INFLATION-MESS OF OUR MAKING

The govenment has allowed inflation to grow in an uncontrolled manner.It did not consider pension reforms and the present pension system whereunder pension is mostly unearned in the case of retired bureaucracy has also fuelled inflation.
Salary hikes granted from time to time on the basis of pay commision 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 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 much by way of completion of workand results after their earlier retirement age of 58and 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 to senior executives and CEOs has also contributed much to inflation as it led to a culture of unwanted consumption.
Inorder to control inflation the government must take steps to 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 huge hikes in pay scales it is better to consider productivity-linked incentives and productivity-linked increments to government staff also.It is also advisable to implement pension reforms and employee contributory pensions must be ipmlemented fortwith.Corruption and bribes must also be eliminated.
Along-side 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 to-day is augmentation of supplies of all commodities-food and non-food -through increase in production and through expansion of capacities in the manufacturing sector.[published in Business Line dated 17th April 2008]