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LATEST NEWS UPDATES | It's not rural India alone; job scheme also in distress -Nitin Sethi

It's not rural India alone; job scheme also in distress -Nitin Sethi

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published Published on Apr 28, 2015   modified Modified on Apr 28, 2015
-Business Standard

Even as country stares at a possible drought, Mahatma Gandhi National Rural Employment Guarantee Scheme has hit a new low

At a time when rural India is in distress, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), which could have provided some relief, is itself facing its worst period ever. The number of people working under the scheme and the amount of work provided is dwindling, and the trend looks set to worsen.

Business Standard analysed government data on work provided to the poor during January-March for three consecutive years. It also looked at the work generated in 2014-15 and the two previous financial years. Both comparisons show the same trend - the work being offered under the MGNREGS is falling with each passing year and in the past three months, it has worsened. The trend began in 2010-11, under the United Progressive Alliance government and has worsened substantially under the National Democratic Alliance (NDA) government.

For January-March 2015, the government provided 347 million person-days of work, less than half of the work provided to the poor in rural India in the corresponding period of 2014 and just below 60 per cent of the work provided in January-March 2013.

The person-days of work generated in three weeks of April 2015 was 24.67 million, less than 14 per cent of the work generated in four weeks of April in 2014. Data captured in central government records have a lag; some shortfall in the person-days generated in April this year can be attributed to this.

But if one compares across years, the trend is evident. In 2014-15, mostly under the NDA, the government provided three-quarters of the employment given in 2013-14 and a bit over two-thirds of that in 2012-13. In 2014-15, the government generated 1,651 million person-days of jobs for the poor, compared with 2203.5 million person-day jobs in 2013-14.

Person-days is the cumulative total of each person securing work under the scheme, multiplied by the days of work she/he gets.

Though the labour rates in 2014-15 were higher than in the previous year, the total wages paid were Rs 23,997 crore, against Rs 26,536 crore the previous year.

After Prime Minister Narendra Modi told Parliament the MGNREGS would continue as a "living proof of the Congress's failure in reducing poverty over decades, but would be strengthened and improved where necessary", Finance Minister Arun Jaitley provided Rs 34,699 crore for the scheme in the Union Budget for 2015-16. He also promised an additional Rs 5,000 crore but only if he could raise additional revenue. Many saw in this a major boost for the MGNREGS. But a deeper look at numbers proves otherwise.

The budgetary support announced for MGNREGS in 2014-15 was Rs 34,000 crore, Rs 699 crore less than this year. The Budget does not reflect that the government owed states arrears of Rs 5,374.21 crore for 2014-15. These would offset the additional Rs 5,000-crore allocation, if the finance ministry provides it.

Also, the minimum wages provided under MGNREGS was scaled up in January 2015. Therefore, with the raise in wages and roughly the same Budget as last year, the total person-days of work will come down this year.

Before the beginning of a financial year, the Centre asks states to project the demand of work under MGNREGS, which is referred to as projected labour budget. Subsequently, the central government pares it using averages or other formulae (which could change every year) and arrives at the approved labour budget.

However, the government isn't able to provide enough work every year to match what it had approved as labour budget. The actual work provided in 2013-14 was only 85 per cent of the approved labour budget. This fell to 74.82 per cent in 2014-15. The total approved labour budget itself had been pared from 2.59 billion person-days to 2.21 billion person-days.

The law governing the scheme requires the MGNREGS be demand-driven. If a villager asks for work, she/he has to be given work even if total expenditure across the country adds up to more than the initial budgetary support. This, however, doesn't happen often, and the scheme remains top-driven.

One way in which demand is artificially squeezed is through delays in transfer of funds to states. State officials start to 'capture' less demand and generate less work for the poor.

With states operating out of their pockets, payments for wages are held back. This dissuades the poor from working under the MGNREGS. Last year, the wages of more than 70 per cent of the people, amounting to Rs 14,339.24 crore, were delayed beyond the legal limit of 15 days. Almost 45 per cent of these wages were paid after more than a month. Of this, about 20 per cent was delayed beyond two months and about nine per cent beyond three months.

In January, the Union government admitted the fear generated by its statements on paring or discontinuing the scheme, along with extraordinary delays in transfer of funds to states, had choked wage payments in rural India.

This year, the finance minister made a conditional commitment in his Budget speech that he would provide additional resources of Rs 5,000 crore if he was able garner unsaid additional revenue. But the law requires the government to meet the demand for MGNREGS, if any, without a caveat.

Governments have justified how the actual expenditure is close to the planned and budgeted amounts, claiming its exercise to estimate the need for work demand is robust. This argument, however, is contradicted by the NDA government's recent move to boost demand selectively in the country's poorer blocks, claiming capacities in these areas are much lower.

It began when Nitin Gadkari was the rural development minister. He sought the scheme focus more on the poorest districts. He was later replaced and the government denied any curtailment in the scheme. But a curtailment has taken place, indirectly.

The government decided to select 2,500 of the poorest blocks to generate more demand and work under MGNREGS. Eventually, 2,549 were chosen. For 2015-16, the labour budget (number of person-days to be demanded) in these poor districts was estimated by doubling the average demand in the three previous years. For the other 4,027 blocks, the expected labour demand was arrived at by using only the three-year average. The government claims this was done because the demand in poorer districts was depressed due to lack of capacities.

As a result, this year, the 2,549 poor blocks have got 52 per cent of the labour budget, while the remaining 48 per cent has been distributed among the other 4,285 blocks. With near-stagnant budgetary support and rising wage rates, the increased expenditure in the 2,549 poor blocks could come at the cost of an artificial choking of demand from other blocks.

Take Rajasthan for instance: The state has identified only 75 poor blocks. But the labour budget for these blocks has been set at 1.17 billion person-days; the other 177 blocks get only 94.9 million person-days.

The work demand projection would not count if the programme really ran on a demand-driven, bottom-up basis. But that isn't the case. This special drive by the government in poor districts could show whether the real demand for MNREGS has been traditionally suppressed and more could be done to generate demand and provide more funds. Demand generation depends on getting funds delivered to states and to the poor within a particular time and building confidence among people about the scheme's robustness through active outreach. This year, the government will emphasise on that in the identified poor blocks.

Business Standard, 28 April, 2015, http://www.business-standard.com/article/current-affairs/it-s-not-rural-india-alone-job-scheme-also-in-distress-115042800035_1.html


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