This year marks the twentieth anniversary of a landmark statutory right established by Parliament. This is the right to work, or right to employment. Such a right is envisaged in Article 41 of the Constitution, directing all states to secure a right to work for all citizens. This law was created as the Mahatma Gandhi National Rural Employment Guarantee Act, which was passed in Parliament on August 23, 2005. It gave the right to a hundred days of unskilled manual work, at a specified daily wage, for one member of every rural household that asked for it. One third of these jobs created were to be reserved for women. Employment is to be given within 5km of the residence of the applicant. And if the government is unable to create such an employment, then it has to give some allowance in lieu of wages. This is the biggest social security and public works programme in the world. Despite early scepticism, it is now universally hailed as a stellar programme of development even by the World Bank.
The provision of rural jobs on demand is a proxy for unemployment insurance. In developed countries, an unemployed person goes and registers himself or herself at the employment exchange, and while looking for a job, gets an unemployment dole. India does not have such a system, since the labour market is not as well organised. Instead, we have the NREGA scheme (also sometimes called NREGS), which covers the rural population. The NREGS employment demand spikes up during droughts and famines, and that is why it is an “insurance” programme de facto. The demand for NREGS falls when labour market conditions improve and there is plenty of work available for farm labour. If NREGS demand falls, it is a good sign. If the programme becomes redundant, it would mean that rural India has reached full employment conditions. But we are far from that situation. Most recently, during the pandemic, the demand for NREGS rose steeply, and the total expenditure in the fiscal year 2020-21 was double what was budgeted, reaching almost Rs 1.2 lakh crore, and generating 300 crore person-days of work.
The benefits of NREGS are as follows: It provides employment during distress. The wages are linked to minimum wages, ensuring that it acts as an anti-poverty measure; women’s participation is high, empowering them politically and giving them autonomy; many work sites provide for creche services to help women with young children to also participate; the public works programmes created to provide MNREGS work build public assets, such as irrigation reservoirs, ponds, canals, rural roads, afforestation, and so on. In some states the programme also includes building rural housing or private assets. The availability of work in rural areas reduces the stress of urban migration on cities. During the pandemic, there was large-scale reverse migration to the villages, where people were provided work under NREGS. Since workers’ rights are enshrined in the law, they have a much better chance of securing those rights. Thanks to the Aadhaar linkage, the payment of wages is directly deposited into bank accounts, reducing leakage.
What about the negatives? First, since it is a labour market intervention providing a wage floor and alternative option, the landlords and those who seek the labour are upset. They have often complained about the shortage of workers or that the NREGS is making workers “lazy.” Since the wages are minimum under the NREGS, the alternative work needs to offer a higher wage to lure workers away. Second, despite controls and biometric tools, there are still alleged leakages of funds that include methods like phantom musters of workers, which help in syphoning out the money. This leakage can be prevented only by permitting social audits by the villagers or non-government organisations. Some states, like Rajasthan and Andhra Pradesh, which had good social audits, had much less leakage. A third drawback is due to biometric requirements. The thumbprint or retina reader might not work, or the failure of electricity or the machine may result in the worker being denied wages. Even if there is a 2 percent error rate, it could result in 10 to 20 million workers being denied their wages. This is a serious lapse and needs some fallback measures in case the biometric does not work. A fourth drawback, and a recent worrying trend, is the delay in payments. Since these are daily wage workers, any delay beyond one or two weeks in payment can be very distressing. Recent data, as per government sources, shows an aggregate of Rs 975 crore in payments has been seriously delayed.
There are many features of NREGS that can be tweaked and reformed to make it even more effective. It is different from Universal Basic Income (UBI), which is an unconditional money transfer and was introduced as a concept in the economic survey of 2017. By contrast, NREGS is for self-selected individuals and has a requirement of hard manual labour. Presumably, this filters out fake and fraudulent claimants, if the system works properly. One measure of success of NREGS is that there is often a demand for an urban equivalent too. Many state governments have considered introducing an urban employment guarantee scheme too.
NREGA was the culmination of public works programmes, experiments and pilot projects, which started as early as the 1960s, with some degree of success. Maharashtra’s Employment Guarantee Scheme was launched in 1973, with the backdrop of a severe multi-year drought. It was financed by the state itself by imposing a profession tax on those employed in cities. It ran well and was an inspiration to the national law. Until the time that India has a full-fledged formal unemployment insurance, with extensive registration and tracking of the employed and the unemployed workers, and a payroll tax collected from employers to pay for this, a scheme like NREGS will be essential. The additional impact of free food grains (5 kilos per person per month) and various direct benefit transfer schemes, like PM Kisan or the Ladki Bahin Yojana, is such that the NREGS need will decline somewhat. Not to forget that NREGS, due to its work requirement, creates durable rural assets, which also add to productivity and public welfare. It also acts as an indirect vehicle for women’s empowerment. Hence, here’s to wishing NREGA the best on its 20th anniversary and hoping it becomes more effective in coming years. It is a role model for the whole world.
Dr Ajit Ranade is a noted Pune-based economist. Syndicate: The Billion Press (email: editor@thebillionpress.org)
