NREG: Rahul’s political lauch pad in a shambles

The Congress is hoping its rural employment guarantee programme will offset anti-incumbency in the next elections but the road ahead is long and pot-holed

By Paranjoy Guha Thakurta

The National Rural Employment Guarantee programme has a long way to go before it makes a discernible impact on rural poverty and unemployment. Current indications are the programme has made halting progress in a few states like Rajasthan, Tamil Nadu and Maharashtra despite tardy and ineffective implementation as well as probable misappropriation of funds. Nevertheless, there is general consensus the programme needs to be streamlined and its functioning improved.

But for a few right-wing economists who say the NREG programme needs to be scrapped altogether, most are of the view the scheme needs to be implemented in earnest if some dent is to be made on the widespread incidence of deprivation arising out of joblessness in India’s more than 600,000 villages. For the Congress party leading the United Progressive Alliance government, successful implementation of the NREG programme arguably holds the single most important achievement to count anti-incumbency sentiments before the next general elections.
Not surprisingly, the government responded with alacrity when Rahul Gandhi, the newly-anointed general secretary of the Congress suggested the government expand the scope of the NREG to cover the entire country, against 330 districts – comprising a bit more than half of India’s geographical area – at present. Representatives of the Left, already having successfully confronted the UPA on the India-US nuclear agreement, supported the move but argued the NREG programme should be “immediately” extended to all districts in the country and not from the beginning of the next financial year starting April 1, 2008. (The NREG programme was originally meant to be extended to all of India’s more than 600 districts over a period of five years.)
After the enactment of the NREG Act in September 2005, the programme was formally launched on February 2, 2006 by Prime Minister Manmohan Singh at a village called Bandameeda Palli in the impoverished Anantapur district of Andhra Pradesh. Initially, the programme was meant to be implemented in only 200 of the most economically backward districts in the country.

The government has described the NREG programme as the world’s biggest and most ambitious social security scheme to provide work to millions of unemployed individuals living in rural areas. Government ministers have described it as “the single most revolutionary social welfare scheme anywhere in the world”, adding it constitutes the largest initiative on job creation in modern history since employment as a legally enforceable right has not been granted to citizens of any country.
Even before the programme was launched, there was considerable scepticism it would not benefit the poorest sections of the country. At least one-fourth of more than a billion people living in India earn less than one US dollar (or less than Rs 40) a day, the internationally defined poverty line, largely on account of lack of job opportunities; this proportion could be as high as 30 per cent, according to the World Bank.

The NREG programme aims at providing guaranteed employment at the official minimum wage for 100 days a year to one able-bodied member of each and every rural household who volunteers to do unskilled manual labour. It was first argued the programme should be confined to those below the poverty line. Thereafter, thanks considerably to the persuasive arguments put forward by social activists like Jean Dreze and Aruna Roy, the phrase “poor household” was replaced in the 2005 Act by “household” to make it applicable to people living above the officially defined “poverty line”.
The government claims that at its core, the Act ensures manual employment to all those who demand it in the rural areas with a provision for unemployment allowance in case there is a failure to meet the demand for work. The Act is also meant to improve working conditions, bring about investments in productive assets, decentralise implementation (mainly by gram panchayats but also by non-government civil society organisations) and ensure a transparent system of implementing projects in rural areas. The successful implementation of the programme is not merely meant to have a positive impact on real wages and employment opportunities, it is intended to enhance food security and check migration from rural to urban areas.

The government acknowledges that most of these objectives, laudable as they are, have not been fulfilled or, at best, partially fulfilled. Despite the fact that the scale of fund absorption, the scale and scope of work and awareness about the programme has expanded gradually, many shortcomings remain that need to be urgently addressed. The Ministry of Rural Development acknowledges that panchayats
and other implementing agencies have weak capacities to plan and execute projects.
Moreover, the provisions contained in the NREG Act in relation to working conditions and minimum wages are not properly enforced. Krishi Bhavan officials concede those who work often do not receive a full day’s wage but have to part with a portion extorted by various individuals including panchayat functionaries. Significantly, when it comes to the rural poor and underprivileged sections, even the articulation of the demand for work is weak despite the prevalence of unemployment and destitution.

The Ministry, in collaboration with the United Nations Development Programme, intends on producing a number of documentary films that would not merely highlight verifiable and measurable success stories which could be replicated but also train panchayat officials and representatives of NGOs. The training films would look at processes to articulate demand for work, formulation and execution of projects, facilities and work sites, besides ensuring proper recording, disclosure, monitoring and audit of payments of wages.

These films are meant to cover the following regions: western Orissa, Jharkhand, Bastar and adjoining regions of Chhattisgarh, northern Chhattisgarh, the Telengana and Rayalseema regions of AP, the Narmada Valley and southern districts of Madhya Pradesh, Bundelkhand in Uttar Pradesh, eastern UP, Vidharba and the northern tribal districts of Maharashtra, southern and western Rajasthan and the western districts of West Bengal.

