Prime Minister Manmohan Singh criticised the high salaries paid to corporate executives. For 40 years, Indian governments in which he held all the top economic positions had capped all managers’ salaries.
Caps remain in the public sector where, as remarked by a top economic bureaucrat, “the highest compensation to the head of the largest public enterprise in the country cannot exceed that paid to the worst secretary in the Government of India.”
This did not stop the growing divide between “India” and “Bharat” as many marketing executives characterised the difference between urban and rural, rich and poor. In 1989-90 the “rich” according to NCAER surveys were 1.4 per cent of all households; in 1999-00 they were 6.9 per cent. The numbers have grown further and the number of “very rich” is growing faster.
The PM has cautioned that these high differentials are bad for our society. He ignored the shortage of trained and experienced executives, global demand for them and bitter competition for their services. 
Differentials today have grown between the professions. In 1956 as a research assistant in the Second Finance Commission my salary was Rs 200 per month. Soon after, as lecturer in a college at New Delhi on new UGC scales it was Rs 315. Friends who joined the central services of government received a starting salary of Rs 400 per month. In Hindustan Lever from 1957 as a management trainee, my salary was Rs 575 per month. Thus the differentials between white collar professions like research, academia, government and private industry were not very wide.
Today the chairman of a major company would cost his company at least Rs 3 crore per year; counting perquisites, a secretary to government might cost Rs 15 lakhs; a professor in the university with accommodation would cost Rs 10 lakhs. MBA’s from even relatively unknown institutions can expect Rs 30,000 per month. So can a computer or software engineer.
Today’s differentials in white collar jobs give the weakest signals for teaching and research as occupations. The bright and ambitious can go overseas where workloads give time for research and developing scholastic reputations. These large differentials are destroying the quality of our higher, professional and technical education and of our scientific and social sciences research.
The “demographic dividend” because of our growing number of youth, depends on how well they are educated. The quality of college and university teachers is dropping rapidly. It is worse in the government school system. A primary school teacher is paid Rs 8000 to Rs 12,000 per month, with small increments each year. Poorly designed curricula, controversial text books, primitive school buildings, many without toilets or water, have led to a widening gap in the quality of school education between the poor and the well-to-do.
New schools for the affluent offer much better remuneration and attract very well qualified teachers. For the majority, government schools offer poor quality teaching. Schools are declining in value in developing a qualified work force. The problem is not the high salaries of some executives but the government’s inability to remunerate teachers adequately, with rewards and penalties based on performance.
The numbers in the unorganised sector was 396.7 million in January 2000, of which 232.8 million were in agriculture. Our very poor are here. The average daily earnings of casual workers were Rs 29.06 for women and for men, 44.85. These millions are in a very different world from corporate executives, call centre employees and air hostesses. Their availability of good and affordable education, health services and sanitation is poor. 
Pay Commissions periodically improve compensations to government officials and public sector executives. Organised labour is protected by trade unions. The unorganised sector especially teachers and researchers have no one to look after their interests. Neglecting academia and the masses will stultify India’s growth potential.
Government must stay out of fixing compensation of business executives. Shareholders’ rights to scrutinise managers’ appointments and salaries must be strengthened.
The Arjun Sengupta Commission has made recommendations to improve the lot of workers in the unorganised sector. They should be accepted and honestly implemented. These include a social security scheme, enforceable minimum wages, and extension of the national rural employment guarantee scheme to cover everyone.
An independent regulatory framework to monitor implementation of such schemes, and imposing severe penalties for cheating and waste can improve their reach to the deserving. In higher education and research, equality must be replaced by merit, with minimum work norms, performance measurement, incentives for good performers, better minimum wages than now, and penalties for performing below norms. Politicians, must focus on such matters – not on executive salaries and populist measures like reservations.