Home > Archives (2006 on) > 2014 > Black Diwali for Rural Daily Wage Earners

Mainstream, VOL LII, No 49, November 29, 2014

Black Diwali for Rural Daily Wage Earners

Monday 1 December 2014

by Arun Srivastava

While economists Jagdish Bhagwati and Arvind Panagariya have been supporting the Modi Government’s initiative to squeeze out the operational area of the Mahatma Gandhi National Rural Employment Guarantee Act 2005 (the NREGA scheme) and confine it to the country’s poorest 200 districts, nearly a thousand workers engaged with the scheme observed Black Diwali against the government’s move to dilute it.

It is indeed an irony that once again a public spat has surfaced between two sets of economists—one representing the line of enhancing the capacity and the other a votary of the capitalist mode of growth, on the relevance and feasibility of the NREGA scheme. The immediate reason for this spat has been the Modi Government’s move to dilute the Act and restrict the scheme to the country’s poorest 200 districts and also imposing a cap on the NREGA expenditure by the State governments.

Though the scheme is a social security measure which aims to guarantee the ‘right to work’ and ensure livelihood security in rural areas by providing at least 100 days of guaranteed wage employment in a financial year to every household whose adult members volunteer to do unskilled manual work, the NREGA scheme is perceived as a mechanism used by the Congress to garner the votes of the rural poor, more than benefiting them economically. Some senior and prominent leaders of the BJP also nurse this feeling. Incidentally, the UPA Government had planned to increase the number of working days from 100 to 150 before the 2014 Lok Sabha elections in the country but failed. The statute is “the largest and most ambitious social security and public works programme in the world”. Undoubtedly introduction of the scheme in 2005 had helped the UPA to get the votes of the rural poor. But this gives rise to the question: if the scheme was flawed and did not help the rural poor, then why did they vote for the Congress?

Obviously there is something amiss between the allegation of misuse of funds and that the Congress used it to gain votes. In fact the latest move of the Modi Government to restrict the scheme to 200 poorest districts is conjured by this fact. However, the NDA Government has not yet come out with the basic material and information which prompted the government to decide to slash the area of operation. Interestingly, the Modi Government has allocated Rs 34,000 crores for the scheme. The outlay for the scheme in 2013-14 was Rs 33,000 crores. The government also made it known that the NREGA scheme will continue, but the Modi Government will revamp the scheme to make it ‘development-oriented’. The programme assuring 100 days of guaranteed wage employment in a financial year to every rural household, has been subject to allegations of misuse and corruption. Significantly the Finance Minister, Arun Jaitley, in his Budget said: “The government is committed to providing wage and self-employment opportunities in rural areas. However, wage employment would be provided under MGNREGA through works that are more productive, asset creating and substantially linked to agriculture and allied activities.”

Surprisingly, the Modi Government has made a sudden backtrack from its earlier position. This raises doubts about the intentions and roles of the academics and economists close to the BJP and Modi Government. Notwithstanding the fact that the UPA Government had tagged the scheme with asset creation, these intellectuals fed the information that the money has failed to create assets in the rural areas. None can deny that a portion of the amount has been siphoned off by the vested interests and government. And true enough, these people belong to the urban middle class which has traditionally and irrevocably been opposed to any financial help to the poor. In their perception these people do not deserve a humane treatment and the government was simply wasting their hard-earned money on these creatures. An insight into some of the infamous scams like the fodder scam, Ayurveda scam, Saradha scam will make it explicit that these urban babus have been usurping the funds meant for the rural poor and tribals.

Famous economists Jagdish Bhagwati and Arvind Panagariya have alleged that the “compelling reason for limiting NREGA as a policy to shift resources to the poor consists precisely in the fact that it has drawbacks that an alternative policy of cash transfers does not have”. In their view, “By opting to retain and complete the Aadhaar project and launching the Jan Dhan Yojana, which would together provide the necessary infrastructure, the PM would seem to have cleared the way for an eventual move to cash transfers. And that makes pruning of the inefficient NREGA as the instrument of shifting income to the poor, an eminently reasonable interim step.”

