Before the general election, the mainstream media was unswerving in its antipathy to the National Rural Employment Guarantee Act (NREGA). In the aftermath of the financial meltdown, the fiscal deficit was a concern while previous poverty alleviation programmes only suggested corruption. However, following the Congress’ victory in the election, the media has suddenly begun to sing its praises, extolling the virtues of this landmark legislation. And it should.
India’s rural landscape is marred by indebtedness passing on from one generation to the next; malnourished children and anaemic women are a common sight. Few pockets in rural India, which have managed to unshackle themselves from the vicious cycle of indebtedness, have witnessed economic emancipation. NREGA was meant to be an instrument for accomplishing greater emancipation. This was rendered possible owing to a host of factors, not the least of which were complete support from the political class and the bureaucracy and fail-safe implementation, as this writer has elaborated upon earlier (“Learning from Andhra”, Mint, 22 September).
Till the 1930s, mainstream economic theory was steadfast in its denial of the very possibility of large-scale unemployment under capitalism. The work of two great economists, Michal Kalecki and John Maynard Keynes, following the Great Depression of 1929-33 changed this view forever. They showed that without adequate government intervention, widespread unemployment would be a characteristic feature of capitalism.
Massive employment generating projects pump money into the hands of employees. Since they have money to spend, their marginal propensity to consume—the change in consumption for every extra rupee earned—increases in sync with their need for necessities. The higher this propensity, the greater the stimulus provided to demand. The thrust provided by this increased demand brings about the multiplier effect, which in turn accelerates the economy. The unique feature about NREGA is that it seeks to transfer money from those whose marginal propensity is much higher to those for whom it is lower, bringing about a more equitable distribution of economic benefits.
Wherever NREGA projects have been implemented efficiently (and there are numerous examples), dried-up water bodies have been recharged, wells have been constructed, unconnected areas have been connected with roads, bunds and embankments for flood protection have been erected. In other words, hitherto unimaginable economic benefits have resulted. It is, therefore, no empty boast that NREGA helped the Congress garner substantial rural votes. The National Commission for Enterprises in the Unorganised Sector (NCEUS) has commended the positive aspects of NREGA. It has said the Act has drastically curbed rural to urban migration, improved food security, generated employment with dignity, brought about the economic empowerment of women workers and rendered sustainable asset creation.
NREGA has brought about a paradigm shift in the project implementation mode of the villages where it has been tried. This has been done by replacing the contractor raj, which has hitherto dominated rural India, with the panchayat raj. The funds earmarked and spent for projects are audited and scrutinized; the same applies to the completed work. This job has thankfully been decentralized with the gram panchayats and the gram sabha, thereby bringing about complete transparency by reducing bureaucratic corruption. It has also helped speed up projects to meet deadlines, bringing about a change demonstrable to villagers. Unless economic benefits become visible on the ground, villagers tend to lose faith in the system.
V.B.N. Ram retired as a senior executive from the corporate sector. Comments are welcome at email@example.com