‘A society which has failed to reduce the unemployment problem in two decades of development cannot ask its unemployed to wait indefinitely for the utterly uncertain prospect of employment growth catching up with population growth or income growth’.¹

 

THE case for a national employment guarantee programme, in the first instance for unskilled and semi-skilled labour in rural India, is so obvious that it should not require any justification. While employment programmes for the urban poor are also now on the agenda, it is the neglect of the rural poor that is shameful.

The facts are striking in their baldness. The most recent country-wide statistics (National Sample Survey data for 1999-2000) show that unemployment rates are as high as 7.2% for rural males in the labour force and 7% for rural females.² There is a worsening when compared to 1987-88 and 1993-94, two other years in which the NSS conducted its survey of employment. This is, of course, the broadest possible measure of unemployment, covering under-employment in the week previous to the survey, which is also the best measure in a society which does not offer universal unemployment security.

Other official statistics give a more detailed and equally distressing picture. The Rural Labour Enquiry revealed a small decline in the average number of days worked (in wage employment, self-employment and salary work) by men in rural labour households between 1993-94 and 1999-2000. The decline was much sharper in wage employment and among women. And between the two years, there was a rise in the number of days when men and women were not employed ‘due to want of work’: 30 days to 36 days for males and 25 days to 32 days for females. The long term trend, as thrown up in the rural labour enquiries and national sample surveys since the mid-1970s, does show fluctuations rather than a steady deterioration in the employment opportunities of workers in rural India. It is, however, clear that there has been no secular improvement in the availability of employment for the unskilled and semi-skilled who usually constitute the poorest sections of Indian society.

 

 

Since employment has not risen fast enough in the non-agricultural sectors to draw labour away from agriculture, this labour has increasingly been employed in very low productivity work in farming. On the other hand, if we want to raise overall output and employment in the economy, the most effective means would be to raise the productivity of agriculture, since it represents a ‘slack’ in the economy. The key to employment planning in India can, therefore, be seen to lie in raising the productivity of the agricultural sector. Within agriculture, it is the sizeable but low productivity dryland segment which arguably represents a huge untapped potential for growth. The potential of drylands can be tapped if we concentrate our investment in these areas on labour-intensive works which raise productivity through the process of environmental regeneration; this could also go a long way towards making the overall growth path of the Indian economy both employment-oriented and sustainable in the long-run.

Indian agriculture is now dominated by small holdings. Small and marginal operational holdings form over 80% of all cultivated holdings, and cover nearly 40% of the agricultural land. According to the data from the Rural Labour Enquiry, the proportion of households with land among agricultural labour households is as high as 79%. This, in part, is a reflection of the process of immiserisation of the peasantry. Thus, a large number of small and marginal farmers, operating very small, low-productivity holdings that cannot meet their livelihood needs, are forced to enter the labour market. If undertaken in the lands of small and marginal farmers, the productivity-enhancing and labour intensive works would make a three-fold contribution to employment generation: (a) by providing short-run (‘revolving’) employment; (b) by increasing the productive capacity of the economy, which would create demand for labour in the next round (‘sedimented employment’); (c) by raising the ability of the land to sustain the household, which would reduce the dependence of these farmers on wage labour, thereby improving prospects of other workers in the labour market.

 

 

If macro-economic development has not delivered results to India’s rural labourers despite the fact that the Indian economy experienced a marked acceleration in GDP growth from the 1980s onwards, then there is obviously a case for the state guaranteeing the employment of labourers in need of work. The attraction of employment guarantee programmes that are designed around public works is that they are self-targeting: That is, only those labourers really in need of work will participate in the programmes which would provide work at the prevailing legal minimum wage.

India already has considerable experience in designing and implementing rural work programmes. The most well-known is the long-running Employment Guarantee Scheme of Maharashtra, which has its origins in the relief programmes during the severe droughts of 1972 and 1973. The success of the EGS spawned a number of national programmes which evolved from the National Rural Employment Programme in the 1980s to the Sampoorna Grameen Rozgar Yojana of today.

 

 

The EGS is the only ‘guarantee’ programme in the country. Independent studies have come up with some very different conclusions, but much has depended on when the surveys have been conducted and the areas that they have focused on. However, certain generalisations – especially in the first 15 years of its operations – can be made. The EGS has obviously not contributed to a major reduction in the incidence of poverty in the state. But it has ameliorated extreme deprivation among the poorest of the poor. It has accounted for 10 to 33% of the number of days worked by the labourers who have participated in the EGS. It has had secondary effects in terms of facilitating unionisation of the rural labourers.

