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Not much of a guarantee

Unlike previous employment-guarantee schemes (with the exception of Maharashtra’s EGS in 1973), the NREGA makes employment a right of the worker, writes Kaushik Basu.
None | By The Visible Hand | Kaushik Basu
UPDATED ON APR 12, 2008 11:40 PM IST

This is an important month for India’s National Rural Employment Guarantee Act (NREGA). The Act came into force in 2006 in 200 districts. This month it is being extended to over 600 hundred districts — virtually the whole country. The Act decrees that each rural household has the right to 100 days of employment each year. So the government is required to run rural work programmes where the poor can work. Unlike previous employment-guarantee schemes (with the exception of Maharashtra’s EGS in 1973), the NREGA makes employment a right of the worker. A worker can move the courts if no employment is provided, and is, in such an event, entitled to unemployment allowance.

I have been reading several evaluations of NREGA and have visited some sites where it is being implemented. It is a well-intentioned programme that involves many dedicated people. But there can be no denying that NREGA has been an overall disappointment. The money spent on it in 2007-08 was Rs 10,133 crores, and, according to Ambastha, Shankar and Shah’s (Economic and Political Weekly, 23 February) estimates, this will cross Rs 50,000 crores when it is implemented in full.

With this kind of money, there is much more that can be done for the poor than will be achieved by this.

Recent studies show that the performance has been mixed. There has been pilferage, though on a smaller scale than in earlier food-for-work programmes. Lots of jobs have been created but lots of workers have been turned away and, importantly, seldom has unemployment allowance been given to those who could not be employed.

These studies, however, evaluate the NREGA against its own targets. What is not questioned is whether the targets themselves are flawed, and whether some of the failures are an inevitable consequence of conception flaws.

Consider first the idea of making employment a right. No country in the world has ever succeeded in providing full employment. The chance of India — with its poor quality of governance and high corruption — being the first is zero. Hence, granting people the right to employment is to devalue the meaning of ‘right’. Rights, such as not to be tortured or to minimum livelihood or access to basic health facilities, that the state should be obligated to fulfill, get devalued by adding to the list rights that we know cannot be fulfilled.

Another mistake is to judge the programme by the number of NREGA jobs that have been created. The economy is an inter-connected system; a poorly-planned intervention in one sector may create jobs in that sector but diminish employment elsewhere. Surely our aim should be to maximise all jobs in India.

Last month I was in Dahod district — a bit of Gujarat that elbows into Madhya Pradesh. Drought prone, poor and rugged, this is the region of the bhils. I travelled there with members of a remarkable organisation, Disha, that has helped organise the bhils, who have been ruthlessly exploited or, at best, ignored in the past. We surveyed an area where villagers were working on digging a well. In this area of chronic water shortage this could be useful, and, as was explained to me, it also meant that these poor people would not have to go hunting for jobs to cities.

But I could not help feeling troubled. It was evident that productivity on these projects is shockingly low and a lot of the resources produced will be of poor quality and transient. The full-fledged NREGA is expected to have over 15 million workers. This will be like running a gigantic, inefficient public-sector enterprise.

Second, since the NREGA pays people for ‘work’, it keeps them away from other productive, income-generating activity. This is bad for the nation and also for the workers. If they were just given the money, they could have done more work and earned more. In this age of rising food prices, that could be useful to them.

Unlike some other critics, I am not worried about the fiscal burden of NREGA. I believe the government ought to spend money on the poor. But the better way to do so is to give money directly as a handout — a negative income tax-to the poor. There are excellent schemes that have been tried in other nations. Something similar could enable us to have the same effect on the poor as NREGA with half the money spent. And the remaining half could then be spent on developing rural irrigation, giving incentives to the firms to take manufacturing activity to small towns and villages and providing better heath and education to the needy.

(Kaushik Basu is C. Marks Professor and Director, Center for Analytic Economics, Cornell University)

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