Wednesday, August 24, 2005

Rural Employment Guarantee Bill

Today the loksabha has unanimously passed the Rural Employment Guarantee Bill. A consensus on the bill was reached across the political spectrum. Most of the articles that I saw in recent days in the media too were not against the bill, with of course many of them strongly advocating the need to have such a bill. Eminent economists like Jean Dreze have come up with viable ways (using the newly enacted Right to Information Act) in which REGB can be made to work, and work well. (See Dilip D'Souza's post, the comments over there, and the links therein. I particularly liked Vikrum Sequeira's long comment here.)

A couple of weeks ago, I had linked to an article by Utsa Patnaik that appeared in the Hindu, where she argued that there's a strong case for a universal employment guarantee scheme and a universal public distribution system. It did not generate any discussion then. Yesterday Aadisht Khanna had a nice post criticising Prof Patnaik's article and her methods. I don't agree with Aadisht much and I'm not surprised at Utsa Patnaik's conclusions that the sufferings of the poor have only increased in the post-reform period as that's what on relative terms that I notice in my visits to my home village. But I thought Aadisht's post was nice because his post was a genuine attempt to understand the situation and not a silly excersise in handwaving of the she-is-after-all-from-JNU sort.

Amit Varma has posted excerpts from Aadisht's post on India Uncut and the new economy blog of which he is a co-author, The Indian Economy, and this latter post has generated some discussion as well.

Point of this post is just to bring your attention to all these, and to invite your comments on related matters. I would also like to link to a related article by Prof Patnaik which has many more details.

Comments are welcome.


At 9:34 AM, Blogger Unknown said...

I think the rural employment guarantee bill is an big step in the right direction. But what would make this a bigger step in my mind is land reform.

At 4:03 PM, Anonymous Anonymous said...

Anand, you might have seen Siddharth Varadarajan's Op-Ed in The Hindu on the employment guarantee scheme. He is worried that the minimum wage may not be respected. From his article:

[T]he Bill as tabled now stipulates that "notwithstanding anything contained in the Minimum Wages Act 1948," the wage payable to those working under the EGA will be fixed at Rs. 60.

At 8:49 PM, Blogger Sunil said...

I'm still undecided on the REG bill.....I think it can be successful, but given past history of such grand schemes, I don't think it's going to be.

Two things missing...the Right to Information (which has been discussed in Dilip's and other blogs), and more importantly, an atmosphere or environment where jobs will actually be provided that are needed.

At 9:44 PM, Anonymous Anonymous said...

Veena writes in:

"I believe that the REGB is a step forward in the right direction if it's actually implemented the way its supposed to be. Which remains to be seen. As far as Prof Patnaik's article goes, I don't think you need to be an economist to figure out that India needs a rural employment guarantee scheme and a universal PDS. Just look at Kerala which I believe has (had?) the best public distribution systems in India (not
just the ration stores, remember the Maveli stores all over the place) - it was a huge success and it was a model for the rest of the country. But I don't think the system works that way anymore. The central govt. introduced TPDS and the entire system as we used to know it is breaking down. I googled a couple of articles that I had read long back about this. This link seems to have all relevant details:

Undermining a fine system?

"I am as much a lover of free markets as the next guy but I think we need to get out of a stereotypical religious framework when dealing with economics. I really do not see a huge difference between a 'south
of Mason-Dixon line' conservative who once tried to convince me that the theory of evolution is nonsense and my uber-cool liberterian buddies (who seem to have stepped out of some Ayn Rand novel) who call for an end to any kind of government intervention whatsoever."

"The overriding question of our times is not whether capitalism or socialism is the right way towards development and its not whether we need government at all; the question is what kind of public-private partnerships do we need to what extent so that we can have a growing entrepreneurial economy within a welfare state which provides basic necessities for all its citizens."

At 1:59 AM, Blogger Abi said...

EGS promises to be a great thing for India, and I certainly hope it is done right, so that when its geographical reach extends to all 600 districts (it covers only 200 now), people will see it as a good thing.

Many people have (mis)characterized EGS as yet another poverty alleviation scheme; however, as Annie pointed out in her comments on Dilip's 'Only Way' post, it is more of a 'safety net' or 'social security' type program, that mitigates economic risks that poor people face during lean times.

Yet another nice aspect of this scheme is that it confers on rural poor folks this 'right to employment'. This feature, and the the recently enacted 'right to information' bill create a conducive environment for EGS to succeed. They certainly provide the right tools for individuals and NGOs who wish to see this program succeed.

