The 8th Pay Commission must bat for public capacity but within fiscal limits

What they recommend is usually adopted—with a few tweaks—by various state administrations for their own employees. It also has a ripple effect on the salaries of defence personnel and others on public payrolls, like school teachers, college professors and medical staff. It affects pensioners too.

Clearly, this salary call will have an impact way beyond the Centre’s payroll of 5 million and pension roll of nearly 7 million. Typically, too, each such pay revision—or even the setting up of an advisory panel for it—is greeted with protests over the fiscal blow that a higher wage bill would deliver.

Whether public employees need a pay hike at all is often contested as well. The first item in the ToR, thus, enjoins the Commission to be cognizant of the “economic conditions in the country and the need for fiscal prudence.”

While valid questions can be raised about the productivity of public employees in general and the changing premium on job security in the labour market, especially in the age of AI, the Centre’s once-a-decade review of its employment packages is a moral must.

Also, in a country of India’s size, far-flung villages, blocks and districts, not to mention urban civic bodies, need able administrators. Given the multiplicity of challenges that governance faces today, with AI-led technological changes gaining pace and scarce talent in high demand, government employment must always be remunerative enough to attract those with wide career choices.

If the results of competitively paid roles are a mixed bag, then much of this malaise can be traced to the political economy. A tight rein kept on salaries would not solve problems, but could worsen them. The right way to address the added fiscal burden would be to rely on robustly rising revenues.

India’s tax-to-GDP ratio remains very low in comparison with countries like South Africa, Brazil, Turkey and Thailand, all of which are middle-income. While tax relief has been a near-term policy theme in support of the Indian economy, we also need to invest in state capacity for the long-term.

Ironically, the bulk of our income tax payers are probably people on salaries—government or private-sector. A ripple effect could reach them all and elevate household spending.

Several issues deserve a deep delve by the Pay Commission. Accountability in government jobs, for example, needs a good hard look; incentives linked with outcomes may be worth a try. Then, a form of elitism may have crept into public service, with the privileges and pay of one class of bureaucrats kept vastly above all others; large pay-gaps can hit morale. Such distortions need solutions.

As for the actual pay award, the ToR’s second item asks the commission to “ensure that adequate resources are available for developmental expenditure and welfare measures.” This, in effect, urges the panel to moderate pay revisions for the sake of other goals. The 8th Pay Commission’s task is far from enviable.