Economics India

Saturday, February 04, 2006

India Launches A Revolutionary National Rural Employment Guarantee Scheme

The Parliament has recently passed NREGS bill that will directly or indirectly benefit some 80 per cent of India’s 260 million poor who live in rural areas. NREGS is indeed revolutionary as it provides for the first time in India, a right to employment to the rural poor, backed by the national government's commitment .

NREGS aims to guarantee a minimum of 100 days' work per year to all (adult) men and women seeking work in rural areas and if the scheme cannot provide work for any of the guaranteed 100 days, it is expected to pay equivalent amount of wages for the work foregone as "unemployment allowance".

NREGS will be implemented in 80,000 villages in 200 districts and will initially cost about Rs. 28,000 crores but eventually the annual outlay could go up to Rs. 100,000 crores. The state governments are expected to contribute about 10% of the total outlay in their respective states, while the balance amount will be provided by the central government. Some state governments have already expressed difficulty in raising the required funds.

Massive cash transfers under NREGS are expected to reduce rural poverty, malnutrition, disease and indebtedness, and improve availability and productivity of assets through critical infrastructure development, which may also help reduce rural to urban migration to an extent.

NREGS was formally launched the other day jointly by India’s Prime Minister, Mr. Manmohan Singh, and Congress President (UPA Chairperson), Mrs. Sonia Gandhi in a village in Andhra Pradesh. Singh and Gandhi believe that benefits of the scheme would reach the targeted poor (living below the income level of about $2 per day equivalent) and that there would be no room for corruption.

The people are urged to make use of the Right to Information Act to ensure NERGS' proper implementation with required transparency. It is hoped that corruption will come down if there is a fear that truth will become public. The scheme provides for a mechanism to help people with grievances to secure justice.

While NREGS is designed to provide national coverage to rural employment and poverty issues for the first time, it is not entirely new in concept. A first such initiative was started in Maharasthra as back as in early 1970s, with a focus on undertaking construction or maintenance of rural infrastructure, especially rural roads, percolation tanks, and other smaller infrastructure, with payment of wages generally linked to food for work program.

The Maharastra EGS had mixed results though fraught as it was with many implementation problems including the lack of adequate annual budgetary allocations, diversion of allocated budgets to other (not necessarily priority) activities, inefficient project designs which meant lack of sustainable outcomes, and above all corruption that could not be easily detected and checked. Hopefully, NREGS will not suffer from these problems.

While one should not sound negative at the very start of NREGS, which undoubtedly is a well-intentioned and well-targeted program, what seems to be problematic is the NREGS implementation might involve a plethora of government officials at various levels, especially in Zilla Parishads, including a Program Officer at Village Panchayat level and a Program Coordinator at Block level to "assist" Gram Panchayats (village level local governments). The communities of rural poor may not necessarily be in the driver's seat?

This blog believes that unless this nation-wide scheme is implemented as a community-driven program in which resources are directed to range of small-scale investments, identified by poor communities to improve their own livelihoods, it will be doomed to fail. Active community participation in planning, decision-making and use of development funds is fundamental for the success of the scheme.

The Indian Press has come down heavily on some aspects of NREGS which says: Imagine the scope for corruption where village level Program Officers and block level Program Coordinators are expected to prepare muster rolls for use by Pachayats? Hopefully, these muster rolls will be verified in community meetings? Why not use local NGOs, acceptable to communities, to assist them exercise oversight over the implementation of the NREGS and the preparation of muster rolls and payment of wages?

Under NREGS, the rural poor are expected to get information about the works to be taken up under the scheme through local newspapers. How many such people read local newspapers on a regular basis, if at all? For this reason, the rural poor need to get information from the communities themselves who should be in charge of the preparation of work lists, hiring their own experts -- governmental and non-governmental. Government budgetary procedures need to be changed and/or adapted to suit the community driven development approach!

While Gram Panchayats and their Chairpersons' political commitment may help to drive the program, this could lead to biases against those who do not belong to the political party in power – this problem cannot be addressed unless communities are in charge of NRGS funds and drive the work programs outside the political allignments.

When communities are in charge on a non-political basis, one can expect that the NREGS financed accretion to rural assets to become demand-driven (rather than supply-led) and the choice of investments determined by the communities themselves, going beyond construction and maintenance of rural roads and drinking water facilities to include construction of primary healthcare centers, schools and the like that are required to improve their quality of life and welfare.

One provision of the scheme that is particularly difficult to implement is the payment of unemployment allowance to those rural adults who do not get work under the scheme. Will rural communities be able to ensure that this process remains transparent and objective and does not benefit the politically powerful? And why not ask people who do not get work at their home locations to move to another location where there is work -- instead of receiving cash for no work? Will the unemployment allowance approach for the rural sector, though justified on socio-economic grounds, be constitutionally equitable and valid, if not made available to urban unemployed/underemployed poor? Also, imagine the administrative work and litigation that will be plague the scheme unless local arbitration is used to resolve the problems? And who will finally pay for NREGS? Is the UPA government and participating states ready to raise taxes – reduce subsidies on grain, fertilizers, oil, power that go to non-poor to raise resources for NREGS?

This blog wishes all success to the NREGS and hopes to monitor its implementation and outcomes on a regular basis. Dear readers, your active participation in this effort is keenly solicited.


  • Dear Ramesh:

    I think you have now opened up a discussion on politically interesting way of allocating national budget. My caution is that the Rural Employment Schemes financed by the Government should be target oriented and should not be demand driven. The employment schemes should focus on agricultural growth: for example watershed development and soil conservation, rural roads and housing, rural hygiene etc. The government sponsored schemes based on the production of handicrafts have by and large been unsuccessful financially.

    Another suggestion is that the Ministry of Agriculture should play a major role in such schemes, because it is agriculture which is the engine of growth and poverty reduction and not Fragmented rural development.


    By Anonymous Anonymous, at 7:28 AM  

  • Chandra:

    Thanks for comments.

    While proper targetting of public resource transfers is critically important for effective poverty alleviation, when such allocations are made through public investments, it is best if the selection of such investments is made by communities concerned -- instead of government officials -- to ensure that such expenditures, besides creating employment, also improve their quality of life and productivity on a sustainable basis. In this sense, the resource allocation under NREGS must be demand-driven.

    It is true that MOA should be involved in this program so also the Ministry of Water Resources, which are faced with deteriorating irrigation infrastructure, which can be improved using NREGS funds.

    By Blogger Ramesh G. Deshpande, at 8:45 AM  

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