Sunday, October 16, 2011

Proposed changes in the NREGA: Why do I oppose them?*

Here are my observations pertaining to the proposed reforms in the NREGS:

1. Rising NREGA wages have not entirely ended distress of the rural poor. 

One of the objectives of the National Rural Employment Guarantee (2005) Act (NREGA) is to enhance the livelihood security of the people in rural areas by guaranteeing hundred days of wage employment in a financial year, to a member of any rural household who volunteer to do unskilled manual work. The Act aims to create durable assets and strengthen the livelihood resource base of the rural poor [mind it the law was not invented to help either the rich farmers (kulaks) or the industrialists]. The kind of works undertaken under NREGS address causes of chronic poverty like drought, deforestation, soil erosion so that employment is generated on a sustainable basis.

(Some portions of the above paragraph have been lifted from: MGNREGA 2005 Report to the People, 2nd Feb. 2006-2nd Feb. 2010, Ministry of Rural Development,

The works to be undertaken under NREGS are as follows:

* Water Conservation and water harvesting
* Drought Proofing (including plantation and afforestation)
* Irrigation canals including micro and minor irrigation works 
* Flood Control and Protection Works
* Minor irrigation, horticulture and land development on the land of SC/ST/BPL/IAY and 
* Land reform beneficiaries
* Renovation of traditional water bodies including desilting of tanks
* Land Development
* Rural Connectivity

Source: MGNREGA 2005 Report to the People, 2nd Feb. 2006-2nd Feb. 2010, Ministry of Rural Development,

Utilizing rural labour for agricultural activities such as sowing and harvesting (and may be other farm activities) was never the objective of the Act since its inception. After all, why should the large farmers be subsidized by allowing them to employ cheap NREGS workers? If the objective is so, then the government should not further reduce subsidies on other inputs like electricity, seeds, fertilizers, pesticides, water.

It must be kept in mind that labour cost is only 20-35 percent of the entire cost borne by the farmers. Farmers also rely on family labour. In fact, the higher cost of inputs (like seed, fertilizers, pesticide, electricity) is worrying the farmers greatly as their prices have skyrocketed more as compared to the cost of labour. Please check the article titled: Is the MNREGS Affecting Rural Wages? by Jayati Ghosh, Macroscan, 4 February, 2011,  

Critics of State supported subsidy regime might argue here that to reduce wasteful expenditure by the government & end inefficient use (overexploitation) of resources like water (that caused falling groundwater table in many areas of Punjab), there should be targeting. So make way for newer schemes like UID with the prudent mix of technology and economics, and here we enter again to another big debate.    

Actually, in the current context one thing comes to my mind. Some economists are eager to prove that NREGA is Pareto inefficient. If for improving the condition of the labouring class, NREGS is worsening the condition of rich farmers and industrialists, then this proves their point. So a market fundamentalist State must intervene to help the rich, whether they pay taxes regularly or not. By the way, agriculture is not taxed in India unlike what was proposed by economist Nicholas Kaldor long back.

Agricultural and rural labourers fall within the category of informal sector. They are not getting the benefits which people in white collar jobs enjoy. Why are we silent about it here? Until recently, the NREGS workers were not entitled to minimum wages. Please read: Maximum Dithering for Minimum Wages!

The recent article titled: The truth behind rural wages in India by Akshat Kaushal (published in The Business Standard, 14 October, 2011, tells us that real wages for carpentry, sweeper, blacksmith, mason and cobbler have stagnated between 2000 and 2010. Real wages for ploughing, tractor driver and unskilled labourer in rural India grew at an annual rate of 0.80 per cent, 0.42 per cent and 1.19 per cent, respectively during the same time period.

The number of persons in workforce (as per usual status) in rural India has declined from 342.9 million in 2004-05 to 336.4 million in 2009-10 despite implementation of NREGA. (Please refer to Employment in India: What does the latest data show? by Subhanil Chowdhury, Economic and Political Weekly, 6 August, 2011, Vol XLVI No 3, Unemployment rate in rural India is 10.1 percent, whereas unemployment rate in urban India is 7.3 percent, according to the Report on Employment & Unemployment Survey (2009-10), Ministry of Labour and Employment, Labour Bureau, October, 2010, Hence the situation of rural labour is not that rosy.

The Planning Commission in the past found merit in relaxing the labour laws in order to make the Indian industrial sector more competitive in the global arena. This is unforgettable. A survey conducted by FICCI (which influences the Government on key policy issues) in the months of August and September, 2011 shows that labour shortages and increased demand for wages have been faced by several companies as a result of NREGS (FICCI Survey on Labour / Skill Shortage for Industry,

2. My personal opinion is not going to affect what the officials in the Planning Commission think or the changes that are in the pipeline for reforming the NREGA.

