NREGA – the pitfalls

NREGA (National Rural Employment Guarantee Scheme for the uninitiated) is another mammoth instrument of corruption in the hands of the political class. This scheme, which ensures a minimum wage to the rural labor, is flawed because it has no output, direct tangible benefit in the form of asset creation. It just disburses tax payers’ money to rural daily wage earners. But given the pathetic condition of our delivery mechanism, only a pittance of the billions of dollars actually reaches the rural masses. Rest of the money is conveniently pocketed by political parties who have floated the scheme, and their middlemen. This scheme is supposed to have contributed in insulating Indian economy from global financial crisis by creating demand and purchasing power at the bottom of the pyramid. Even if this is considered true, isn’t the Government encouraging reckless spending through this scheme? Given the fact that rarely the benefits of savings and investments reach the rural people who actually benefits from this colossal disbursal (according to an estimate in 1980s, the disbursal rate was only 18%, i.e. for every dollar given by Government only 18 cents reaches the intended beneficiary. Given the fact that the Government delivery mechanism has changed little since then, there is no reason to believe that the situation has changed for the better), it can be safely said that this amount of money actually does not provide a better life and a sustained livelihood for poor but only provides them with a temporary relief. After the money is spent they are once again dependent on availability of work. Moreover, there is tremendous pressure on the local bodies to spend the allocated amount. Thus the money often ends up literally in digging holes and filling them again.


Instead, if the Government were genuinely concerned about poverty alleviation, it would have used this money to employ rural people and engage them in productive, meaningful community work – of urban and rural asset creation, infrastructure building like schools, hospitals, roads and bridges, rail network, forestation, sewage treatment, clean water, libraries, computer centre etc. This model was followed by Franklin D. Roosevelt right after the grim years of depression in US when the unemployment rate there was as high as 25%. These activities ensured gainful employment as well as asset creation which created more jobs and sustainability of employment, thereby starting a virtuous cycle and ending the gloom and despair associated with Great Depression.

Oh, when will our political leaders ever learn! When will they ever learn!