At 2:33 AM, Blogger Anand said...

Akshay -- I too think land reforms are crucial. At least in the context of Kerala, it has had many progressive results.

Vishnu -- Thanks for linking to Siddharth Varadarajan's article. I've been meaning to link to it.

Sunil -- I guess no one can claim that it's going to be successful for sure. But I'm with those who say that the current situation is grave and it demands such a bill. I think, as Abi quotes Annie in his comment, it should be viewed "more of a 'safety net' or 'social security' type program, that mitigates economic risks that poor people face during lean times".

Abi -- Thanks. With sufficient political will, this one should result in some tangible positive changes.

At 5:47 AM, Blogger Michael Higgins said...

Hi Anand
I only have some peripherial knowledge of this whole issue but I have just the strongest instinct that the Indian government is flying completely blind here. They probably have no hard evidence at all that anything bad is happening in rural India.

The article by Utsa Patnaik is absolutely pathetic. There is simply no way one could infer anything about the well being of farmers by looking at their diet. I posted about this subject here.

At 8:11 AM, Blogger Anand said...

Hi Michael,

There is absolutely no way you can infer anything about how well off a person is by just looking at his or her diet over time.

Are you sure Michael? At least in extreme cases one can and should infer something from that data, right? If one is not able to afford food, and is starving to death, surely some inference should be drawn?

In any case let me agree with you for now that looking at absolute calorie consumption doesn't say anything about how well-off one is. So let's stick to indicators about serious "nutritional deficits" which I hope neither you nor Swaminathan Aiyar will write off as nonsense.

Let me request you to have a look at this article for more details.

This is done by first having a reference consumer unit and then by applying conversion factors to all the population according to age, gender, type of work etc to ascribe consumer units to all sections of the population. Nutritional deficiency means calorie consumption at less than 90% of the units for that particular person. Then nutritional deficiency in India increased by 5% in the period 1983 to 2000 (from 40% to 45%).

Coming back to calorie consumption, per capita calorie consumption in rural India and urban India is the same (in 2000). Calorie consumption should have been higher in rural India if we go by your argument.

Swaminathan Aiyar was being disingenuous by taking the example of an average American eating at McDonalds and Burger King, and suggesting that the average calorie consumption is around 1500. Per capita calorie consumption (in 2000) in the US was over 2600 and this is a 7% increase from the 1971 figure.

At 8:49 AM, Blogger Aswin said...

An amendment was moved in at the last minute to factor in the problem that Sid Varad was talking about.But not many people seem to be reporting that. I got it from here.The PTI report floating around does not contain this bit of info.

At 10:13 AM, Anonymous Anonymous said...

Thanks Aswin. I'm a bit confused. Are you saying that now minimum wage protection is in place?

At 11:22 AM, Anonymous Anonymous said...

Here's a report from yesterday's NDTV news site:

Maharashtra govt admits starvation deaths

2800 children died out of hunger in the last seven months (just the official figures).

Link via Quizman.

At 11:29 AM, Blogger Aswin said...

err..sorry, I linked to the wrong page. The original Lok Sabha passing was covered here.The
The one that I linked is the Rajya Sabha one.

Hindu says..

"Ahead of his reply, Union Rural Development Minister Raghuvansh Prasad Singh moved a last-minute amendment on minimum wages. While the Minister did not refer, during his reply, even once to the issue of minimum wages — a point raised by many a member right through the debate — he responded to a specific question later and said the minimum wages of States would apply to the programme and the amendment enabled the Centre to step in to ensure a minimum rate of not less than Rs. 60 a day in States where it was lower."

But then, I am confused too.. this (surprisingly)does not seem to have caught much of the attention of the press.

At 11:41 AM, Anonymous Anonymous said...

Many thanks Aswin. Looks correct.

At 10:27 PM, Anonymous Anonymous said...

i really don't think the employment guarentee bill is a right step
read this (completely to unterstand):
With Millions Still in Poverty, India Considers a Job Guarantee

By Rama Lakshmi
Special to The Washington Post
Monday, June 13, 2005; Page A15

JEJURI, India -- Kailash Jagtap, a millet farmer in western India, spends seven hours a day digging soil with a spade and scooping it onto a plate, which his wife then carries away on her head. Twenty other people work alongside them under the scorching sun. Their mission is to build a pond to collect rainwater in hopes of reviving their parched village.