If the big farmers (thanks to Sharad Pawar) and industrialists find NREGA guilty of pushing up the wages (and hence cost of agricultural production, industrial production, tea plantation cost,  construction, so on and so forth), then the deflationary curbs are bound to happen. This also means confining 100 days of employment under NREGS to those times when agriculture faces slack season such as maintenance of water bodies during heavy monsoons (he..he..he). Has there been a proper, serious study (well sampled one) regarding NREGS that it is triggering higher cost of agricultural production? First, do this and then demand for the needful changes. There is scope for debate on the NREGS reforms in the current democratic setup.

3. I am not a huge fan of any political leader or bureaucrat.

Ramesh babu has recently advocated that all file notings under the RTI law should not be disclosed to the public particularly the correspondences between the various Ministers and the PM when the final decision is yet to arrive on any policy related issue. His view came to light when several UPA ministers such as Salman Khurshid, Veerappa Moily opposed the RTI sought note getting shared. The note was originally issued by the Ministry of Finance to the PMO that revealed the contradictory position of Pranab Mukherjee with P Chidambaram pertaining to 2G spectrum allocation. What more can we expect from Ramesh babu who is so critical of even a transparency enabling legislation like RTI. Please check: Jairam fuel in RTI debate, The Telegraph, 11 October, 2011,

The maxim goes like: Too much faith on a public servant is not good for democracy.   

4. What Bengal (i.e. the Left) thinks today, India (i.e. the Congress party) will think tomorrow.

It is often said that the Left Front government in West Bengal stayed in power for 34 years for helping the sharecroppers, landless labourers and the small and marginal farmers via Operation Barga. The Left Front was ousted out of power because of its unfriendly attitude towards the agriculturalists and its wrong land acquisition policies. It seems that the present UPA government and its policy makers are making the same mistake. While the UPA's comeback to power for the second term (2009 Loksabha elections) is often put on the employment guaranty scheme, this time (i.e. in the forthcoming 2014 Loksabha elections) the UPA might not make it thanks to the sheer number of scams that have cropped up recently and the overconfident, unemotional officials who are desperately tinkering with the NREGA rules and regulations.

The dictum goes like: If the politicians do badly, they won't be elected next time but if the bureaucrats do worse, they still manage to stay back. 

5. Mihir Shah's argument that NREGA reforms incorporating agricultural works in the crop fields would help the dalit, BPL and small and marginal farmers is faulty.

First of all, how come a BPL farmer is held as a landowner? Going by the standards, a BPL farmer should not own valuable assets like: car, land etc. Secondly, very few dalit farmers are farmers in reality and hence small and marginal farmers because traditionally they do not have title to land. Dalits and tribals have customary rights over forests and common property resources. But majority don't have their land registered against their names. The same happens for female agriculturalists. Thirdly, most small and marginal farmers (mainly comprising SCs and STs) have leased in their land. Improving land productivity may increase production but it may also augment the incomes of the rent seeking class who seldom invest in their lands to improve agricultural productivity and often indulge in conspicuous consumption.

6. Initially, the argument against NREGS was that the rising demand in rural areas due to improved wages was contributing to inflation. But soon this argument against NREGS was replaced by another argument i.e. NREGS is instigating shortage of labourers for doing agricultural operations. It has pushed up cost of production.

The article titled: Challenging the poverty dimension of inflation by Madan Sabnavis (published in The Economic Times, 13 July, 2011, shatters the initial argument. It says that on an average, the NREGS in reality provides 37 days of employment to households when they are entitled to 100 days in a financial year. This should not cause much worry to big farmers, industrialists and policy makers. Moreover, the expenditure made on food items by the NREGA workers is too low to entirely eat away the rise in agricultural production witnessed in the recent years (excess demand), hence setting off  inflation. Recent increase in food prices happened due to wastage as India is unable to manage its surpluses. There is dearth of storage facilities. 

7. NREGS arrests distress migration of labourers during droughts when there is not much opportunity left in agriculture.

During my visit to a village located in Bhilwara district of Rajasthan for witnessing social audit in October, 2009, some people complained to me that rising NREGS wages made agricultural operations costlier. I replied that in the wake of drought due to shortage of monsoon rains causing agriculture to suffer, NREGS helped in stopping distress migration of poor, rural labourers. For further information one can consult the report prepared by Committee on Agriculture (2009-2010) titled: Deficient Monsoon and Steps taken by the Government to Mitigate its Impact on Agriculture Sector,, which says that rain scarcity in 2009 was observed in 27 districts of Rajasthan including Bhilwara.

* Image courtesy: India Together  

Further readings

Mihir Shah, Planning Commission member and chairman of the committee to redraft rules and guidelines of NREGA interviewed by Sreelatha Menon, The Business Standard, 9 October, 2011,

Should MNREGA labour be used for farming?, The Business Standard, 12 October, 2011,

Aruna Roy to Sonia: Link NREGS, minimum wages, The Indian Express, 9 October, 2011,

After losing male workers to migration & NREGS, carpet industry eyes women by Prashant Pandey, The Indian Express, 19 August, 2011,

Labour shortage, wage hike hits Indian industry hard: Ficci, The Economic Times, 9 October, 2011,

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