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LATEST NEWS UPDATES | A very poor programme by Surjit S Bhalla

A very poor programme by Surjit S Bhalla

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published Published on Mar 3, 2012   modified Modified on Mar 3, 2012

MGNREGA 2.0 should really be MGNREGA 0.0 — it has been outdated from the start, five years ago

It is a fact universally acknowledged that India is at a fiscal crossroads. It swerved quite significantly to populism over the last several years, and the consequences of this lurch are that the UPA’s own finance minister is (thankfully) losing sleep over the fiscal burden. More specifically, over the subsidy burden.

As we all know, the fiscal problem is the net resolution of taxes and expenditures. A country may be taxing its citizens too little, so revenue needs to be raised. Or it may be profligate and spending too much, and causing sleepless nights. Both sides need to be examined, and this will be attempted in articles in the next few weeks.

In an earlier article, ‘The real scandal’ (IE, February 4), I outlined the performance pertaining to one popular, indeed flagship, spending programme of the UPA — its employment guarantee scheme for the poor, MGNREGA. The article documented the fact that several non-poor in rural India were receiving jobs meant for the very poor. In addition, perhaps as a coincidence, it was noted that Congress-ruled states like Andhra Pradesh and Rajasthan were particularly bad in administering resources to the poor.

There have been two sets of (related) criticisms about my findings. The first problem, as indicated by leading World Bank poverty economist, Martin Ravallion in the Economic and Political Weekly (‘Corruption in the MGNREGS: Assessing an index,’ February 25) is that looking at non-poor who receive MGNREGA wages as an indication of leakage or corruption is inaccurate because the non-poor may be close to the Tendulkar poverty line and/or may have been “hit by a shock that will affect their future incomes”. In the latter case, the non-poor availing of hard low wage labour maybe doing so because they are temporarily poor. Ravallion also makes the point that my corruption leakage index is negatively correlated with the headcount ratio of poverty — obviously, states which have a low poverty rate, like Kerala, will have a higher proportion of non-poor. Hence, the non-poor in Kerala will receive a higher proportion of wages distributed via MGNREGA. “It may be entirely possible that the scheme is better targeted in Kerala than calculations based on the Tendulkar line,” hence, Ravallion concludes, my estimates of the leakage to the non-poor is really an artifact of the data.

Ravallion and the critics will be right if the non-poor receiving benefits were close to the poverty line. It is nobody’s case that the Tendulkar poverty line is sacrosanct, so people with incomes some percentage points above the poverty line are poor according to most sensible definitions. However, to be noted is the contention by supporters of the programme that MGNREGA is meant really for the poorest of the poor. Aruna Roy, member of the National Advisory Council and a strong advocate of the scheme, spelt out the wish, the intent and the purpose of the programme almost three years ago: “NREGA evolved out of a political response to a people’s movement and the articulated needs of rural workers. It put the people’s right to seek work in a legal framework, and approached development through the economic and social empowerment of the poor and the marginalised. The focus was clear: work must be provided on demand. The assets created should benefit the poorest and most marginalised communities first” (‘Dalits, the Poor and NREGA’ , The Hindu , August 27, 2009).

What is clear in the language and intent of the Act is that MGNREGA is an income supplement scheme for the poorest of the poor, that is, those individuals who are in desperate need of incomes and are willing to do unskilled manual work. MGNREGA 2.0 is in the works, and upon receiving recommendations for the same, Jairam Ramesh, minister in charge, stated that the scheme was meant “for our self-selecting poorest people” (emphasis added).

The table documents the consumption, income and wealth levels of MGNREGA beneficiaries in 2009-10. Estimates are based on the NSS 2009-10 survey; this survey had a special set of questions on participation in the programme and the results broadly match the numbers published by the Ministry of Rural Development. Five facts suggest that far from being for the poorest of the poor, the MGNREGA programme is not even for the poor or the near-poor.

Fact 1: Sixty per cent of the beneficiaries are non-poor.

Fact 2: The non-poor receive 17 per cent more workdays than the poor.

Fact 3: The MGNREGA non-poor are in the top third of the consumption distribution of rural Indians — at the 66th percentile compared to the 14th percentile for the poor beneficiaries. The poor who do participate are right in the middle of the poverty distribution, so at least this aspect of the programme is working well. Presumably, they are also doing whatever work is being done. It is unlikely that someone belonging to the top third of the distribution is indulging in desperate backbreaking work for low wages.

Fact 4: The expenditure patterns of the poor and non-poor beneficiaries are revealing. The poor spend Rs 62 per household per year on jewellery. The non-poor MGNREGA beneficiaries spend close to eight times that amount, or Rs 487 a year. For the MGNREGA non-poor, fully 14 per cent goes towards purchase of jewellery, compared to only 2 per cent for the MGNREGA poor.

Fact 5: On an all-India basis, some Rs 8830 crore were paid as wages to the MGNREGA non-poor; and some Rs 1260 crore went towards jewellery purchases.

The poverty expert, Ravallion, had made the point that the non-poor were most likely those that were temporarily poor. It is unlikely that an income emergency leads people to go and buy jewellery, or that temporary poverty means that your expenditure level is in the top third of all rural Indians.

Jairam Ramesh, please note — the facts suggest that something is drastically wrong in MGNREGA land, a programme meant, in your own words, for the poorest. The scheme was outdated on inception some five years ago. MGNREGA 2.0 should really be MGNREGA 0.0. It would be much better to implement a cash-transfer scheme for the genuine poor identified through Aadhar, than to be caught in a puritanical trap that only encourages corruption.

The writer is chairman of Oxus Investments, an emerging market advisory firm

The Indian Express, 2 March, 2012, http://www.indianexpress.com/news/a-very-poor-programme/918879/0


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