Finally, someone has summoned some words of wisdom about India’s most ambitious poverty alleviation (or entitlement, if you wish) effort of recent times, the National Rural Employment Guarantee Scheme (NREGS). In Reshaping Economic Geography , the World Development Report (WDR) 2009, The World Bank took a long-term view of how scale and size conspire to keep people poor or make them rich.
Illustration: Jayachandran / Mint
The report looks at economic successes and failures as stemming from a combination of population density, transportation costs, factor mobility and agglomeration of industries, among other factors. These factors have been debated since the time of Adam Smith (“The division of labour is limited by the extent of the market”– the famous third chapter of The Wealth of Nations ). What is new are attempts to formulate policy debates in terms of these factors.
India comes up in the discussion implicitly. In a chapter on factor mobility and migration, the report outlined how some of India’s economic policies, real and implicit, were acting as barriers to internal mobility, something that was detrimental to the economic life chances of the country’s poor.
In this context, the report mentions the mobility-inhibiting role of NREGS. So far, criticism of NREGS has revolved around the massive official corruption and institutionalization of corrupt practices in the programme. Apart from this criticism, everyone agrees that NREGS has created a “wage floor” that prevents the exploitation of unskilled labourers.
Viewed geographically, however, NREGS prevents labour supply from reaching those parts of the country where there is high demand for it. To cite a few examples, acute labour shortages exist in many urban areas as well as developed agricultural regions (the “Green Revolution” states of Punjab, Haryana and western Uttar Pradesh). As a result, the “wage floor” being created in places where NREGS is in place is rather “artificial”. While such arguments are controversial, there is nothing surprising about them. Since independence, poverty alleviation strategies have been skewed against urban areas and are tailored to the interests of rural areas.
Within days of WDR being released, the World Bank’s India office sent out a note saying that NREGS played an important role in reducing poverty. This, however, raises more questions: Can long-term issues be divorced from short-term programmes of the NREGS kind? Is a politically funded anti-poverty programme sustainable in the long run? WDR has neat arguments against such interventions.
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