Inflation and its compensatory Graph
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.