Financed in equal measure by special cesses and matching grants from the state government, resource mobilisation has not been a major problem. What have emerged as problems are uneven implementation between the districts of Maharashtra, the non-durability of assets (an excessive focus on rural roads that built in an unsatisfactory manner) and corruption/non-payment of wages.³ The efficacy of the EGS has recently been in some doubt because labourers have shown a preference to work in national programmes where the wages offered are higher and the state government has not been able to release the resources when they are most needed.

The experience of the EGS, more than the many national programmes, constitutes in many respects a microcosm of the challenges in a national employment guarantee programme as promised in the common minimum programme of the United Progressive Alliance and its supporters. There are three core issues in the design and implementation of an employment guarantee programme. These are: (i) asset creation (ii) design and execution and (iii) finance. These are the same issues that have been raised by critics of the proposed National Employment Guarantee Act (NEGA).

 

 

Asset Creation: A national employment guarantee programme (NEGP) will work only if it is not visualised as a relief programme. The problem with the many rural employment programmes of the past and the present (true to a large extent of the EGS as well) is that they have been seen more as providing succour, without being integrated in any way with a programme of asset creation. Hence the term ‘roads that get washed away’ for rural employment programmes as the local administration embarks on public works to meet targets on resource utilisation and employment generation.

It is time now to dovetail public works programmes with a NEGP so that the two contribute to creation of agricultural and rural assets, and the regeneration of farm lands. The current crisis – characterised by the twin problems of low public investment in agriculture and ecological retrogression – presents an opportunity to work towards such an integration. Some of the areas that suggest themselves for coverage by a NEGP are: (i) watershed development, (ii) restoration of tanks and other water bodies, and (iii) environment restoration activities like land development, forest regeneration and control of soil erosion. In addition, considerable opportunities are going to be created by the universalisation of elementary education that has become a core programme of the UPA government.

It would be necessary to design schemes appropriate for each region, rather than impose a uniform set of activities on all parts of the country. To illustrate: Dryland areas would need a focus on watershed development, flood-prone tracts would call for attention to control of soil erosion, water run-off and effective flood-drainage systems and in hilly/forested areas the most obvious activities would cover reforestation and construction of rural roads. This region-specific design of the employment programme would mean that the states and local bodies would have a greater say in identifying public works for execution.

 

 

Design and Execution: The critical requirement for the success of an NEGP is an effective mode of implementation. Indeed, the more we refine the visualization of the strategy, the more the demands that are placed on this aspect. An NEGP is not just an instrument for employment generation. The question no longer remains restricted to one of an efficient mechanism of delivery. To be a vehicle of fundamental social transformation, the NEGP must necessarily be conceptualized as part of an ongoing process of empowering the community.

While there is a universal agreement regarding the ‘government failure’ in executing these programmes, as confirmed by widespread reports of corruption and poor quality of implementation, non-government organizations (NGOs) and panchayat raj institutions (PRIs) are being variously commended as the answer. The danger here is that in the present climate of liberalization, this could constitute a pretext for the withdrawal of the state from spheres of action where its role is both indispensable and irreplaceable. The NEGP of the expanded scale that is being advocated here can only be executed with massive state investment.

 

 

Moreover, the wisdom of attributing any one agency as solely responsible for implementation at any level should be open to questioning. Rather than devolving the entire programme to any one single agency, the synergy of and collaboration different agencies need to be explored in detail. This presupposes a great deal of spadework – mobilisational, technical and institutional – directed towards the empowerment of the people. For this, the strengths of various potential agents of change must be fully utilized in a way that they complement each other without making the mistake of attributing to agencies roles which they simply cannot fulfil. In our view, the state, grassroots organisations and the PRIs need to come together to contribute their own bit to the success of these programmes – each has a role to play, which is as indispensable as it is unique.

The role of grassroots organisations should essentially be seen as that of mobilising the gram sabhas and gram panchayats and empowering people in political processes. For instance, the draft EGA 2003 mentions that gram sabhas and gram panchayats should conduct periodic social audits of the work done in their jurisdiction. Performing this function presumes that considerable mobilisational work is undertaken by the grassroots agencies in activating these institutions as well as empowering them with knowledge preparing and checking of estimates of work to be done, valuation of physical work using standard government procedures and proper accounting and book-keeping. It is also necessary that they give priority to such works which have highly favourable labour-material ratios.

