4% Stalled DA Hike vs 30% Cut in cabinet minister's salaries.

How much would the government save in Total?

Background

Earlier in September 2019, as sated by Economic Times in an article that all temporary and contractual workers would receive equal salaries as their permanent counterparts receive. This was supposed to benefit about 10 lakhs contractual employees working with the central government.

Three years after the Supreme Court ruled that temporary employees should have a salary of equal worth to permanent workers, however many were not even bothered because they knew that like earlier these were just going to be another so-called false hope which would take many years to become reality.

Now coming to context with COVID-19 and increasing inflation coinciding with decreasing GDP growth, though IMF has taken a very modest approach in estimating that it would not affect India and it will still have positive GDP growth. But our estimate of becoming a 5 trillion dollar economy by 2024 has now come again into question.

Previously-

All cabinet Ministers who were being paid around Rs. 4 lakh rupees a month would take home 30% less salary for the entire financial year of 2020-2021. In India, there are about 788 MPs which include 245 Rajya Sabha MP 543 Lok Sabha MP. All in all they are about to save about Rs 7900 crore during the financial years from both salary reductions and suspension of MPLAD funds for the year 2020-2021. This money saved would go to the consolidated fund of India as said by Mr. Javedkar on April 6 after Prime Minister Narendra Modi approved the ordinance to cause the salary cut. This has been reported by in The Hindu dated April 6.

Salary comparison of a Government employee vs a Member of Parliament

On average a government employee is paid between Rs 40,000 to Rs. 1.5 Lakh (Excluding Rs. 2.5 Lakh for cabinet secretary). Their salary is counted under taxable income so they receive their salaries after pre-deduction of income tax under the various tax slabs present in India. On the other hand salary of MPs does not come under taxable Head salary income rather come under income from other sources and namely constituency allowances.

MPs are entitled to Rs. 40,000 per month as constituency allowance and another Rs. 60,000 every month for office expenses in the form of staff and stationary. The earnings of a person as an MP are tax-free as stated by an indiatoday.in an article dated 23 March 2017. So in comparison, a middle-class employee is comparatively earning less as compared to an MP in 2020.

 

Also, a person becoming an MP for even a day is eligible to get a basic monthly salary of Rs. 50000 as an MP and Rs. 20,000 as pension after retirement. So this has been going on since its inception.

A detailed analysis of the salaries of MP will be done in my next article.

Continuing this objective of this article below-

Government Stance-

Now coming to DA increase case, basically, the government of India hikes the DA on basic pay twice a year to compensate for ever-increasing inflation. Similarly in March 2020 government decided to increase the DA by 4% i.e from 17% at present to 21%. But within a fortnight to tackle the COVID-19 crisis the Indian government decided for nationwide lockdown and thus DA hike has been hanging since then. Earlier it was decided that DA hike would be counted from January 1, 2020, and arrears for the same would be given to government employees and Pensioners.

 

Now coming to DA increase case, basically, the government of India hikes the DA on basic pay twice a year to compensate for ever-increasing inflation. Similarly in March 2020 government decided to increase the DA by 4% i.e from 17% at present to 21%. But within a fortnight to tackle the COVID-19 crisis the Indian government decided for nationwide lockdown and thus DA hike has been hanging since then. Earlier it was decided that DA hike would be counted from January 1, 2020, and arrears for the same would be given to government employees and Pensioners.

How much money would the government save in total from both these decisions?

This is the question we are going to answer in this article. Now as per reports from The Hindustan Times the total savings from stalling the DA hike for a year and if held for a year it would amount to a whopping Rs. 14,595 Crore and as reported by The Hindu money saved from salary cut of MPs would result in Rs. 7,904 Crore.

Now where does the government plan to use this kind of money, I could only hope it utilizes as it says to tackle the COVID-19 situation only.

There have been reports that the government gives a go for its ambitious projects i.e the Central Vista government Building makeover when the nation is facing a cash crunch as well as COVID-19 pandemic situation. This would be covered in our next article.