The Hindu Business Line : Integrating NREGP with the market

The NREGP is designed to provide succour to the most vulnerable sections by providing employment. But it does not provide for them to pick up skills that will equip them for the employment market.

THE National Rural Employment Guarantee Programme is the most ambitious Rural Development Programme to be launched in the country till date. It has brought into focus the roles of the State and the market in generating employment in the rural areas, which is captured in the assertion that the poor have a right to 1 per cent of GDP in an economy that is growing at 6-7 per cent per annum.

Since growth is being eminently addressed by the market, why is State intervention necessary? State intervention is warranted because the data of both the National Sample Survey Organisation and the Census of 2001 show that there are more marginal workers in the 1990s as compared to the 1980s.

There is also an increasing trend of migration to the urban areas as the rural areas are unable to provide viable employment opportunities. Also, the recent spate of farmer suicides especially in Andhra Pradesh shows that in an era of liberalisation the markets have been less than effective in addressing India's rural agrarian economy.

What the NREGP scheme seeks to do is provide at least one hundred days of guaranteed wage employment to every household whose adult members volunteer to do unskilled manual work.

The kind of jobs to be undertaken are water conservation, drought proofing, irrigation canalconstruction, renovation of traditional water bodies, land development, flood protection and improving road access.

All this will cost the state Rs 40,000 crore, which is to be raised through increase in budgetary support, savings from existing employment schemes and additional allocation in gross budgetary support to states.

Since growth is to a large extent proportional to the investment that the economy makes, it is important to factor in the returns on such an investment. Would investing in the NREGP yield the same returns as it would if the investment is made in upgrading the existing seaports or in creating high-speed corridors for vehicular movement? The returns on the NREGP would certainly be less, but add to it the social and economic cost of poverty and the equation will change substantially. The bottomline, however, as the Prime Minister said, should be that outlays match outcomes.

Apart from return on investment, we also need to see if the investment is in line with the requirements in the rural areas. One way of ascertaining this would be through total factor productivity, which looks at not just investments but the combined productivity of all the inputs, direct and indirect, that generate economic growth.

Activities such as water conservation and drought proofing are certainly relevant, but for the rural economy to substantially increase its productivity, we also need to install sound infrastructure such as rural electrification availability of power, communication facilities and so on.

It is also important to create value addition for rural products by setting up cold storage chains, agro processing units, and the like. These issues can be addressed within the ambit of market forces if the state boosts the same by way of incentives. We need to actualise investments in all these areas to make an overall impact.

The NREGP scheme has the inherent advantage of ensuring that only those who are in need and who are willing to do manual labour become its beneficiaries. But the focus of implementation should be on less bureaucracy and more accountability as also on choosing the most relevant works for optimal use of the resources.

The implementation of the Employment Guarantee Scheme in Maharashtra as well as the Food for Work Programme across the country has produced mixed results. Due caution must be taken to ensure that the NREGP does not become yet another source of revenue for local politicians and bureaucrats.

The biggest gap with regard to the NREGP is that it is not growth-oriented. It is designed to provide succour to the most vulnerable sections by providing employment. But it does not provide for them to pick up skills that will equip them for the employment market. A skill-training component, therefore, should be incorporated in the programme.

In all it attempts to take opportunity to rural India, the state should not exclude the poorer sections from the market, but strive actively to integrate them with it.

(The author is Director, Kerala Tourism, and the views expressed are personal.)

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