In the process, they are also earning a basic living -- 15 pounds of wheat and 50 cents per day -- under a government public works program that guarantees manual labor jobs to anyone who seeks them in the state of Maharashtra. The program has been so successful that the government hopes to replicate it nationwide.

In the Indian state of Maharashtra, villagers such as Kailash Jagtap and wife Chaya, center, are guaranteed jobs. (By Rama Lakshmi For The Washington Post)

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"The drought in the last two years has crippled our lives," said Jagtap, 38, who owns two dried-out acres but has helped build several other ponds and dirt roads in the past two years. "My farm lies barren and I have sold all my buffaloes and cows. This digging work is all that I have, and it has kept my family away from hunger."

The Maharashtra jobs program, which has been operating ever since a severe drought struck the state in 1972, has been a virtual lifeline for the poor, allowing villagers to demand work from the government if they cannot find any other livelihood.

Now, the Congress Party government in New Delhi hopes to launch a similar job-guarantee scheme across the country. Following up on its 2004 election promise to give a job to every rural family, the government introduced the National Rural Employment Guarantee Bill in Parliament in December. To begin with, the bill guarantees 100 days of employment per year to the poorest villagers.

"The aim is to provide livelihood security for millions of poor families. It is a safety net," said Prithviraj Chavan, an official in the prime minister's office. The bill, now under review in Parliament, is likely to be passed in the next two months. "This will put some money in the hands of the poorest in the difficult dry months, so that they don't have to scramble for food. It will also build rural assets like roads, canals and water-harvesting structures," Chavan said.

The program, which will guarantee a "right to work" for the first time across India, may cost around $5.4 billion in the first year.

Many economists have criticized the initiative, calling it a populist welfare dole that will drain the nation's resources. They argue that the best way to create jobs is by expanding the economic reforms program that began in 1991, and achieving higher growth.

The Indian economy has grown at an impressive average of 8 percent in the past two years and the proportion of the population living in absolute poverty has been reduced to 27 percent. Still, voters in the 2004 national elections identified unemployment as their prime concern.

Since India opened its economy to foreign investment in 1991 and began deregulating domestic industry, millions of jobs have been created in private industry, with a great deal of growth in information technology businesses. But the changes have made little dent in the national unemployment rate, which is officially over 9 percent. Among rural homes, the jobless rate is 12 percent.

About 60 percent of the billion-plus people in this nation still depend on agriculture for their livelihood, but nearly 70 percent of Indian farms depend solely on the erratic annual rainfall.

Two years ago, when the rainfall was below normal levels in some districts of Maharashtra, Jagtap and his wife enrolled with the village development officer for manual work. The officer drew up a plan to widen roads, build earthen trenches and water-harvesting ponds, and plant fruit trees in Jejuri.
According to the state law, when 50 villagers get together and demand jobs, the government is legally bound to come up with some kind of public works project within 15 days.

"The wages are not very high, but at least we did not have to migrate to the city in search of work," said Jagtap's wife, Chaya, 34, a shy woman in a blue floral-printed sari.

In the Indian state of Maharashtra, villagers such as Kailash Jagtap and wife Chaya, center, are guaranteed jobs. (By Rama Lakshmi For The Washington Post)

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In the last three decades, the Maharashtra government has created more than 4 billion days of work, and spent about $2 billion on the program.

But like most things in India, charges of flawed implementation and corruption dog the program.

"It is work for the sake of work. Most dirt roads get washed away in the rain. Water-harvesting structures are built without any scientific study," said H.M. Desarda, an agricultural economist who filed a petition in the Bombay High Court in 2003, asking for a review of the program. "Poor people have definitely benefited. But in many places the scheme has been reduced to merely digging a hole and filling it."

Surjit Bhalla, an economic consultant to the World Bank, calls the proposed national program a "masterly scheme for encouraging corruption." In several cases in Maharashtra, corrupt officials and politicians at the local level have entered fake names of laborers and public works into the rolls, then pocketed the money.

"The bulk of unemployed Indians possess some years of education and are unlikely to turn up for manual digging work," Bhalla said.

But a drought is a great leveler, according to Jagtap.

"You may own land; you may be educated. But when there is no rain, everybody in the village is equal," he said as others at the digging site nodded. "You eventually turn up for work in the farm pond with a spade and pickax in your hands."
and then realise that this is just a easy method to increase corruption manifold.

it is always better to teach a man to fish than give him fish.
through this bill we give money in free to the people for trash -work instead of teaching them to earn money

this really will make the growing economy take a U-turn.

