Are unemployment doles necessary?
As if the tussle between the Communist allies and the Manmohan Singh government over privatisation, foreign investment and other measures relating to economic reforms was not enough, the two have now clashed over the implementation of an employment guarantee scheme. Given the nature of the rhetoric used by some members of the Left, no compromise seems feasible at the moment between the two sides, even if it is generally believed that the communists will not take the dispute to a breaking point. The problem has arisen over what the latter perceive as a ‘watering down’ by the government of the original proposals on the scheme adopted by the National Advisory Council.
Jean Dreze, a well-known economist who has co-authored several books with Nobel Prize winner Amartya Sen, has described the government’s modification as a ‘travesty’ of what was approved by the council. Another well-known Left-leaning member, Aruna Roy, has spoken in a similar vein.
Since both Dreze and Roy are known for their extensive study of rural poverty, there is little doubt that the government will not find it to easy to reject their views, which carry considerable weight in academic circles. The difference between the two sides relates to the government’s decision to confine the new employment generation measure to 150 of the poorest districts as opposed to the original proposal to cover the entire country. What is more, the government wants to give the ‘guarantee’ of employment only to ‘poor’ households in the countryside, or those who possess the BPL (below poverty level) cards, and not offer it to all the rural households.
Those who want the council’s advice to be fully accepted and not modified in any way argue that, first, the BPL cards are not reliable and, secondly, offering the guarantee to all rural households will ensure that no destitute family is excluded. They also maintain that only the really deprived will accept the offer since the better off will not be interested in accepting a Rs 60 Indian Currency (IC) per day dole for 100 days of work as a casual labourer. There is a third modification to which the Left is opposed. It wants the programme to be a long-drawn affair and not to be operated for a specified period, as the government wants.
However, the economists who support the modifications say that clear guidelines relating to those eligible for the offer and a prescribed time limit are needed so that there is no wastage or misuse of the funds. There are also doubts about exactly how much it will cost. Although the official estimate is Rs 4 billion IC, others believe that the government may finally end up spending a sum as high as Rs 150 billion IC.
The reason for such a wide variance is that government calculations have rarely proved reliable. In addition, there is the fear that whatever the amount, only 15 paise per Indian rupee will reach the targeted beneficiaries because of the ‘leakage’, a euphemism for corruption, at various levels. It is worth remembering that the figure of 15 paise was mentioned by former prime minister Rajiv Gandhi in connection with the allotment of government funds for the underprivileged, and is now generally acknowledged as a useful and reliable estimate of how such grants are misspent.
Those who cast doubts on the programme believe, therefore, that the entire allocation will be a sheer waste, for the genuine poor are unlikely to benefit. The gainers will be middlemen and corrupt officials and politicians. Besides, it will also be a waste because no durable assets can be built with casual labour.
Only some panchayat-level work like building unpaved roads or cleaning the village ponds can be undertaken. There are other objections, too. For instance, it is not clear how the project will be financed. Will the government raise the tax level, as favoured by the Left, or resort to another of its periodic attempts to unearth ‘black money’ or hidden wealth, a measure of intrusive official functioning associated with the earlier controlled economy? Nor is it clear how bankrupt and generally inefficient state governments will handle a project of this magnitude. Doubts have already been expressed about Bihar in this context.
At the same time, the states may not like the central government to monitor the programme too closely lest this should hamper the channelling of the funds to political elements associated with the ruling party in the countryside.
A further objection is that the move will deflect attention away from genuine efforts to reduce poverty, which includes building infrastructure like roads, power stations and transport services. If there is greater focus, for instance, on establishing a chain of cold storages with a reliable power supply in the countryside, the development of ago-industries will bring prosperity. It is also argued that the decline in poverty levels from 39.1 per cent in 1987-88 to 27.1 in 1999-2000, according to the National Sample Survey, means that India is already climbing out of the abysmal poverty it experienced earlier and that there is no need, therefore, for the kind of unemployment doles which the government is now proposing.
(The writer is a current affairs analyst.)