Pulin B Nayak: Changing the face of rural India

Poverty eradication cannot be addressed without creating a foundation for jobs for all.

The concluding chapter of John Maynard Keynes' General Theory of Employment, Interest and Money opens with the observation: "The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes".

It is the motivation to ensure full employment that principally led Keynes to present his revolutionary tract in 1936 in the immediate aftermath of the Great Depression.

If the rationale for full employment is to be regarded as self evident in any modern economy, the National Rural Employment Guarantee Bill (NREGB) that is being taken up in the ongoing monsoon session of Parliament must be regarded as possibly the most profound economic legislation of post-Independent India.

This Bill seeks to guarantee employment in the rural sector. It has now received the assent of the Union Cabinet. It purports to improve the lives of the rural poor by providing one member from each of the country's 150 million rural households to get at least 100 days of employment at minimum wages.

The idea was originally conceptualised by the National Advisory Council set up by Sonia Gandhi. It has had to put up with fierce opposition at each step. The UPA government introduced the above mentioned Bill in Parliament on December 21, 2004.

However, it was a mauled version of what the NAC originally envisioned. The Bill, for instance, stated that the guarantee would come into effect "in such areas and for such periods as the central government may notify". This obviously meant that if the government would not notify then no one could expect to get employment on demand. There was, thus, no guarantee that the guarantee would apply.

But more grievously, the Bill sought to restrict the guarantee to the poor with BPL (below poverty line) cards and, surprisingly, even suggested that the minimum wage be not necessarily paid. It is well established that migrant labourers, beggars and the destitute, not a small number in our country, are invariably without BPL cards and, therefore, would be excluded from any employment guarantee scheme. For too long has Indian babudom used legalistic ruse to escape responsibility, especially when it has to do with the poor and the underprivileged.

In the form that it was concretised, the Bill was obviously a travesty of the original vision of the NAC. And yet it was not the members of the NAC alone who were critical of the Bill. There was a chorus of protest from several quarters, mostly economists and influential commentators in the media. The criticism largely centred on two considerations. It was argued that the Bill would be far too costly and it was said that it would open up fresh possibilities for corruption.

Neither of the above criticisms should be allowed to derail the passage of the Bill if one is convinced of the centrality of the importance of providing employment that would typically involve arduous physical labour in the countryside, if there is no coercion and if it is voluntarily sought. It can be nobody's case that corruption can be ruled out.

But if the administration of the employment schemes at the ground level are to be managed jointly by the representatives of the labourers themselves along with the village councils or panchayats, then one may well expect to limit the extent of corruption.

As regards the fiscal cost, the expenditure, depending on the scale of the programme, would be in the range of 0.6 per cent of GDP, at the modest end, to about 1.5 per cent of GDP at its most extensive formulation. This is not a small amount, fiscally speaking, but if we are convinced of the social purpose to which the funds are supposed to be set out for, then it would be well worth the outlay.

The key to the desirability of the EG programme would rest squarely on whether the administrators of the scheme would be in a position to devise meaningful and long term asset creating activities. It would not do to "make roads that get washed away", nor would it be desirable to engage in the fanciful activity of "digging holes only to fill them up again".

In their remarkably perceptive report on the NREGB the Parliamentary Standing Committee on Rural Development not only roundly supports the Bill, but also goes on to alert the policy makers to be mindful of a number of important concerns. For instance, one must be particularly cognisant of the need for deserted, separated or divorced women to be offered employment. Similarly, there must be special consideration for the disabled.

If poverty eradication is to be regarded as a worthwhile goal then this cannot be addressed without creating a foundation for jobs for all. To rely on the market mechanism to address the problem of rural unemployment is a non-starter. The problem is particularly acute in drought prone districts and tribal tracts.

It is incumbent for the state to step in, with a system of participatory management which must involve the labourers themselves. Anyone who is excessively worried about the fiscal costs should first try and recover the rather substantial NPAs from India's banking sector. The list of top defaulters reads like a who's who of India's top business houses.

The writer is Professor of Economics at the Delhi School of Economics