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Downsizing: A Move Towards Fiscal Stabilization

Of late, the phrase ‘downsizing’ has acquired prominence visibly on account of the move being made by the Government as an instrument to mobilize resources and curb unproductive spending. The need for it is being felt not only by the Government both at the Government both at the federal and state level but also by sundry manufacturing industrial and corporate houses with a view to recast and restructure its functioning from within. In fact, downsizing implies fine turning of the work force ‘“ it stands for the ‘˜appropriate size’ of workers/ employees for a given volume of works. There is so far no hardboiled formula to determine the right or appropriate size; it all depends on the given volume of works.


It may be recalled that by the middle of the last decade the state had experienced a very severe financial crisis. Since, then, there seems to be no end to this bitter pill of fiscal instability. Most of us have said that it has been due to the adoption and implementation of the Fifth Pay Commission’s recommendation for the employee of the State Government. This may be partly true but it must be remembered that it is not the implementation of the new scale alone that causes the underlying crisis. Many mundane factors are at work alongside to accentuate the perilous condition. Parallel to Adam Smith’s ‘˜invisible hand’ we have ‘˜invisible Government’ ruling the roost in addition to venal babudom competing to loot the State. Which one of them shall we call lesser evil ‘“ extortion by force or extortion over a table by means of clever paper works through inflated or deflated bill or by means of totally fake bills? Unless we try to tackle the problem (resource mobilization) in its totality, we’ll merely end up in robbing Peter to pay Paul.

Be that as it may. Let it be admitted that downsizing of employee is imperative and a must for a resource- constraint State of Manipur. It is stated umpteen times that there are about 90,000 employees in the State that has a total population of just below 24 lakhs. As percentage to the total population, the much ‘“ maligned employee of the State Government constitutes only 27 percent and pensioners of only 12 percent respectively.

Given the total population, the number of persons being employed in the Government offices seems to be not that enormous in size. But the acute financial condition of the State dictates the Government to come up with or take some hard and unpopular decisions in the long-term interest of the economy as a whole. While participating in the Assembly discussion, Chief Minister O. Ibobi stated that there are, according to 1998 ‘“ 99 figures, about 74,839 regular employees in the State government, requiring the latter to pay Rs 55 crores per month as salary bill. He has also informed the House that his Government has concluded/ signed MoU with the Central Government which, amongst others, contain downsizing as one of its article with a view to drive resources and effect necessary administrative change. Following the MoU, as many as 9385 employees from 51 departments of the Government and 5000 Work Charged employees from the Engineering department will remain lay off. Thus, the total number of employee that will ‘˜go’ or ‘˜rest’ under the MoU comes to 14385.

It may be noted that it is against the basic tenet of positive economic to go on employing worker whose productivity is zero. Such workers, if any, are lost-ensuring liability for the employer. An astute and vigilant entrepreneur earnestly committed to the growth and development of the firm may be duty-bound, under the circumstances, to retire or part with the surplus laborers. This simple analogy holds true for the Government saddled with excess workforce. Why employ 10 persons for a work that can be done by 5? Why engage 8 to 9 clerks for a job that can be done by 3 or 4 clerks?

This has become the familiar scenario of any Government office here and there. It shows the need to rewrite the entire framework of Government’s machinery more strictly in the light of its perpetual insolvency. Realistically speaking, what the Government is trying to do or is doing viz, retiring of off-loading a certain proportion of its employee appears to be economically sensible and a step in the right direction keeping in view of our poor and dismal record in mobilizing resources or wealth production.


The underlying idea of downsizing the Government has been based on the premise that there are more people than is required in the Government sector. It may be difficult to determine the appropriate size that can run the day to day business of the Government. It is still theoretical and subjective in its concept. One thing is however clear and transparent that there can be excess workforce. The operation of the law of diminishing return, in spite of having clear relevance, doesn’t help us in determining the appropriate number.

As a matter of fact, most modern States have assumed the role of ‘˜provider’ in place of ‘˜facilitator’ which has become largely untenable today. This may quite understandably be in consonance with cliche like ‘˜welfare State’ or ‘˜welfareism’, the dominant political thought of the establishments of the early 60s, 70s and the 80s. It is good that more and more people are employed by the Government, provided there are sufficient productive works as well as adequate resources to compensate them. No real economic problem arises so long as the economy could generate resources enough to meet its liability. But this is simply not the case today. Border States of India’s North-East are distinctively hard pressed by shortage of resources and economic disabilities.

There is a vicious circle operating here. The absence of private or non-Government avenues of employment in the economy makes Government’s job attractive and profitable in the market. It therefore induces ‘everybody’ to queue up for any job, big or small, in the Government. Such wild craze or undue accent on Government service/job has, in turn, thwarted private sector initiative from taking a firm root. There is hardly any scope for private enterprise when the Government tries to give job to all and sundry even without the backing of sustainable resources.

We can therefore conclude that downsizing has double advantage. As stated, it is imperative for the Government to cut jobs the abolition of which doesn’t in any way affect its functioning. This is tantamount to curbing leakage or unproductive expenditure. It may also amount to mobilizing resources. Secondly, the contraction of employment avenues in Government sector, it is believed, would pave the way for the emergence and development of private sector in the economy. As indicated earlier the Government would have to change its role from being ‘˜a provider’ to ‘˜a facilitator’. Dhirubhai Ambani who passed away recently was a gas station attendant before he become CMD of his (own) brainchild Reliance Industries Limited (RIL), the largest private company in India ‘“ Rs 65,000 crores company equivalent to some 3 percent of India’s GDP. Who knows we must be having among us such enterprising people as the Ambanis, the Tatas and the Birlas provided the right or conductive atmosphere is facilitated by the Government.

It is sad to see the Government crumbling under its own weight. It’s high time the Government should lessen its burden and liability. It’s simply not sustainable to create jobs without being able to drive the necessary resource.


For a Government (any Government at that) is constantly a prisoner of overdraft-overspending-rightsizing or downsizing may be an attractive proposition. As an instrument to mobilize fund and curb unproductive spending, downsizing demands, on the part of the executive, skill and tactful handling by its very nature. It is a ‘˜necessary’ but ‘˜unpopular’ step for the Government. Extreme care has to be taken in determining the proposition as there is always the danger of the weapon being backfired. It is suggested that the measure be applied in tandem with other parallel measures. Lastly, we have admitted that downsizing is a must. But we should focus it to cover all classes and categories of employees. Our approach may be made more comprehensive, functional to all categories of employee in a non-discriminatory manner.

* The article was written by By L Chinzakham

* The writer is a Reader in Economics, Lamka College, Churachandpur

(Courtesy: The Sangai Express)

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