At 10:28 PM, Anonymous Anonymous said...

unterstood what this guarentee actually means creating more burden on GDP
its useless wastage of money

At 11:02 AM, Blogger kuffir said...

"The overriding question of our times is not whether capitalism or socialism is the right way towards development and its not whether we need government at all; the question is what kind of public-private partnerships do we need to what extent so that we can have a growing entrepreneurial economy within a welfare state which provides basic necessities for all its citizens."
i'm glad you've quoted this anand. when you've already decided, though not so clearly stated, that the bill is good why go through the ritual of initiating a debate? the issue is not about, in my view, employment or raising living standards but about the temerity of the goi in thinking that it has the wherewithal, not just financial mind, to effectively implement this, here i have to use a euphemism, pipedream. one gets a fresh indicator everyday that its writ doesn't run much beyond new delhi. the states which are supposed to implement this hold the key, and in places they can't even effectively convince people that polio drops do not stunt a male child's potential virility. farmers being compensated for drought-affected grain spend a third of the amount they are paid for each bag of grain as bribes.
the right to information act will lend support to the ega? that makes me laugh. this is the right moment to recall the much older guarantee : right to education. i suppose, the new bill will in turn bolster implementation of the older guarantee?
while the ruling coalition thinks up these elaborate bills, schemes and programmes, which only indicate a certain amount of disillusionment with a hundred other older schemes not unlike the way dissolute nawabs of lore regarded their older mistresses, young india toils and withers away in farms, homes, factories, quarries and other sweatshops. unschooled, they will thankfully grow up in a country where the state guarantees employment and would be ever ready to enact new legislation reguarantee it.
i hold the view that the state should stop pretending that it is all-powerful and all-knowing and pay a straightforward dole to all rural parents who send their children to school. so that it adds to their limited resources. and more importantly, also helps equip the young with the one tool that could help them in their future fight against poverty.
this is perhaps a progamme too unelaborate and unglamorous for the current mike-bearers in the ruling dispensation.
victory mixed with the ashes of one's opponents' mortal defeat at the end of a long-drawn debate always tastes better, right? that has been the longstanding style of those who pretend to be the left in this country. let's forget unsavoury details such as the unemployment doles that were stopped with as little fanfare(in contrast with the hype which they were started) as possible in the states where these pretenders hold the mandate.
if this were a debate on a national scale, how come the pm has so little to say on the subject until now? the bill effectively ties him up in more than a fiscal knot. so let's
not pretend that there has been a consensual agreement on this being the panacea that eggheads such as manmohan singh, amartya sen and magically the world bank have always being looking for. the king is wearing no robes and the pretenders are free to pin as many data as they can think up on this non-existent attire in order to gain a meaningless victory over the so-called reformists.

At 8:10 PM, Blogger Vasanth Rao said...

The REG is out and there is no going back on this policy. The policy per-se is not bad considering the spin of benefits it would have to the rural economy- that increased wage incomes in rural areas would generate more demand for rural goods and services, and thus generate positive multiplier effects. What we need to talk about is how to translate the policy into administrative action that is guaranteed to be free from corruption and how the monies will go directly to the beneficiaries seamlessly. Secondly, it would be important to itemize kind of work to be executed during this period that would have positive effects on rural infrastructure- that labor is well utilized. Any suggestion on these lines?

At 10:39 PM, Anonymous Anonymous said...

Sunil Laxman points me to an article @, which details the corruption unearthed recently in the Maharashtra EGS.

The author, Surekha Sule, has the following suggestions regarding the implementation of EGS:

1. EGS should be handled by someone with independent charge of the scheme.

2. The labourers should be given identification cards with photos; these can then be single identity cards for all other purposes too. The payments should be made only on producing these identity cards.

3. Go beyond agriculture-related works under EGS. Works that create social assets for community or improving social infrastructure - in health, education, skill development, marketing, etc.

4. Under the Right to Information Act, the list of EGS-registered labourers, the muster of all works, payments made, absentees, etc. could be made public; this transparency would cut down on the corruption greatly.

At 11:20 AM, Blogger Vasanth Rao said...

Anand, did read sunil's article. Good one. What about social audit-who should do it-the present scheme is too extensive for any NGOs to cover any suggestions?
Vasanth Rao

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