Friday, February 19, 2010


Hi friends

This small piece is taken from two articles in Mint giving opposite perspectives to the NREGA scheme of the Congress(I)-led UPA Govt. The first article talks about how NREGA has helped increase the disposable incomes of people from rural areas, and the second article talks about how NREGA might shunt the long-term economic development of the country. I will try to illustrate both sides of the story, in a point-wise format below.

What is NREGA?

The National Rural Employment Guarantee Act (now called "Mahatma Gandhi NREGA")  is a scheme that provides a legal guarantee for 100 days of employment every financial year to adult members of any rural household willing to do public work-related unskilled manual work, at the statutory minimum wage of Rs.60 per day. It aims at enhancing the livelihood security of people in rural areas. The Central government outlay for this scheme has been Rs. 39,100 crores ($8 billion) in FY 2009-10.

Positive side of NREGS:

1. Around 80% of the workforce is constituted by rural women, who were previously economically unproductive. By working under the scheme, women are able to bring in supplementary income.

2. Most villagers prefer to work under NREGA rather than in factories nearby since the scheme entails 8 hours of labour a day against the 12 hours workers have to put in at the latter.

3. It has increased “bargaining power” as well as household incomes among the poor in rural areas.

4. NREGA serves as an effective safety net for the unemployed, especially during years of famine and drought.

5. For a change, the money seems to be percolating down to where it needs to reach, resulting in the generation of income. People don’t need to go off to cities any more during the lean season.

6. It appears NREGA has succeeded in removing the kind of wrenching poverty that most of the communities have endured so far.

7. NREGA does not just give wages to labour, but also creates community assets which are useful for the villagers in the long run. To widen the scope of asset creation under the scheme, the Centre last year tied NREGA to other government schemes related to agriculture, water resources, land resources, forests and rural roads.

8. In the long term, the actual physical work done via NREGS might prove to be trivial in the face of the social and administrative gains it brings, if utilized properly.

Sounds great, right? Well it is good considering the situation that the poor of this country are facing today. But then there are always two sides to the same coin.

The negative effects of NREGS:

1. Economic development necessarily involves the movement of people from low-productivity to high-productivity jobs. NREGS creates perverse incentives for poor villagers to stay behind to earn a basic income for 100 days a year rather than take the risk and venture out to seek more productive employment.

2. NREGS effectively puts a floor under rural wages, leading to labour shortages during harvest time (a problem faced by farmers).

3. Poor implementation of NREGA in states such as Bihar and Uttar Pradesh.

4. Payments to workers are being delayed as there is a late measurement of work.

5. Only 19% of the 850,000 differently abled people registered for the scheme have got work under NREGA.

6. The so-called elite groups within the workers capture most of the job cards. In Bihar, it was observed that only the people of the dominant caste got the job cards whereas the Dalits were denied participation. (Jobs cards are given to workers to enrol them for projects under NREGA)

What was my take on this?

Point 1 of the "negative-effects" was something that I have always believed in. I know it, because in a very different, yet related way, I am facing it myself. Although I believe that it will take some time before we see the effects of this, but my assessment is that NREGS must have indeed brought about social and administrative gains in the society. But these measures need to go hand-in-hand with the economic and fiscal scenario that we face. Economic development will happen when people seek better jobs and take more risks. With more than 60% of the population below the poverty line, it will take a while before we ensure that everyone feels secure. But once we reach the critical-mass, we need to take effective measures to ensure that the system does not depend solely on NREGS. I hope our sensible Govt. headed by an economist, is listening.

P.S. The title of this post is inspired by this faking news article.

Ciao for now.


Yemiledu said...

Good POst Cause I could eaily understand everything though such topics scare me :P
Keep writing such posts and do some gyan daan to me :~P

IIM ka Sarkari Babu said...

@Sivarchana: Till Feb 28th surely :)