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Asset creation, skill enhancement key to MGNREGA success

The MGNREGA must focus on creating assets and enhancing the skills of the beneficiaries

comment Updated: Feb 07, 2015 00:10 IST

In 2005, the then Union finance minister P Chidambaram promised to give a “new deal” to rural India. What followed was a raft of policy and legislative interventions to ensure that those at the bottom of the pyramid remained within the perimeter of India’s development framework. The spirit of ‘inclusive growth’ was predicated upon the perception that India was a ‘welfare laggard’ and it was about time to tilt the balance. The National Rural Employment Guarantee Scheme (NREGS) was born precisely to address this anomaly. The world’s largest rural job scheme made it mandatory for the government to offer work to the poorest rural households. There were a few assumptions that fortified the arguments for its launch. One out of every two Indians earns their living by working on farms. Farm income accounts for just about 15% of India’s national income. This implies that there are thousands of landless workers who toil in the farms primarily because there are no alternatives. This also exemplifies a classic case of disguised unemployment, implying that there are more people working on the farms than required.

What, however, is established is that the programme — the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) as it is now called — has helped push up rural incomes and, as an attendant corollary, people’s spending power in the countryside. From about `25,000 in 2004-05 India’s average annual or per capita income currently stands at more than `80,000. Howsoever small it may be, part of this rise has also come from rural areas attributable to MGNREGA-driven wages. Besides, there is enough evidence to suggest that government-guaranteed jobs closer home have kept rural folks rooted in villages.

While this income transfer is exactly what India wants as a development policy, this transmission should come bundled with two other attendant objectives: Asset creation and skill enhancement. The total MGNREGA budget over the last 10 years would top `3 lakh crore, but the use of these funds in creating infrastructure and other public assets has, perhaps, left much to be desired. There is a redistribution that is happening from urban areas to rural areas. At a secondary level, MGNREGA has also brought about a shift in income distribution away from the landed class to the landless labour. Likewise, part of the funds can be used for enhancing skills at the village level through a policy that mixes work with stipend-based apprenticeship. Skill enhancement empowers people and prepares them for jobs to conform to new technologies. These design flaws in the policy need immediate attention. Otherwise, the much-touted but well-meaning rural job scheme will increasingly resemble a direct cash transfer programme.