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LATEST NEWS UPDATES | New index could boost NREGA wages by 9.5% -Sreelatha Menon

New index could boost NREGA wages by 9.5% -Sreelatha Menon

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published Published on Nov 26, 2013   modified Modified on Nov 26, 2013
-The Business Standard


Currently wages are linked to CPI AL

Mahendra Dev who heads the new committee set up by the Rural Development Ministry to determine a new index for NREGA wages said that his job is not to engineer an increase in wages to suit political interests. My job is to find a suitable index for NREGA wages based on which a new baseline wage can be fixed for 2014, he said. The earlier baseline wage was fixed for different states in 2009 and has to be revised.

Talking to Business Standard the former chairman of the CACP said that the main consideration while selecting an index would be to look at what affects rural labourers most. And food inflation is a factor that affects them most as they spend 60% on food. he said.

The wages under the rural job scheme are currently indexed to CPI AL which has a larger food component and reflects the current food inflation. The other option before the committee was to index the wages to CPI Rural which gives less weightage for cereals and food and more to miscellaneous items like education, health and transport.

I dont rule out either option, he said adding that it was wrong to generalise that CPI AL or CPI Rural would give higher wages under the scheme.

While CPI AL showed an increase of 8.7% in 2012 CPI Rural showed an increase of 9.5% the same year.

However in 2013, positions are reversed thanks to food inflation, he pointed out. Now the CPI AL has showed an increase of 12% while CPI Rural shows an increase of 10%.

So indexing NREGA wages to either of them would mean different in different times, he said.

Ruling out any dramatic increase in wages, Dev said that the main purpose of the setting up the panel is not political or electoral gains but to find a baseline wage to replace the existing one that was selected in 2009. "It had to be revised by 2014 . It was an ad hoc arrangement in 2009 to use the CPI AL for indexing the wages and a permanent solution had to be found," he said.

This baseline wage would be different for different states as it is now and would be based on either CPI Rural or continue to be linked to the CPI AL, he said.

There may be a marginal increase and it will be different in different states, Dev said pointing out that he was merely continuing the work that was being done by the previous committee headed by Pronob Sen.

NREGA wages are currently indexed to CPI AL which alongwith CPI RL are estimated by the Labour Ministry and Labour Bureau.

The CPI Rural is calculated by the Central Statistical Organisation.

The composition of the two indices are quite different, with CPI- AL giving more weightage (41%) to cereals. This comes down to 19% in CPI Rural.

In the latter the weightage for miscellaneous expenses like education, medicine and transport goes up to 25% from a mere 12% in CPI AL.

The bulk of the weightage in both is for food and beverages 57% in Rural and 69 in AL.

Prof Dev is accompanied in the panel by activists Jean Dreze, Nikhil De and statistician KP Kannan besides the director generals of CSO and Labour Bureau.

Nikhil De's mentor Aruna Roy had quit National Advisory Council in May this year complaining that the minimum wages are not being considered for NREGA wages.

Prof Dev said that the money spent under NREGA has been coming down over the years and will remain lower in 2013. The expense is only .3 to .4% of GDP. A change in index is not going to increase the money spent under the scheme, he said.


The Business Standard, 26 November, 2013, http://www.business-standard.com/article/economy-policy/new-index-could-boost-nrega-wages-by-9-5-113112600425_1.html


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