Bad cap­i­tal­ism

Di­lut­ing MGNREGA does not make mar­ket sense


Di­lut­ing MGNREGA, the world's largest pub­lic wage pro­gramme, will not serve the pur­pose

Lwhen more than 10,000 peo­ple AST FORT­NIGHT trooped to Delhi to protest the bud­get cut in so­cial sec­tor pro­grammes, the mes­sage was loud and clear: there is a sense that the new gov­ern­ment is down­siz­ing wel­fare pro­grammes ini­ti­ated by the last gov­ern­ment. The loud­est protest was against di­lut­ing or do­ing away with the Ma­hatma Gandhi Na­tional Ru­ral Em­ploy­ment Guar­an­tee Act (mgnrega), the world’s largest pub­lic wage pro­gramme.

But is the gov­ern­ment re­ally think­ing of do­ing away with mgnrega? It has been send­ing con­fus­ing sig­nals.The first ru­ral de­vel­op­ment min­is­ter of the Na­tional Demo­cratic Al­liance ( nda) gov­ern­ment, Nitin Gad­kari, wanted dras­tic changes in the pro­gramme and even con­firmed lim­it­ing its ge­o­graph­i­cal cov­er­age. In the first bud­get, nda did not al­lo­cate much to the pro­gramme,fu­elling the spec­u­la­tion that mgnrega could be near­ing its end. But this has been de­nied by the new Union ru­ral de­vel­op­ment min­is­ter, Biren­der Singh. One thing, how­ever, is def­i­nite—the gov­ern­ment is in a fix over the pro­gramme.Though it has adopted all the key pro­grammes of the erst­while Congress-led gov­ern­ment, many Bharatiya Janata Party (bjp) lead­ers have doubts over mgnrega. They ad­mit in pri­vate that a lot of bjpruled states have suc­cess­fully im­ple­mented mgnrega and close to 40 per cent of the to­tal em­ploy­ment de­mand for the pro­gramme comes from th­ese states. It is, for sure, popular among the ru­ral elec­torate.

So why does the gov­ern­ment want to di­lute it? mgnrega, with an an­nual bud­get of around 33,000

` crore, has been crit­i­cised for be­ing a dole that ham­pers in­vest­ment in other “pro­duc­tive” pro­grammes. In the past five years, bjp lead­ers and pro-growth econ­o­mists have crit­i­cised the pro­gramme cit­ing its im­pact on food in­fla­tion and for turn­ing a huge labour force un­pro­duc­tive. mgnrega, they say, is a pub­lic pro­gramme that has neg­a­tively im­pacted the cap­i­tal­ist econ­omy. Not to for­get that it is a legacy of the for­mer gov­ern­ment that touches ru­ral house­holds, and is, there­fore, po­lit­i­cally dis­com­fort­ing.

This col­umn ar­gues that do­ing away with mgnrega is bad cap­i­tal­ism. Re­cently, the Re­serve Bank of In­dia came out with a study which negated the idea that the pro­gramme is fu­elling food in­fla­tion and turn­ing peo­ple un­pro­duc­tive. In fact, there are sev­eral stud­ies that show mgnrega has helped the mar­ket by in­creas­ing ru­ral pop­u­la­tion’s spend­ing ca­pac­ity.

In the past nine years, gov­ern­ments have spent close to 2,68,800 crore on mgnrega.Of this, 1,88,180 crore ` ` has been given to peo­ple as wage— hard cash that they could spend on what­ever they wanted. Some 22 per cent of In­dia’s house­holds have ben­e­fited,mostly com­pris­ing land­less, small and mar­ginal farm­ers. In the best case sce­nario, mgnrega gives cash in­come of 15,000 per house­hold per year. ` This fig­ure is more than dou­ble of the ru­ral poverty line fig­ure.The pro­gramme has re­sulted in a “trickle down” of cash that no other pro­gramme or pri­vate in­vest­ment can boast of.

mgnrega money has fu­elled both food and non­food mar­ket de­mands.A study by the In­dian Agri­cul­tural Re­search In­sti­tute says mgnrega ben­e­fi­cia­ries spend six per cent more on food items than non-ben­e­fi­cia­ries.The trend is sim­i­lar for non-food ex­pen­di­tures like on fans, lights and durable goods.

mgnrega is not a waste­ful ex­pen­di­ture. The pro­gramme has helped re­duce un­der­nour­ish­ment and nu­tri­tion deficit by eight-nine per cent. It has even helped ru­ral house­holds tide over the drought of 2009. The share of ru­ral eco­nomic growth in over­all na­tional eco­nomic growth is sig­nif­i­cant and many econ­o­mists have pointed out that the cur­rent growth rate is due to the boom in ru­ral econ­omy.

If the gov­ern­ment ig­nores the pro­gramme in the name of growth and fis­cal pru­dence, what will hap­pen to the mar­ket which is be­ing sus­tained through mgnrega money?


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