NREGS: Jholawala economics at its worst
by Virendra Parekh on 23 Jun 2011 3 Comments
What passes for economics among jholawalas is centred on the idea of creating large networks of patronage funded with taxpayers’ money - be it public sector enterprises or welfare schemes. Any policy or scheme that creates or enhances dependence of citizenry on sarkar maai-baap is to be preferred to one that empowers people to solve their problems. Sooner rather than later, such an approach to economic issues leads to damage and distortions.


One such scheme, the National Rural Employment Guarantee Scheme (NREGS), the flagship of jholawalas dominating the National Advisory Council, is doing great harm to the countryside by inducing distortions. As is known, the sole objective of the scheme is to create employment out of thin air. Wages under it are generous by local standards and, for good measure, linked to inflation. There is no compulsion to create durable, productive assets in a cost-effective manner. Apparently, these features make it attractive to a large number of people who may not have been its prime intended beneficiaries.


Sadly, the scheme is hastening demise of traditional skills which, though productive, do not offer comparable returns mainly due to poor marketing. The weaver, the carpenter, the goldsmith, the kalamkar, the Bidri blacksmith no longer has any incentive to carry on.


As Nirmala Sitharaman points out in an excellent article (Hindu Business Line 15 June 2011), the system has excluded them. The schemes which were tailor-made for them were poorly funded and suffered due to half-hearted implementation. Among this class of self-employed, whose core competency lies in creating handcrafted, eco-friendly products, a perception has set in that governments do not value them though the markets may. And their skills are not good enough to reach the market that exists.


As a result, handloom weavers producing sarees, dhotis or upholstery prefer to dig canals and fill earth in them again. A recent delegation of weavers from Andhra Pradesh demanded from the Prime Minister a NREGS exclusively for handloom weavers.


Joining the queue for NREGS is the small number of Ona Villu makers in south Tamil Nadu. Essentially from the community of carpenters (viswakarma), these are families which have for generations undertaken the service of preparing the bow of Sri Rama for the ancient Tiruvattaru temple. Requiring three months of total dedication and commitment, they live a life of penance during the period – selecting the wood, crafting and readying the bow. A theme drawn from the Ramayana is then drawn and painted on the bows with selected natural dyes. They are then offered on the sacred Onam day with due accompanying ceremony. The faceless bureaucracy managing temples fixes ridiculously paltry wages for these artisans by quoting archaic rules.


Now, many of them find working under NREGS more rewarding than their traditional occupation. Ms. Sitharaman reports that the two sons of a now deceased artisan, who made the villu in Tiruvattaru for more than four decades, have migrated to different villages, one joining the “employment guarantee” queue.


Notice that these traditional skills cultivated over ages are part of our national heritage and in a sense irreplaceable. For centuries, they have provided livelihood to millions of people in adverse times and also nourished their self-respect. However, in the recent past, growing input costs and failure to realise sustainable price for their produce resulted in suicides among people with skills inherited over generations.


It is possible to argue that NREGS has actually thrown a lifeline to these artisans sinking under the weight of their traditional calling. But what about the permanent loss of skills? A more sensitive government would ensure sustainable wages for the 90-day penance, and for the rest of the year promote the artisan by linking up with craft bazaars held all over the country.


Please remember, their products do have a market. The patolas and paitanis are possessions of pride for most women who can afford them! Men also do make a fashion statement with their kurtas. The villu, too, are much sought after, less as prasadam and more as unique art pieces to adorn up-market homes in metros. The artisans, however, lack skills and means to reach the market. It is here that the state could make a difference.


Another distortion brought about by NREGS is the fillip it has given to mechanisation of farm operations. In many parts of the country, farmers find it difficult to get labour at the going rate, especially during harvest time or during planting of paddy from nurseries on to the field. In Andhra, for instance, even the small farmer has to join in the village mechanised harvester pool. The net effect is an increase in farming costs, at a time when agriculture is losing viability as a commercial enterprise. Small and medium enterprises are also hard pressed for semi-skilled and unskilled workers as workers are no longer keen to move out of their villages.


Now, there is everything to be said in favour of taking people away from lowly paid farm operations into more productive jobs. The crux of rural poverty lies in the fact that while 65 per cent of our people depend on agriculture and related activities for livelihood, the share of agriculture in GDP is hardly 16 per cent. In other words, 65 per cent people get only 16 per cent of the bread. If fewer people depended on agriculture, it will reduce poverty both inside agriculture sector and outside it.


However, this transfer of labour force from agriculture to industry and services has to be brought about by creation of commercially viable, productive job opportunities, preferably in rural areas. That is the whole purpose of economic development.


What the NREGS has been doing is create jobs which are paid for from government money and have little relationship with productivity. Its purpose is to create jobs and distribute money as wages. The performance of the district collector, for example, is evaluated in terms of the amount of employment (number of man days) he has created under the scheme, rather than the quantity and quality of assets built under it. So, what was intended to be a self-targeting scheme for the people at the bottom is fast becoming a disguised system of doles and may soon come to be treated as entitlement by a large section of the non-poor. No wonder it has succeeded only in artificially pushing up wages and costs (and demand for food) all around in rural areas without creating any real assets.


Notice that we have not even mentioned so far the biggest bane of NREGS: the massive, systematic and organised corruption pervading it from top to bottom. It is so well known and so widely commented upon that there is no need to elaborate it.


Neither corruption nor economic flaws discussed above are accidental or incidental to NREGS. They are central to its design. NREGS is out and out a political scheme intended to create a class of beneficiaries that is beholden to those who conceived it. The patronage network affords ample opportunities for lining the pockets and forging vote banks. The benefits are reaped by those who implement the scheme, while the costs are borne by taxpayers and the economy.


The author is Executive Editor, Corporate India, and lives in Mumbai

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