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Poverty alleviation

“Employment in lean seasons”

by K. P. Kannan
In the general election this year, India’s Congress Party benefited handsomely from a programme called “NREGA”, which is designed to help needy households in rural areas. Implementation started in 2005. In an interview, development economist K. P. Kannan explained what this programme is about. [ Interview mit K. P. Kannan ]

What is the basic idea of NREGA?
The basic idea of India’s National Rural Employment Guarantee Act 2005 – popularly known as NREGA – is to entitle all households in rural areas to up to 100 days of manual work per year at the stipulated legal minimum wage prevalent in their particular region. Sometimes Indian media also use the term NREGS, with ‘S’ standing for scheme. Both terms mean the same, however.

Job programmes and food-for-work schemes are nothing new. Why has NREGA made a difference?
Earlier public works programmes were not backed by any law. They were just schemes governments implemented at will through the bureaucratic machinery, without the participation of the people. Such schemes were not based on need, and the funds allocated were not adequate to really fight poverty. In contrast, NREGA is better implemented for several reasons, the important ones being:
– employment is given only when there is demand from the local people, channelled through the democratically elected village-level government bodies called panchayat,
– the panchayats also design the public work projects and implement them, so there are no contractors who might try to siphon off money,
– the wages paid are above the prevailing market rate in most villages, because the market wages are usually lower than the stipulated minimum wages,
– there is greater vigilance by civil-society organisations, especially those working among the poor, and lastly
– there is a stronger political will to implement NREGA than was the case in earlier schemes.

Who are the beneficiaries of NREGA?
The beneficiaries are, mostly, the landless poor in rural areas. These people struggle to find regular employment, so they have to accept whatever work comes by, even if it is at very low wages. There is a high correlation between this group with India’s scheduled castes, who were formerly known as “untouchables”, and scheduled tribes, who were outside mainstream society. However there are also sizeable sections of such workers who belong to the intermediate castes. A positive and important side-effect of NREGA is the improvement of rural infrastructures, a worthy goal in its own right.

How is NREGA assessed in political terms today?
Many of the people who are directly affected by NREGA consider this reform an important pro-poor initiative of the national government and thus voted in favour, once more, of the Congress Party, which lead the coalition government that introduced NREGA. It is now recognised in political circles that the outcome of the general election was partly, if not wholly, influenced by such pro-poor schemes as the NREGA. This is quite important because parties advocating a communal agenda were decisively defeated, though they are still in power in a few states. As a social scientist, I think that NREGA is only a small step in the fight to end poverty in India.

What do you think should be done next?
For a large and diverse country like India, the fight against poverty is a daunting task. But the Indian political system has to face it squarely. Earlier it was land reform that was marked as a major agenda. I think it is more complex than that. I would argue for the provision of a set of basic social security such as access to a public distribution system for food, access to education, access to at least primary health care and provision of better housing. At the same time there should be legal entitlements to a national minimum wage along with NREGA. Education and skill formation is crucial to enable the working poor to earn an income to take care of their basic needs. Instead of chasing aggregate economic growth, the central government should focus on generating employment that will ensure decent work conditions and fair wages.

I have read that NREGA has helped to stem internal migration, particularly from poverty- and conflict-ridden Bihar. Is that so?
Yes, it is indeed the case, going by the reports of both the media and civil-society organisations. Much of rural to urban – or poor state to rich state – migration in India is distress migration. NREGA seems to have helped to reduce such migration, which is yet another proof of just how important it is to create regular employment opportunities in the local economy.

Why is guaranteed employment particularly important in rural areas?
India is, in a sense, a transitional economy. Only around 20 % of income is generated in agriculture. Nonetheless, 57 % of employment is still in agriculture. Rural people depend on agriculture and the primary sector in general. The main problem is that agriculture and other primary activities are mostly, if not entirely, seasonal in character. Employment, however, has to be provided during lean seasons too, which is why employment guarantees matter very much.

Bad weather has hurt Indian agriculture this year. First there was hardly any rain, and then there was very heavy rainfall in a very short time span. Neither phenomenon is good for farming. Does NREGA help to fight or contain poverty in this context?
Most likely, the existence of NREGA will have helped to alleviate the distress of poor rural families by providing paid work. However, we are yet to get reports on this. The priority now is relief. Many people have lost their cattle, houses and crops. But the overall shortage in foodgrains is being taken care of by India’s buffer stock system.

To what extent does NREGA enable rural people to cope with high and rising food prices?
NREGA cannot contain food-price inflation. It is a programme that gives some additional purchasing power to the poor people in rural areas. That in itself may actually contribute to food-price inflation, if rising demand for food coincides with supply constraints. All summed up, however, India is self-sufficient in terms of food today.

Are there plans to establish something like NREGA for urban areas?
The National Commission for Enterprises in the Unorganised Sector (2004-09), a body constituted to examine the state of the informal economy, has recommended a similar scheme for the urban areas. The central government is examining this recommendation. There is, as yet, no right to work for people living in urban areas. In the meantime, the government did announce a housing scheme for the urban poor.

Can other developing countries, for instance in Africa, copy NREGA?
As an idea, it is eminently doable. In practice, however, success will depend on a government’s willingness to reprioritise budget expenditure in favour of the poor. The implementation machinery will also be of crucial importance. While India has a well-oiled bureaucracy, there are problems of leakage as well as a general antipathy to the plight of the poor which, I suppose, is not unique to India.

Questions by Hans Dembowski.