Growing Manpower; Crumbling Finances

SONAM TSHERING

The recent announcement of a holiday to celebrate  a community’s foundation day adds a new holiday to already long list of government holidays. Whether the holiday will benefit the community will need to be seen, the said holiday will cause a financial loss of about Rs 9 crores in salaries and wages and Rs 144 crores in GSDP. Sikkim government employees are one of the most pampered government servants in the country enjoying perks and facilities compared to the work they do. The government being the largest employer in the state due to political considerations desires to keep the government workforce happy by turning a blind eye to bloated manpower sucking the development resources to keep it alive.

Holidays Restricted Holidays

Sikkim 47 7

Haryana 33 14

Rajasthan 33 20

Punjab 31 28

West Bengal 31 4

Manipur 30 35

Tripura 29 13

Gujarat 27 39

Mizoram 27 27

Telangana 27 23

Odisha 26 8

Karnataka 25 19

Uttar Pradesh 25 31

Uttarakhand 25 17

Andhra Pradesh 24 17

Maharashtra 24 58

Tamil Nadu 24 18

Jharkhand 22 3

Madhya Pradesh 22 68

Meghalaya 22 10

Delhi 20 12

Bihar 19 21

Assam 18 37

Kerala 18 3

Arunachal Pradesh 17 38

Chhattisgarh 17 34

Goa 17 20

Himachal Pradesh 17 34

Central government 17 12

The growth of government employees in Sikkim since the British era has been a complex interplay of historical, political, and economic factors. While precise data for the pre-independence period is scarce, it's evident that the number of government employees has significantly increased, leading to substantial financial implications for the state government.

Pre-Independence Period:

British Influence: The British, upon their entry into Sikkim, established a rudimentary administrative structure. This involved recruiting local individuals to assist in governing the region. The number of government employees during this period was relatively small, primarily consisting of administrative and clerical staff.

Post-Independence Period:

 Expansion of Government Services: After Sikkim's merger with India in 1975, the state government embarked on a path of expanding its services to cater to the needs of its population. This expansion necessitated the recruitment of additional personnel in various sectors, including education, health, agriculture, sand public works etc. The number of departments increased from  less than one dozen to over three dozens.

Implementation of Welfare Schemes: The government's commitment to social welfare led to the introduction of various schemes and programs. These initiatives required a dedicated workforce to implement and monitor them, further contributing to the growth of government employees.

 Political Factors: Political considerations, such as job creation and vote bank politics, have also played a role in the expansion of the government workforce. Successive governments have often resorted to creating new posts and departments to appease various interest groups.

Financial Implications:

The growth of government employees has had a significant impact on the state's finances:

 Salary and Pension Expenditure: The salaries and pensions of government employees constitute a major portion of the state's expenditure budget. As the number of employees increases, so does the financial burden on the government.

 Reduced Allocation for Development: The rising expenditure on salaries and pensions limits the government's ability to allocate funds for development projects and social welfare programs.

Debt Burden: To meet the increasing salary and pension costs, the state government may resort to borrowing, leading to a higher debt burden.

  The government's recent decision to regularize over 22,000 employees and expand the workforce poses a significant risk to the state's financial stability. Additionally, reinstating the old pension system will exacerbate the financial strain. Sikkim currently holds the highest ratio of government employees to population in the nation, with the government being the largest employer in the state. Despite a relatively stable workload since the merger, the increase in government employees has been remarkably high.

Year Number of employees

1974 4000

1977 7200

1985 14000

1989 19000

1992 22000

2002 37005

2012 54079

2018 73411

States Ratio of Employees per lakh population

Sikkim 12235

Nagaland 5806

Arunachal Pradesh 4679

Goa 3777

Tripura 3749

Himachal Pradesh 3691

Mizoram 3571

Jammu& Kashmir 3141

Meghalaya 2786

Manipur 2697

Uttarakhand 2282

Tamil Nadu 1582

Kerala 1569

Assam 1233

Punjab 1196

Odisha 1002

Chhattisgarh 924

Telangana 920

Haryana 901

Andhra Pradesh 859

Rajasthan 846

Madhya Pradesh 804

Karnataka 795

Gujarat 707

Maharashtra 627

Jharkhand 442

Uttar Pradesh 357

Bihar 312

West Bengal 310

 The post-merger departmental expansion has seen only a marginal rise in state government initiatives. The state predominantly executes centrally sponsored or aided programs, with limited projects financed entirely by its own resources. The increase in government personnel is disproportionate to the workload, and the state's failure to stimulate private sector employment has positioned it as the largest employer. The escalating financial strain of sustaining this extensive workforce is intensifying, potentially precipitating a financial crisis. 

