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Resource centre on India's rural distress
 
 

Faring well


AMIT KUMAR must be one of the few bankers in the world turning away depositors. The manager of a village bank in the Indian state of Rajasthan, he was reluctant to take a cheque for 1m rupees ($21,200) from the elected head of the village, or sarpanch. The cheque was meant to pay hundreds of villagers for their work under India’s National Rural Employment Guarantee Act (NREGA), which guarantees 100 days of minimum-wage employment on public works to every rural household that asks for it. But getting the work is not always easy. And getting paid for it is gruelling labour in itself.

Mr Kumar has three colleagues but no computer. It will take him four days of paperwork to distribute the money to hundreds of tiny accounts opened by NREGA workers. He will get to it when he can, he says. It could be worse. In the eastern state of Jharkhand, a banker was more enthusiastic about the NREGA. He conspired with a local official and contractor to fake the number of days worked under the scheme, withdrawing the extra money from oblivious workers’ accounts.

Despite such flaws, the NREGA is winning praise from unexpected quarters. One reason India weathered the financial crisis of the past year was the strength of rural demand, many economists argue, and one reason for that strength was the expansion of the act to every rural district in April 2008. Once dismissed as a reckless fiscal sop, the scheme is now lauded as a timely fiscal stimulus. Because it must accommodate anyone who demands work, it can expand naturally as the need arises.

The idea has appeal even in rich countries. Paul Gregg of Bristol University and Richard Layard of the London School of Economics have called on the British government to provide a “job guarantee” to anyone out of work for more than 18 months (and any youngster out of work for a year). In countries like Britain, there is a thin line between a job guarantee—providing work to anyone who needs it—and workfare—denying benefits to anyone who refuses it. Mr Gregg and Lord Layard are insistent that the government pay market wages for the jobs it provides under any such scheme. "This is essential for the credibility of the job," they write.

In India, wages under the NREGA often exceed the market rate. State governments are free to raise the minimum wage, knowing that the central government will pick up most of the tab. In Uttar Pradesh, India’s largest state, the government raised the minimum wage from 58 rupees a day to 100. Landlords complain of labour shortages as a result. In Rajasthan, a private factory making beedi cigarettes had to close in the day and open at night, when workers were more available.

Policy wonks argue that cash handouts to the poor would be easier to administer, and would leave the recipients free to work the fields or roll beedis for private employers. But the poor themselves seem surprisingly sceptical of such an idea. “If money comes for free, it will never stay with us,” one elderly farmer says. “The men will drink it.” To wring anything out of India’s calcified bureaucracy takes a fight. If people feel they have earned their money from the government, they become more determined to claim it, even if that means waiting all day outside the village bank.

In rich countries, workfare is meant to stop people living off the state rather than finding gainful employment. In rural India, where you can see brittle old women breaking the earth with pickaxes, the poor do not have that option. Indolence and inertia is a problem only with the officials administering the payments, not the workers receiving them. In the country’s worst-run districts, India’s villagers will only enjoy the right to work when India’s apathetic bureaucrats forfeit their right not to.