 

 

It is clear that to perform these functions, grassroots organisations also need to be carefully chosen and evaluated. They have to be identified, selecting only those with many special qualifications:

* solid field presence and deep commitment, so that the benefits can be sustained in the long-run;

* requisite technical skills, with a capability of conducting meaningful interface with scientists, translating their inputs into specific field conditions, marrying the insights of scientists with those of the farmers and providing detailed feedback to scientists;

* capacity to carry out empowerment programmes for representatives of village level institutions (VLIs);

* capability of networking with other genuine grassroots agencies, so that the benefits can be transmitted far and wide, with significant multiplier effects.

In view of the differential incidence of unemployment across states, agro-ecological regions and social groups, the revised and expanded REP should have a sharp area focus. Prioritisation should be done with the development block as the unit. A multiple set of criteria can be evolved by each state in prioritising problem areas within it and thus area-focusing the programme. Such criteria would emerge from the problem typology specific to each region – such as recurring droughts, aridity, floods, land degradation, high land-man ratios, and so on – and would inform the content of the programme implemented. The extent of mobilisation work done by grassroots organisations should be one of the criteria for area selection.

The implementation of an NEGP has to be done in a phased manner. It has to be introduced in specific districts in each state and with the experience gained from initial implementation, gradually expanded to the rest of the state. There will be pitfalls, especially in states where the quality of governance is poor, which are also the states that are most in need of large scale public works programmes. It would be practicable to first introduce the programme in the 100-150 most backward districts and then expand the programme to all 400+ districts in the country.

If we consider land development alone, of the 323 million hectares of the land area of the country, at least 200 million hectares are in need of urgent intervention in land and water management. Even at a minimal per hectare cost of Rs 6,000 the total expenditure required is a massive Rs 1,20,000 crore. While the employment potential of such works is tremendous, they can be carried out only over a phased period of five to seven years.

 

 

It should be pointed out that a massive public works programme will not be a permanent operation. As assets get built up, the scope for additional public works will gradually reduce. So too the need of unskilled labourers for additional employment. It is to be expected that a regeneration of agriculture and a rapid expansion of non-farm activities in rural India will both eventually create job opportunities for rural workers. This will lower the demand for state guarantee of employment.

One cannot overlook the fact that class, caste and gender will have a major role to play in influencing the implementation of a NEGP. Local powerful groups will seek to direct public works programmes to their benefit, so too the dominant castes in both project design and selection of beneficiaries and short-changing of wage payment to women labourers will not be uncommon. In addition, there are other major problems like use of these programmes to distribute political patronage and the most common form of ‘leakage’ – the creation of fictitious accounts. All these shortcomings have plagued past and present rural employment programmes and they will afflict a NEGP as well. It is at the same time important not to discount the possibility of change in what could be a mass movement.

It is significant that surveys in Maharashtra have shown that the EGS has been most effective in areas where rural labour has been able to organise itself to demand project execution and transparency in payment of wages. The EGS has facilitated such organisation, which in turn has improved implementation. This has not taken place all over Maharashtra, but it has in a number of districts. This does suggest that it is possible, under pressure from below, to ensure greater transparency, minimise corruption and make the right selection of projects.

 

 

Finance: The last and perhaps the most frequently voiced concern is: ‘Where will the money come from?’ Strangely, this is perhaps the simplest of challenges. The fact is that the resource requirements are not likely to be large and they will not call for imposition of new or higher taxes. A number of estimates have been made earlier and more recently about the financial implications of a NEGP. One study made in the mid-1990s, admittedly with a focus on the dryland tracts, concluded that an employment guarantee to the under/unemployed in rural India would cost only between 0.54% and 1.52% of GDP a year.

A more recent exercise, which assumed that 30 to 40% of India’s 148 million households would seek employment, that a NEGP would provide 100 days of work to one member of these households at a wage of Rs 60 a day, and that the wage cost would constitute two-thirds of total expenditure, came to the conclusion that a rural employment guarantee would cost between Rs 44,000 crore and Rs 53,000 crore a year. This would be inclusive of the Rs 6,100 crore that has been allocated in the Union Budget for 2004-05.