0wn resources Salaries&

pension Salary as ratio

Own resources

2016-17 625.56 2126.33 3.40

2017-18 1342.71 2261.98 16.84

2018-19 1550.7 3003.7 1.94

2019-20 1663.81 4027.45 2.42

2020-21 1628.99 3576.72 2.20

 The analysis indicates that the state's own resources are insufficient to cover the financial obligations of salaries and pensions, resulting in a heavy reliance on central government support. The salary expenditure exceeds the revenue by over 2 times. While revenue increased by 38%, the salary burden escalated by 59%, highlighting a lack of strategic manpower planning and revenue generation efforts. This unplanned expansion of manpower without corresponding resources poses a risk of financial instability. As the government is the largest employer, any salary default could trigger an economic crisis within the state.

States with the highest salary expenditure to revenue expenditure ratio

     States salary to rev exp

Sikkim 56.16

Punjab 49.3

Kerala 48

Maharashtra 41.7

Telangana 38

Andhra Pradesh 37.9

Tamil Nadu 36.4

Rajasthan 32.9

Chhattisgarh 32.7

Bihar 30.6                  

Salary & Pension as % of total revenue

2007-08 37.76

2008-09 31.77

2009-10 40.75

2010-11 48.44

2011-12 36.51

2012-13 36.38

2013-14 34.78

2014-15 38.4

2015-16 46.51

2016-17 40.56

2017-18 33.17

2018-19 50.73

2019-20 83.19

2020-21 63.77

 The table indicates that Sikkim significantly surpasses Punjab, despite Punjab having higher revenue. Last year, Punjab's employees initiated a strike due to delayed salary payments by the government. Similarly, Kerala's government employees protested in January over dearness allowance payments. With over half of the revenue expenditure allocated to salaries, the government must curtail spending in other areas. This heavy reliance on revenue expenditure could result in increased borrowing, potentially leading to a debt trap. Sikkim is already heavily indebted, and additional loans could precipitate a financial crisis. The government's decision to revert to the old pension scheme is expected to exacerbate the financial burden due to the interest payments on GPF and pensions for all employees.

Salaries, Pension, Committed expenditure as percentage of

Total revenue expenditure

Years Salaries Pension Committed exp

2012-13 54.13 8.18 55.98

2013-14 55.47 8.62 52.21

2014-15 55.69 9.92 54.33

2015-16 67.19 11.04 55.7

2016-17 44.36 11.79 64.71

2017-18 42.34 12.17 62.23

2018-19 42.36 12.17 65.76

2019-20 50.4 14.72 73.36

2020-21 41.90 14.26 64.77

2021-22 39.45 14.74 63.71

           The committed expenditure, encompassing salaries, pensions, and loan interest, constitutes a significant portion of revenue expenditure. As these expenses are obligatory, the government must limit spending on other revenue programs. With annual increases in salaries, pension rates, and loan interest due to additional borrowing, the committed expenditure is expected to rise. Recent large-scale recruitment and the reversion to the old pension plan will further escalate salary and pension costs, elevating the committed expenditure's share of total revenue expenditure to unprecedented levels.

To mitigate the financial implications of a large government workforce, the Sikkim government could consider the following measures:

 1.Rationalization of Workforce: Conducting a comprehensive review of the existing workforce to identify redundant or underutilized positions and streamlining the administrative structure.

2. Encouraging Private Sector Growth: Promoting private sector investment and job creation to reduce dependence on government employment.

3.Reforming Pension System: Implementing pension reforms, such as introducing contributory pension schemes, to reduce the long-term financial burden.

4.Improving Efficiency: Adopting technology and streamlining administrative processes to enhance efficiency and reduce the need for additional manpower.

5.Fiscal Discipline: Maintaining fiscal discipline and prioritizing expenditure to ensure that essential services are not compromised.

By carefully considering these factors and implementing appropriate measures, the Sikkim government can strike a balance between providing essential services and managing its financial resources effectively. These steps have to be taken immediately if the drive towards financial hell is to be stopped.

(Views are personal. Email: sonamdhondup59@gmail.com)