They even state: “To appreciate fully how inefficient NREGA is at transferring income to the poor, consider the following. Existing data show that on average 30 per cent of NREGA expenditures are incurred on materials and 70 per cent on wages. Assuming the daily NREGA wage to be Rs 130, this requires an expenditure of Rs 186 to employ one worker per day. But not all Rs 130 in wages amount to transfer. When accepting NREGA employment, the worker forgoes the opportunity to work elsewhere. Even assuming the daily market wage to be a low Rs 80, net transfer under NREGA is only Rs 50. So we spend a solid Rs 186 to transfer a mere Rs 50.

“This example does not include the additional cost in bribes as money flows from the Centre all the way down to the NREGA employee. Conservatively assuming a leakage of 25 per cent along the chain, the starting amount would have to be Rs 248 to transfer a net of Rs 50 to the worker. That works out to Re 1 in net transfer for every Rs 5 spent!”

It is worth mentioning the remarks made by the former Prime Minister, Rajiv Gandhi. He had said that out of 100 paise only 15 paise goes to the people at the grassroot level. The two persons should have said something original and new. Instead of holding responsible the UPA Government for poor implementation of the scheme, they are acting like a quack to amputate the limb, to deny whatever little the poor got. It is most unfortunate that they are not aware of the ground realities. The NREGA has in fact put a check on the migration of labourers. Bihar has been a major supplier of the work force to Punjab and Harayana for agricultural activities. But after the NREGA was implemented, most of the labourers preferred not to migrate. This has created a major labour force crunch in those States. The farmers of these two States had in fact offered many other benefits to them. Whoever has fed the information that the NREGA provides employment during periods when no other employment is available has done a major disservice to them. Yes, it is a fact that the NREGA has raised the market wages by leaps and bounds. This remark of the economists makes it abundantly clear that the NREGA has boosted the economic condition of the rural poor and placed them in a position to bargain. Naturally their argument—“if NREGA employment is provided only when no other employment opportunities are available and is absent when employment opportunities in the market exist, it is a stretch to argue that it has led to any increase in wage”—does not stand scrutimy.

The economists cite the study report of Accountability Initiative of the think-tank Centre for Policy Research. According to it, “In FY 2010-11, Uttar Pradesh—which accounts for 20 per cent of the country’s BPL population—generated 13 per cent of the total NREGA employment provided while Andhra Pradesh and Tamil Nadu, which together account for 8 per cent of the country’s rural BPL households, provided 23 per cent of total NREGA employment.” Obviously for this the UP Government should be held responsible. It is really a skewed argument that the poor people should be sacrificed for the failure of the UP Government.

There is little doubt that the entire approach of the two economists smacks of bias. Since they are opposed to the socialist ideas, they try to find fault with this scheme. They are also opposed to it for the reason that the scheme was conceptualised and drafted by Jean Drèze who is known for his anti-market stance. He has been close to Amartya Sen. He has worked on many issues relating to development economics including hunger, famine, education, gender inequality, childcare, school feeding, employment guarantee etc. It is a known fact that the economists have been opposed to Sen and earlier they had a spat with him on the NREGA itself. The scheme, which provides jobs to the rural mass, was in fact lauded by Nobel Laureate Amartya Sen who described it as an “enhancer of capacity”. “NREGA reaches out to the people and gives them income. It is an enhancer of capability. It enhances their self-respect and participation in life and community,” Sen had said during a function to mark the golden jubilee of the Bar Council of India.

One thing is quite significant that Sen and Bhagawati are for the eradication of poverty and launching of poverty alleviation programmes. Naturally it is imperative that they should suggest to the government not to ignore the interests of the poor. It is indeed shocking to see common people identifying the intellectuals and economists opposed to the anti-poverty programmes like NREGA as capitalist roaders. One can expect this nature of treatment from the BJP politicians since they are politically opposed to secularism and the Nehruvian concept of discourse. But others are supposed to act in a rational manner. Nonetheless it cannot be ignored that the NREGA has benefited the rural poor. What is needed is to chisel it and make it more responsive and also to ensure that the fund leakage is completely stopped. The bureaucrats should be made answerable. The proposal to introduce cash transfers should be implemented if it helps the cause of the poor.

