A ‘Fitness Factor’ For Farmers And Farm Workers Can Help Bridge The Country’s Economic Divide

However, other sections of the society can’t be left languishing at the bottom of the pyramid. The rural wages, which fall in the unorganised sector, must also receive a comparative hike in wages

For quite some time I presumed that the ‘fitment’ factor was some sort of a grading or standard that is expected to be achieved by fitness enthusiasts in a gym. But with the announcement of the 8th Pay Commission, I realise that this factor has nothing to do with a gym.

Like in finance, where a ‘haircut’ is actually a deduction taken from the principal loan amount at the time of insolvency proceedings, a fitment factor is a simple formula that has been worked out to show by what percentage the salaries of employees should be increased at the time of pay revisions.

After a little more research, I found that in the 6th Pay Commission, a fitment factor of 1.86 was applied. In the 7th Pay Commission, using a fitment factor of 2.57, the minimum basic salary for a government employee jumped from Rs. 7,000 to Rs. 18,000 per month.

While it is too early to say what will be the fitment factor by which the newly constituted 8th Pay Commission will raise the salaries, it is generally believed that the basic and grade pay salaries are projected to increase by a factor of 2.28 to 2.86. If that be so, the minimum salaries will rise to anything between Rs. 41,000 and Rs. 51,480 per month. Similarly, pensions will increase from a minimum of Rs. 9,000 to anywhere between Rs. 21,500 and Rs. 25,000. At least, this is what the media is speculating. The employees, however, are demanding a fitment factor of 3.68, which means a still higher jump in basic salaries.

‘The fitment factor is an important means of keeping the salary of government employees and pensioners in line with rising inflation. It adjusts the basic salary to the new pay scale by increasing it by a certain multiplier. It has a direct impact on the gross salary and pensions. Through this, it ensures to maintenance of the purchasing power of the employees and improves the economic condition,’ says an explainer on the MSN portal.

This is certainly welcome. There has to be a mechanism which ensures a bright economic future for the employees. The fitment factor surely helps ensure ease of living for the employees.

The bigger question it entails is as to how much will be additional burden from the pay rise expected every year after implementing 8th Pay Commission recommendations. Against the expectation of an additional expenditure of Rs. two lakh crore per year for the central government employees and pensioners, the total additional burden when the 8th Pay Commission gets implemented across the country will be very high.

As per a study by Credit Suisse, the 7th Pay commission for instance had resulted in an additional financial burden of Rs. 4.5 lakh to 4.8 lakh crore every year, the total expenditure from the new Pay Commission would be comparatively much higher, may even touch or exceed Rs. Six lakh crore.

Given the economic benefit from the 8th Pay Commission accruing to the government employees, who at best form just four to five per cent of the population, it is time to ensure that other sections of the society are not left behind, specially the workers and farmers comprising the majority population.

While the Fitment factor ensures that salaries of employees are well taken care of, other sections of the society can’t be left languishing at the bottom of the pyramid. The rural wages, which fall in the unorganised sector, must also receive a comparative hike in wages.

While the generous application of fitment factor for employees is justified, why can’t a suitable formula – call it a ‘fitness (not fitment) factor – be worked out for MNREGA workers.

The revised estimate in FY 24 for MNREGA workers is Rs. 86,000 crore, which is hardly 1.78 per cent of the total budget. This needs to be enhanced substantially and should not be seen as an unwanted or avoidable burden. It will, however, make a lot of economic sense if these workers also see a jump in wages in the same proportion as the government employees. The higher minimum wages for 100 days guaranteed employment will surely translate into a higher rural demand. This will lead to inclusive growth.

Similarly, a fitness factor needs to be introduced for working out in future the Minimum Support Price (MSP). While farmers get MSP based on A2 plus FL formula, which means the farm output price based on the cost entailed in cultivation plus the cost of family labour, farmers are demanding MSP to be given as per the recommendation of the Swaminathan Commission.

Accordingly, the MSP they demand should be worked out as per the formula C2+50 per cent, which means setting a price based on comprehensive cost plus 50 per cent profit. But considering that 79 per cent farmers do not even know of what is MSP and how it works (as Sharad Pawar had once remarked), I guess farmers, by and large, have little idea about how the fitment factor works for employees.

As per the latest Situation Assessment Survey for Agricultural Households that was conducted in 2019, the findings of which were released two years later, the average monthly income for a farm household stood at Rs. 10,218. While an average agricultural household comprise five members, it is the combined income of a family which may have a member running a tea shop or working as a daily wage worker.

As has been often mentioned, the average income from farming operations alone (without adding any non-farm income) comes to a paltry Rs. 27 per day. Given that the periodic labour statistics show an increasing reverse migration to the villages, agriculture is coming under additional stress. Already, studies show that close to seven crore workers have gone back to their villages in the last five years, which shows a heightened need to enhance budgetary support for farming.

From a well-established fitment factor already in place for the employees, introducing a fitness factor for farmers and farm workers will surely help to bridge the economic divide.

It will help to move from existing income disparity towards more inclusive income parity, carving a definite pathway to achieve the vision of ‘Sabka Saath Sabka Vikas’.

(The author is a noted food policy analyst and an expert on issues related to the agriculture sector. He writes on food, agriculture and hunger)