Over Public Spending is Bad for Country's Financial Health

Modi govt, undoubtedly,  deserves the credit for implementing "one rank, one pension" scheme despite rumblings by the army veterans. The scheme was withdrawn by the Indira Gandhi govt in 1973. Now that Prime Minister has cleared the air on OROP to even early retiree servicemen, the strike at New Delhi's Jantar-Mantar should end. A great injustice has been rectified by the Modi govt. It wasn't as easy. There are so many strings attached to this demand of army veterans. There is no denying that pension can't be revised annually, and army veterans should realize this. Now that OROP has been extended to army personnel, the discontentment among para-military forces are bound to creep-in. Last week, Delhi High Court has ruled that para-military forces be treated as "organised services" at par with defense forces. The govt employees can also raise similar demand. And finally, what a vast unorganized sector of industrial and farm workers, deprived of social security for long. The govt sector employees including defense and para-military forces have been the biggest beneficiaries in post-India. They get salary hike every tear, scale revision every ten year following Pay Commission recommendations. The sixth pay commission had brought the salary structure of govt employees to an honorable level, if not at par with private sector. Though regular pension have been discontinued after 2004 except defense forces, the old ones are getting enough for living a honorable retired life. However, all these benefits have put too much financial burden on federal and state governments. So much so that some states like Punjab, Himachal Pradesh have gone bankrupt. This reminds us the Greek crisis. The crisis of the Europe ancient country stemmed from government overspending on salary, pension and other benefits.Like India, Greece  All such populist measures made it bankrupt. Greece came into existence as a nation much before India  in 1830 following the war of independence from the Ottoman Empire. However, its roots go back to the civilization of Ancient Greece, considered to be the cradle of all Western civilization. As such, Greece is the birthplace of democracy, Western philosophy, the Olympic Games, Western literature, historiography, political science, major scientific and mathematical principles, and Western drama, including both tragedy and comedy. Despite all this this ancient country is struggling to meet both the ends. By 2015 the incidence of  public debt had risen to the level of un-redeemability. Prior to the 2007 crisis, it was deemed unlikely that advanced economies could experience financial meltdowns of a severity to match those of the pre-World War II era. The prospect of a sovereign default in wealthy economies was  unthinkable. It now appears that it was collectively “forgotten” that the widespread system of financial repression that prevailed for several decades (1945-1980s) worldwide played an instrumental role in reducing or “liquidating” the massive stocks of debt accumulated during World War II in many of the advanced countries, United States inclusive. It must be remembered that apart from World War I  II, the Second Great Contraction of 2008 impacted exclusively the advanced economy debt peaks culminating into debt crisis. Greece is one such example. India need to take a leaf out of Greek crisis. Let us not forget that  higher public spending can lead to sovereign default.