about government jobs. But the fact is, in the given situation where we have no private sector investment, government jobs seem to be the only solution,” a senior official said.
“It is sad. But in Jammu and Kashmir government is considered to be the only employer. Elsewhere in the world the government employs people to run administration. Here it employs to create employment,” says former Finance minister, Muzaffer Hussain Baig.

He argues that people could earn a lot in sectors like poultry and sheep-breeding but no one comes forward to develop these sectors, making the government jobs only alternative.

In May 2008, the Ghulam Nabi Azad government announced creation of 70,000 jobs in the state. The officials of the Employment department say there are 3 lakh educated unemployed youth in the state. “The people usually now don’t come for registration in the employment exchanges as it is not mandatory under new guidelines of the Apex Court. But rough estimate is around 3 lakh,” said an official.

The Rajasthan government employs about 6 lakh persons. But it is about five-and-a-half times bigger than Jammu and Kashmir in terms of population.

Baig argues that government jobs would remain in demand unless people here develop entrepreneur temperament despite the state having locational disadvantage for investment.

However, Shakeel Qalander, president Federation Chamber of Industries Kashmir disagrees. He cites the example of closure of veneer and ply-board industrial units. The Industries department had registered 85 such units in Kashmir valley, employing nearly 5000 people. However before registration of the units the Industries department had to seek clearance from the Central Empowered Committee. Following October 10, 2002 order of the Apex Court, the state government had to conduct a survey about the raw material used for making veneer and ply board. For the past seven years the Forest and Industries departments have failed to figure out who has to conduct the survey.

Qalandar says the state government should have conducted the survey and then pleaded before the CEC that the veneer and ply board industry of Kashmir had nothing to do with the forests but instead poplar, an agriculture product, was being used as raw material. But the government failed to do it and instead decided to close down the units. “This bureaucratic inefficiency renders private sector vulnerable and forces people to prefer government jobs,” says Qalandar.

But senior officials in the government describe the closure as isolated incident and argue that it should not be construed as yardstick. They say there are hundreds of units in other sectors that were closed down by the unit holders after getting subsidies. “The government job has become an additional income resource for most of the government employees making it lucrative among educated youth of the state,” says an official. He said government jobs have become so lucrative that those who are already in it demand enhancement in retirement age to retain “benefits of doing nothing and getting salary.”

The entrepreneurs however say the government has not created necessary infrastructure to build a strong private sector. The raw material, they argue, is being sent outside the state and by design Kashmir has been turned into a consumer economy. “It is such a consumer economy where it is not getting benefit of being a consumer even,” said an entrepreneur. He said whenever the infrastructure has been raised, the state has done it for its benefit and if people get benefit of the infrastructure they get it by chance of being in the vicinity.

Baig however refuses to buy the argument. He says when the government tried to build infrastructure in Gulmarg it was not allowed to do so. “Had it happened, we would have hosted international games here but it didn’t happen because some people made an issue of it,” he said.

However, the former Finance minister, Tariq Hamid Qarra, said the scarcity of power in the state was major stumbling block. He said the lack of power was making investment difficult. “There have been examples when investors left the state due to power scarcity,” he said. He argues unless the state was not compensated on account of the Indus Water Treaty and it is not made self-reliant in power the private sector investment would not come to Kashmir and the government has to be only employer.

State does well, still

Economists say that in spite of reliance on government jobs, the state does quite well in terms of socio-economic development. The literacy level (64.8%) is almost at par with the national level (65.4%). Its sex ratio (923/1000) is nearly at par with the national average (933/1000). The birth rate (19.9/1000) is lower than the national average (25.8). The death rate (5.4/1000) is also lower than the national average (8.5/1000). The infant mortality rate (45/1000) is also superior to the national average (68/1000). The official per capita income of Jammu and Kashmir is Rs. 12,399 and is lower than India’s Rs.16,707. But it is much better than Bihar’s Rs. 5108 or Orissa’s Rs. 8547. In the last 10 years JK’s poverty level has dropped from 25.17% to a mere 3.48%. The poverty level in India still hovers around 26%.

But, they say, there are hardly any public works contributing to the common good and higher productivity to show. Roads are in a terrible condition, the power situation is miserable. There is no public sanitation worth the name.