Inflation and its compensatory Graph
-R.PATTABIRAMAN
The history of economics is proving again and again
that real wages actually decrease during the periods of rising inflation. The
simple and basic definition of inflation is that too much money chasing too few
goods. The currency is losing its value. In the case of organized working class, unless
the protective compensatory dearness allowance is merged and made as the
part of pay, the wage set on 2007 will not get its original value at 2017 after
ten years. Many of our brethren in the working class are not having any type of
compensation to adjust inflation or price rise.
Even IMF/ WB findings are supporting the fact during
inflation there is an important redistribution of income away from labourers
and workers with lower skills suffered heavy losses. Real wages are important
component of wealth factor and erosion of real wages will affect even the
saving pattern of employees and arrest their quality and quantity of
consumption.
There is a
theory going on that wage increase will cause inflation. The DPE guidelines are
barring any type of wage push inflation. That is after increase of wages; the
companies should not increase the cost of goods and services that they
marketing. And so one cannot blame wage increase as a cause of inflationary
spiral.
If we study and compare the IDA rise of 1997-2006 with that of
2007-2016, we can understand how the rate of IDA has gone double because of
high inflation. From 1-4-97 to 1-1-07 the increase of IDA was 68.8 and
it was 119.5 for the period 1-4-2007 to 1-1-2017. Because of 50 % IDA merger
the rate was increased from 68.8 to 78.2 gaining 9.4 percent for the revision
of 2007. .
The rate crossed 10 % in 1-7-98 within 18 months as of
1-1-97 and 20 % in 1-1-99 in 2 years but got its reduction from 24.2 % to 21.6
and 20.1 and 22.2 in three consequent quarters and increased to 25.5 on
1-1-2000 after 9 months reduction. Again the rate found its decrease on
1-4-2000. Then the decrease was found
during 1.4.2002 for the 5th time in 63 months duration and it touched 40 % on
1-1-2003 after 72 months gap. On 1-4-2003 the decrease was announced for the 6th
time.
The crossing of 50% IDA was taken place on 1-1-2005
but though they agreed IDA merger at 50 %, the benefit was not given from that
date. The 60 % mark was seen by 1-7-2006 after a period of 111 months. There was no decrease after this period and
at the end of 10 years (120 months) the marked IDA was 68.8 which one was
merged with basic by DPE guidelines in the 2007 wage revision. The PSUs like
ONGC severely fought against the Govt with good amount of sacrifices and
restored the benefit IDA merger by raising the benefit of merger at 78.2
In the case of 2007-2016 periods of 120 months the
story goes like this. The first 10 % crossing was occurred on 1-10-2008 after
21 months. It crossed 20 % on 1-10-2009. The 30 % crossing was within 36 months
from 2007. The crossing of 40 % and 50% were found after 48 months and 57
months. During April 2011 to April 2012 there were two quarters we found no
increase or decrease.
Within 6 months
gap we happened to see the markings of 60 % and 70 %. This 70 % crossing was
after a period of 72 months. The IDA more than 80 % was on 1-10-2013 and 90 %
within 3 months of 80 %. The first decrease of IDA we found only on 1-4-2014.
The IDA crossed 100 % on 1-1-2015 after 8 years. In the 1997-2007 case it was
50 % after 8 years in 2005. Even after crossing 100% there was no talk or
demand of IDA merger by any central unions or PSU unions as they expected wage
revision shortly. This time the inflation was double within 8 years period
comparing 1997-2007 period. After 120 months- 10years period the 3rd PRC merged
IDA at 119.5 %.
There was no increase or decrease in IDA during the
first quarter of 2016 Jan- march. and the second decrease was found in the last
quarter of 2016 sep to dec..
Since the govt not agreeing to propose 50 % IDA
merger, the merger point has become 119.5 on 2017 Jan instead of 119.5 plus
34.75% (50% of 69.5) that is in total 154.25. The real fitment formula should
be basic plus 154.2 % and for this 15 % rise to the PSU workers and Executives
. Even if the merger was accepted at 100
% IDA then the fitment mark would be 119.5 plus 19.5 % (100% of 19.5) and in total
goes to139 %.
Even the profit
making PSUs are having their grievances comparing 2nd PRC fitment formula.
Unfortunately the issue of inflation is not taken seriously though the issue of
price rise was placed as one of the demands of our General strike . The
Government was let off free as no specific demand like restoration of real wages
is in its table to consider. It is time to raise the demand with the hope it
may grip one and all. Better late than never.
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