Surjit S Bhalla: Ten Lies and an Act: III

, December 25 and December 30, 2004) documented six LNLFs""Lies, Near Lies and Falsehoods""in the government's super-creative Employment Guarantee Act (EGA).

This ambitious act, supported fulsomely by the World Bank President, James Wolfensohn, and in a somewhat flip-flop manner by Nobel laureate Amartya Sen (" a very worthwhile programme but one should be cautious") purports to provide 100 days of guaranteed employment to one member of every poor family in the country.

The articles documented that the politically correct EGA had very little substantiation in the form of facts. This article documents four more LNLFs.

The seventh lie is the claim that the Indian experience with employment programmes has been successful and therefore should be expanded from about Rs 5,000 crore today to Rs 40,000 crore in the United Progressive Alliance's (UPA) nirvana of tomorrow.

Apparently, the arrogance of poverty ideology recognises no limits to LNLFs. The EGA advocates fail to point out that the government was only able to spend 81 per cent of the allocated expenditures in 1999-00 .

 

Rajiv Gandhi Index of Effectiveness of Government Expenditures
Row No	1993/94	1999/00
All India
1 Government allocated expenditure (crores)	4059	5227
2 Government spends (crores)	3874	4215
3 Government spends on wages (%)	57	59
4 Mandays created (Govt), in crores	108	55
5 Mandays created (NSSO), in crores	34	20
6 Rajiv Gandhi Index of Effectiveness (RGIGE)
Step 1 (Row 3*Row5/Row 4) (in %)	17.9	21.5
7 Percentage of poor beneficiaries (NSSO data)	50	32
8 RGIGE, final (Row 6*Row 7/100) (in %)	9	7
Maharashtra
9 Mandays created (Govt), in crores	14.8	9.5
10 Mandays created (NSSO), in crores	3.5	1.7
11 Mandays created for poor (NSSO), in crores	1.8	0.4
12 RGIGE, final (in %)	12.4	4.5
Source: Department of Rural Development, Government of India; NSSO Employment Unemployment Surveys for years 1993-94 & 1999-00. Notes: Government allocated funds are computed as the sum of funds allocated and spent on JRY/JGSY & EAS. JRY: Jawahar Rozgar Yojana; JGSY: Jawahar Gram Samriddhi Yojana; EAS: Employment Assurance Scheme

How can one therefore extrapolate that the government can manage to spend 10 times the amount, and that too in a booming rural economy (and booming because of the UPA's policies of employment generation!)? Even residents of cloud cuckoo land do not make such claims.

The eighth LNLF is somewhat involved. Essentially, the advocates argue, with support from well-meaning liberals (is there any other kind?), that the EGA would be self-targeting and therefore a good, if not the best, policy to help the poor.

As evidence they point to the "success" of the Employment Guarantee Scheme (EGS) in Maharashtra, a job scheme in operation for decades.

In the beginning (early 1970s), the EGS claimed to have spent over 90 per cent of total expenditures on wages""this number fell to 60 per cent in 1993-94 and has stayed at the same ratio through the nineties. So much so that the EGA advocates have used this ratio as a benchmark for their calculations. Therefore, each 100 rupees meant for employment deliver 60 rupees of employment.

The poverty impact of such programmes (hereafter called the Rajiv Gandhi Index of Government Expenditures or RGIGE), if all the employed were poor, would be 60 i.e. 60 per cent of expenditures meant for the poor reached the poor.

Recall that Rajiv Gandhi had stated that the average index value of government "in the name of the poor" programmes was around 15, so the EGS does seem to have been a particularly good, pro-poor programme. This is a lie (the eighth)""the effectiveness of the EGS programme is nowhere close to the 60 per cent assumed by the priests of the Employment Guarantee Act. At best, it is around 5 to 10 per cent.

The EGA Bollywood heart tugging campaign informs us that the jobs offered are back-breaking and the wages offered are low""so only the poor apply.

How can one verify whether such assertions are true or are another LNLF? A prior question""forget the poor beneficiaries, how can we verify that the government provided, nationally, 108 crore mandays of work in 1993-94 and 55 crore mandays of work in 2000-01? Most (if not all) analyses of government programmes take the government estimates to be true, and then proceed to analyse the incidence, benefits and costs, etc.

Using government data on inputs and outputs may be, just may be, akin to believing Enron's cookbooks.

The veracity of any (private or public) claim can be checked via the market place. If a corporation claims it is selling so many toothpastes, one can verify by counting the toothpastes sold.

The equivalent of the market test for the public sector is a household survey on employment. Fortunately, the government's own National Sample Survey Organisation (NSSO) has estimated the amount of work created by public works programmes.

Indeed, Abhijit Sen, member of the Planning Commission and one of the "sponsors" of the EGA Act, asserted that the NSSO survey estimates validate the government's claims of employment generation, i.e. the NSSO estimates of employment in government public works are very close to those of the government.

In other words, no Enron effect here, at least according to Dr Sen.

The NSSO documentation of public works employment is radically different from Dr Sen's assertions. This is the ninth lie. Instead of the government claim of creating 108 crore mandays in 1993-94, the NSSO number is only one-third: 34 crore mandays.

For 1999-00, the lie is not less. For its two flagship employment programmes""the Employment Assurance Scheme and the Jawahar Gram Samridhi Yojana""the government claims to have created 55 crore mandays. The NSSO verification number: only 20 crore mandays.

For both these years (one during the Congress rule and the other during the BJP rule) the stated mandays are almost three times higher than official mandays""lots of leakage (lies) here.

But, several liberals contend one should not begrudge such lies because, after all, the poor make a pittance and the EGA can only help. Jean Dreze, National Advisory Council member and the leading point person of the EGA advocacy, asserts that the leakage in job programmes is very low: "Three fears about the EGA need to be addressed.

One is that the money will be wasted due to widespread corruption. Rajiv Gandhi's statement that only 15 paise out of every rupee of public expenditure on anti-poverty programmes actually reach the poor is often quoted in this context.

Aside from the fact that this much-cited figure has never been substantiated, it is important not to interpret it as a law of public expenditure in India. For one thing, the effectiveness of public spending varies a great deal between different programmes.

While leakages are certainly rife in many cases, there are also important examples of anti-poverty programmes that have done relatively well, and relief works are among these". (Financial Express, December 17, 2004)

This is the tenth lie, and possibly the biggest. In 1993-94, only 50 per cent of the employed beneficiaries were poor; in 1999-00, the fraction came down to less than a third, 31 per cent.

(These very same programmes were assumed by Mr Dreze to have minimum leakage.) Which means that Rajiv Gandhi's estimate of the fraction of expenditures reaching the poor, was an estimate of an inspired genius""and that of an optimist.

Even for the holier than thou government employment programmes, the poor received only 9 per cent of expenditures in 1993-94 and 7 per cent in 1999-2000.

As a practising economist, I must confess that I have never seen such a lack of documentation, let alone LNLFs, for any important government initiative, either in India or the rest of the world""either now, or a 100 years earlier.

It was this shock, and this recognition, that propelled me to write these three articles. What is most unfortunate is the barely concealed arrogance of the representatives of the poor.

They seem to have an overriding belief that since advocating poverty removal is noblesse oblige, anything goes, even extreme intellectual dishonesty. This is one bluff that is the most necessary to call.

With this article, the Calling the Bluff series ends""it can never be more fruitful. The next series is a close cousin and seems particularly appropriate in these times of human face reforms""Jadu economics.

ssbhalla@oxusresearch.com