In the Union Budget for 2005-2006, Finance Minister P. Chidambaram provided an allocation of Rs 24,000 crore to implement the NREG programme. However, after the Act was approved by Parliament and the programme was operationalised, there were less than three months left in the financial year. In February 2006, in the Budget for 2006-07, the allocation for rural employment schemes was Rs 14,300 crore, Rs 11,300 crore for the NREG programme and Rs 3,000 crore for the Sampoorna Grameen Rozgar Yojana. In the budget for the following year, the allocation went up only marginally to Rs 14,800 crore: Rs 12,000 crore for the NREG programme and Rs 2,800 crore for the SGRY.

Chidambaram was asked why the budgetary allocations had gone up only marginally although the government intended to expand the coverage of the programme from 200 districts to 330 districts. He said the NREG scheme was “demand driven” and not dependent on budget allocations. Funds would not be a constraint in expanding the coverage of the programme. It has been calculated that if the NREG programme is effectively implemented all over the country, the total expenditure would be Rs 40,000-50,000 crore per year – or more than one percent of India’s GDP.
Ten percent of the total amount spent on implementing the NREG Act would have to be spent by state governments, most of which are already strapped for funds. A part of the money would come from merging existing rural development schemes with the employment guarantee programme. For example, out of the 200 districts covered by the programme in its first phase, an existing Food for Work programme was under implementation in 150 districts.

The other issue pertains to uniform implementation of the scheme in a country in which the official daily minimum wage varies widely, from Rs 45 to more than Rs 100 (or an average of around Rs 60), not only from state to state but within individual states as well. The average annual wage per person thus works out to Rs 6,000 or only Rs 500 per month.

The NREG Act has been criticised for many reasons other than the ones already mentioned. It has been apprehended that there could be friction within a family over selection of the member to be provided the job resulting in discrimination against women and those physically challenged. Then, many state governments in India are perennially short of funds and may not be able to contribute their 10 percent share. It is further contended that if the money spent on the scheme does not reach the genuinely needy, it will not be able to halt migration from villages to cities.

According to the 2001 Census of India, 720 million people live in rural areas. The census said the rate of unemployment was 7.8 per cent. Absence of employment opportunities is the principal reason why many people migrate from rural to urban areas. One of the youngest countries in the world, close to two-thirds of the Indian population is under the age of 35. The country needs to create an estimated 60 million jobs over the next five years to prevent the current unemployment rate from worsening.

There has been considerable scepticism about the efficacy of the employment guarantee programme. According to economist Omkar Goswami: “In principle, there is nothing wrong with this Keynesian kind of programme that seeks to create jobs while building the rural infrastructure, but there are at least three sets of problems. First, since the national exchequer is bone dry, any largesse would increase the country’s fiscal deficit with all its attendant problems. “The second set of constraints relates to the fact that most of the money for the programme would have to move from New Delhi to state capitals and thereon to district headquarters, by which time there would have been a hell of a lot of leakage,” Goswami said, adding that the third problem related to India’s “woeful track record” in targeting subsidies to ensure government funds reach those who need them the most.

“I don’t buy the line that numerous righteous NGOs using the Right to Information Act would be able to ensure that the funds meant for the rural employment guarantee scheme are properly utilized,” said Goswami, a former chief economist at the Confederation of Indian Industry and currently chairman, CERG Advisory, a consulting firm.

A spokesperson of the World Bank in New Delhi had told this correspondent that the scheme has great potential but the “devil may lie in the detail”. He said four key issues needed to be addressed: “The wage rate should be such as to ensure that it is employment of the last resort so that there is self-selection by the poorest labourers and there is no withdrawal of skilled workers from existing jobs. Secondly, the assets that are created in the rural areas should not only be maintained on a sustainable basis but should directly benefit the poor,” he said, adding that the “generic issue of corruption must also be tackled”.

Despite the checks and balances that are supposed to exist in the NREG Act, there is apprehension that political parties in power in specific states would ensure that their supporters would get enrolled in large numbers to the exclusion of those who support opposition parties. Only an honest and responsive local administration would be able to ensure that only the truly deserving get work irrespective of whether or not they are supporters of particular political parties.
Data compiled until September by the Ministry of Rural Development indicates that instead of 100 days of work in a year, the NREG programme has been able to provide work for 18.46 days in Bihar, 21.61 days in Assam and 39.90 days in MP. Even in a state like Maharashtra which has the longest history in the country of implementing a rural employment guarantee programme, the days of work provided is 44.69 days. The track record of the programme in Rajasthan (50.67 days) and Tamil Nadu (52.59 days) were among the best. In particular states like Orissa, there were imbalances in the pattern of implementation. For instance, most of the households covered were in the districts of Dhenkanal, Mayurbhanj and Sambalpur while there were relatively few households in the relatively more impoverished districts of Koraput, Kalahandi and Kandhamal.
The Union government and the state governments clearly have considerable ground to cover before the National Rural Employment Guarantee programme can be truly described as not only the world’s largest but also an effective social security scheme.