 

 

Large as this amount may seem, this is equivalent to only between 1.55% (coverage of 30% of households) and 1.86% of GDP.⁴ Small as these resources are they still have to be generated. Yet, even here the demands are far from being unrealistic. For instance, the Centre currently collects tax revenue of 9% of GDP, compared to 11% in the late 1980s. The extent of tax evasion at even currently low levels of taxation is, by common knowledge, astronomical. It is therefore not a question of imposing higher taxes or collecting new cesses (as for education) but merely of better tax collection.

For a variety of reasons the effective burden of a NEGP on the economy will be even smaller than outlined above. First, a true mass public works programme will simultaneously contribute to a quantum jump in GDP growth. This by itself will reduce the financial burden on the economy. Second, the expenditure on materials in a large-scale public works programme (usually estimated to cost up to one-third of the total outlay) will by itself contribute to higher tax revenue. Third, a programme of this size will contribute to income growth and thereby ease the demand constraint (inadequate purchasing power) in the economy. This too will lighten the burden of a NEGP.

There is always the concern about the fiscal deficit and a NEGP could be seen as fuelling the fires of inflation. However, if a NEGP results in a sustainable rise in agricultural productivity, through labour intensive methods, using technologies which are environmentally regenerating. They will hold the key to a simultaneous solution to the problems of unemployment and inflation in India. As well-known economists have argued, even in theory, any absolute level of fiscal deficit could be sustainable, if the economy has excess capacity and unemployed resources and if the fiscal deficit is productivity enhancing.

The resulting higher incomes and tax revenues to the government would restore the revenue and fiscal balance in the short and medium term. A NEGP as visualised here does not remain a mere short-run relief measure. It is instead an integral element of a strategy for rural transformation. It is quite clear, therefore, that a rural employment guarantee in India can be sustainable in the long-run if the expenditure is focused on productivity-raising public works. The crucial question is of ensuring effective implementation at the grassroots under the vigilance of the organised strength of the rural poor.

 

 

In conclusion, mention must be made here that grassroot organisations are far ahead of the government in preparing the groundwork for the introduction of a NEGP. A number of organisations took the initiative (July 2004) to draft and post for public debate a model ‘National Employment Guarantee Act’.⁵ The main features of the draft legislation are that it guarantees any adult in rural India unskilled work in public work programmes. There is no 100 or 150-day limit on employment. Any labourer seeking unskilled work has to be provided employment within 5 km of his/her home and within 15 days of registration. The wages will be the statutory minimum wage, payable in cash and kind.

 

 

The programmes will be under overall administration of a State Employment Guarantee Council. It will be implemented by the district administration in conjunction with gram sabhas. The projects will be executed by the gram sabhas, which will also be responsible for monitoring. The national programme will be financed by a National Employment Guarantee Fund set up by the central government, while the state governments will be responsible for the payment of unemployment allowances if they cannot provide employment to applicants within the period laid down in the act.

It has been 30 years since one state government first introduced an employment guarantee programme. Since then the central government has put into operation a number of rural employment programmes, although none but one (the Employment Assurance Programme in the ‘most backward’ districts) have guaranteed work. A plethora of schemes, a dole mentality, inadequate planning and a lack of concern for integrating employment with productivity-enhancing activities have all meant that government intervention has done little to directly tackle under-employment of rural labourers. A national employment guarantee programme is now required. It is practicable and the resources required are available. It should and can be planned to raise the asset capacity of rural India.

 

Footnotes:

1. Raj Krishna ‘Unemployment in India’, Economic and Political Weekly, 3 March 1973, reprinted in V. Krishna (ed.), Raj Krishna: Selected Writings, Oxford University Press, New Delhi, 1995.

2. A. Vaidyanathan, ‘Employment in India, 1977-78 to 1999-00: Characteristics and Trends’, Journal of Indian School of Political Economy, April-June 2001, Table 19.

3. S. Mahendra Dev and Ajit K. Ranade, ‘Employment Guarantee Scheme and Employment Security’, in S. Mahendra Dev, Piyush Antony and V. Gayathri (eds), Social and Economic Security in India, Institute for Human Development, New Delhi, 2003; and S. Mahendra Dev, ‘Rural Public Works’, in K. Seeta Prabhu and R. Sudarshan (eds.), Reforming India’s Social Sector – Poverty, Nutrition, Health and Education, UNDP, New Delhi, 2003.

4. C.P. Chandrasekhar and Jayati Ghosh, ‘How Feasible is an Employment Guarantee?’, BusinessLine, 22 June 2004.

5. The text of the draft legislation and comments from a number of groups are available at www.righttofoodindia.org