There is no denying the fact that the achievements of the NREGA have been significant; however, the Act has the potential to play an even greater role in ensuring productive assets and sustainable livelihoods. It is thus critical to build the capacity of the communities to more effectively demand their entitlements, plan works, create durable assets and implement the NREGA. The Ministry of Rural Development should initiate reforms to simplify procedures, increase use of information technology, involve civil society organisations (CSOs) etc. Livelihood security for the poor is one of the most important goals. It is important, at the same time, to recognise that neither is Sen against growth, nor is Bhagwati anti-poverty alleviation. Sen’s appreciation for India’s post-reforms economic growth and Bhagwati’s assertion that the task of reforms is not complete without redistribution are candid examples of this.

The compulsion to win over the support of the burgeoning urban middle class has been at the root of the present controversy. The Indian middle class is not the classical middle class of Europe or France which took birth after the industrial revolution. It is a hybrid. Naturally this class lacks a class character and commit-ment. It thinks itself to be the custodian of all the government’s welfare programmes and benefits. They nurse the view that they are the first claimant to anything that the country offers to its citizens. The poor have no right. India has a large middle class with immense purchasing power. Those who have risen from the category of poor and are yet to stabilise in the middle class, the ‘neo-middle class’. Having moved out of poverty, their aspirations have increased. They want amenities and services of a certain standard. They feel that the government’s facilities and services are not up to the mark, and hence they resort to the private sector for things like education, health and transport. This is obviously costly, but they are not hesitant to have it even at a premium price. It is in this perspective that they expect the government to provide them everything. It is a paradox that they oppose subsidies to the poor but when it comes to themselves, they oppose tooth and nail any move to reduce the subsidies on the items meant for them.

We ought to see when, how and under what circumstances the middle class prefers to align with the poor people and anti-poverty social agendas and policies. Middle class vulnerability is the key to understanding the role that the middle classes play in development and poverty politics. There is a lot of talk about the millions of people being lifted into the middle classes in India. It is doubtful that these relatively vulnerable middle class actors can be engines of growth and mobilised politically for a socially cohesive policy. It is an irony that the middle class people apprehend that the doles will have an adverse impact on their growth and consolidation. They are scared of the prospect of a possible shrink. Evidence from emerging economies suggests that the term “global middle class” hides the transitory and temporary nature of this middle position. The Indian middle class cannot also be clubbed as petit bourgeois. In a real sense they represent the culture of crony capitalism.

The NREGA, rolled out in three successive stages starting from 2005, covered the entire country by 2008. The scale of the programme is staggering, providing employment to a third of India’s rural population at an annual cost of 0.3-0.4 per cent of the Gross Domestic Product (GDP). It formed the backbone of the UPA Government’s anti-poverty and rural safety net programme, and may well represent its most important legacy in the long run. The views concerning the impact of the NREGA are varied, predictably along partisan lines. Critics argue that it is populist, politically motivated and manipulated by the UPA for its own electoral gains beset with corruption and leakages. However, one thing is certain: notwithstanding runaway fiscal deficits, inflation and slowdown of growth, the programme has succeeded in reducing rural poverty, building infrastructure and strengthening local governance.

It is a paradox that most of the self-styled conscience-keepers of the country, a big section of the middle class nurse skewed views about the NREGA. They believe that it is a mechanism to inculcate skills in the unskilled labourers. They are not aware of the simple fact that it is a simple instrument for providing 100 days’ work each year to the rural poor. Prior to the enactment of the NREGA India had no programme in the rural areas that promised employment as a legal right..The primary aim of the scheme has been creating ‘durable’ assets, and improving food security in the rural areas through public works with special safeguards for the weaker sections and women of the community.

Instead it was perceived as a mechanism to discourage migration and utilise the human resources for the development of the state. From 2006 to December 2013 a sum of nearly Rs 1,55,000 crores has been spent on wages. The year-wise expenditure would reveal that the amount is much less to the subsidy given for the middle class people. In fact the scheme’s notified wages have been increased from Rs 65 per person in 2006 to Rs 124 by 2013. The audit of the work done and labourers benefited from the scheme reveal that in the current financial year 2013-14 (upto December 2013) at least 3.8 households were provided employment and 135 crore person days of employment were created. During the current financial year nearly Rs 17,832 crores (76 per cent of the total expenditure) has been incurred on wages.

