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June 10, 2007
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June 10, 2007

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Home > 2007 Issues > June 10, 2007


Corporate splurge, what about sarkari extravaganza?

By Aditya Pradhan

The recent stunning election debacles including Rahul Gandhi?s flop show in UP has probably triggered the PM?s reaction. But blaming the corporate sector alone will not do. Look at the suicides that are taking place in states like Andhra Pradesh and Maharashtra. It is becoming clear now that the growth story is not touching large swathes of people.

Prime Minister Dr Manmohan Singh has got the problem right but the solution wrong. Because the solution lies with his government. Dr Singh while inaugurating the CII annual session in New Delhi last week exhorted the captains of industry to desist from ostentatious display of wealth which has accompanied the rapid rise in salaries of the professionals.

The ugly display of wealth is more prominent with the well-known industry leaders whose lifestyles have been extensively covered by the media. The voyeurist media has regularly delved into the finer details of what the rich drive, eat, clothe, wear, buy, etc. so much so that the man on the street is well acquainted with their seven and eight figure salary. The availability of various higher-end foreign products and services, be it watches or vacationing, is now the heated debate topic in party circuit. All that would be well if the whole population is getting a raise in their income to indulge in that kind of splurge.

Unfortunately, the gap between the rich and the poor is becoming so stark that it is being deeply resented by the have-nots. More than what the head honchos of the corporate world get, it is the widening gap between the professional middle-class and the unskilled labour class which is making the situation alarming. To be fair, the Prime Minister has to be credited for having the ability to comprehend the under-currents in the Indian society today. It is not just about CEOs? outrageous salaries, it is also about the rich getting benefits of the country?s economic growth while the poor are just mute onlookers.

The recent stunning election debacles including Rahul Gandhi?s flop show in UP has probably triggered the PM?s reaction. But blaming the corporate sector alone will not do. Look at the suicides that are taking place in states like Andhra Pradesh and Maharashtra. It is becoming clear now that the growth story is not touching large swathes of people, and the emerging India story might end up like the India Shining campaign of the previous government.

Walk into any mall, you will realise that the people who are serving the customers are so poor that they are far removed from the savouries of the middle-class buyers who throng these malls. The income levels of these middle-class professionals have shot up nearly five times in the last 10-12 years and their purchasing capacity to buy unnecessary items during their weekly jaunts to the sprawling malls has also considerably gone up. All the while the poor unskilled labour find it hard to fend for their next meal, what with spiralling inflation. Yes, the middle-class increased appetite and consumption have helped in boosting demand and hence the growth of industry, but it has also left the poor out. This situation can be seen in almost all sectors.

In Mumbai, for instance, real estate developers don?t make one-room-kitchen or even one-bedroom apartments anymore as the demand from the new rich middle-class for two-bedroom plus flats is itself not being fulfilled by the market. Would the slum-dwellers not cavil at the middle-class propensity to buy duplex homes when they don?t even have a choice to buy an ordinary flat?

The huge demand-supply mismatch in the professional community and stagnation in the unskilled labour market is now getting alarmingly out of control. It is true that in certain ways the new economy has been a great leveller. Like the prices of cell phones and airtime charges that have plunged which make it affordable even to the lowest common denominator. Today Basmati rice costs Rs 22 in some of the malls. But when the poor get the benefit of economic growth only in chosen sectors resentment sets in. That is what the Prime Minister rightly pointed out. But the solution suggested by the Prime Minister is na?ve and unbecoming. Asking corporate head honchos and professionals to give up high salaries is like asking politicians to give up power. And it does not serve the purpose.

The best solution in such a situation would be to bring in a legislation to narrow the gap between the salaries paid to professionals and unskilled labour when the profits of the company zoom up. It is outrageous that when the top management of companies are paid in tens of lakhs of rupees every month the workers and the unskilled labour like lift operators and clerks are paid not even Rs 10,000 per month. A legislation which clearly states that in any company there should be not more than 50 per cent difference between the highest salary paid to the management and the lowest salary paid to the unskilled labour is an idea whose time has come.

So the difference in salaries in the heirarchy would be a small token amount. Only then, again, can we have a majority middle-class in the country, very little disparity in wealth and very little resentment to the ostentatious display of wealth. That one move could hugely improve productivity as every member of the enterprise would have the impetus to work harder so as to maximise their personal wealth. The Prime Minister should give this idea a good thought.

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