Thousands of NREGA labourers from 15 panchayats in Bihar’s Muzaffarpur district observed Black Diwali. They have been on dharna demanding payment of the wage dues and also protesting against the Central Government’s move to dilute and disband the NREGA scheme. “Nearly 3000 workers from six blocks have not been paid their wages for the past six months and the total outstanding comes to Rs 1 crore,” said Chinmay Kumar of Samaj Parivartan Shakti Sanghtan. a non-governmental organisation. The workers were either denied their daily wages or paid Rs 60 against the prescribed Rs 162. As the officials have not done anything, they invited Professor Jean Drèze to investigate the issue and do the needful. In fact Drèze also sat on dharna at Mahant Manihari Panchayat Bhawan under the Kurhani block. Sanjay Sahni of the Samaj Parivartan Shakti Sangathan says: “In the villages, the poor need employment. It is true that there is a lot of corruption But in the last three years, they have fought for their rights and ensured they have earned some money.” One of the beneficiaries of the scheme is 60-year-old Paramshila Devi. The Rs 20,000 she has earned in the last three years, doing various jobs under the NREGA, has helped her survive after her husband’s death two years ago.”

Sometime ago, 28 of India’s top economists, including Dilip Abreu, Pranab Bardhan, V. Bhaskar, Ashwini Deshpande, Jean Drèze, Maitreesh Ghatak, Jayati Ghosh wrote to Prime Minister Narenda Modi expressing appre-hensions that the government was trying to dilute the rural jobs scheme. They raised specific objections to some of the proposed moves like restricting the scheme to the country’s poorest 200 districts and imposing a cap on the NREGA expenditure by the State governments.. They wrote: “Despite numerous hurdles, the NREGA has achieved significant results. At a relatively small cost (currently 0.3 per cent of India’s GDP), about 50 million households are getting some employment at NREGA worksites every year. A majority of NREGA workers are women, and close to half are Dalits or Adivasis. A large body of research shows that the NREGA has wide-ranging social benefits, including the creation of productive assets. Recent research also shows that corruption levels have steadily declined over time. For instance, official estimates of NREGA employment generation are very close to independent estimates from the second India Human Development Survey. While corruption remains a concern, experience shows that it can be curbed, and the battle against corruption in NREGA has helped to establish new standards of transparency in other social programmes as well. No doubt, the programme could and should do even better. But the gains that have been achieved are substantial and amply justify further efforts to make it a success.”

They also mentioned; “The Central Govern-ment appears to be considering an amendment aimed at restricting the NREGA to the country’s poorest 200 districts. This runs against a fundamental premise of the Act: gainful employ-ment that affords basic economic security is a human right. Even India’s relatively prosperous districts are unlikely to be free from unemploy-ment or poverty in the foreseeable future. The message seems to be that the new government is not committed to the NREGA and hopes to restrict it as much as possible. We urge you to reverse this trend and ensure that the programme receives all the support it requires to survive and thrive.”

The most disgraceful aspect of Bhagawati and Panagariya’s objection was the language used by them against the signatories. They wrote: “Reports that the government proposes to confine the NREGA scheme to 200 poorest districts has prompted 28 ‘leading economists’ to denounce this reform in a petition to the PM. While some of the signatories can indeed be described as ‘leading’ economists, many are there just to add weight through numbers. But the real problem with the petition is that it misses the logic underlying the government proposal and therefore might well be described mischievously as authored by (mis)leading economists.” This kind of language does not behove the stature of the two economists. Moreover they described the move of the government as “reforms” which is a wrong presentation. It is indeed pruning and slashing of the programme that amounts to denying the poor the right to survive by a welfare state. Actually there is little doubt the poor of the country would be really benefitted if the scheme is thoroughly reformed, strengthened and not slashed.

The author is a senior journalist and can be contacted at sriv52@gmail.com