Financial Daily from THE HINDU group of publications
Monday, Sep 05, 2005
Industry & Economy - Social Welfare
Columns - Vision 2020
REGS: How to make it really work
P. V. Indiresan
The idea is laudable but is beset with problems, such as the following:
Functional: Evidence of employment is perishable; the evidence of how many were actually engaged for work vanishes the very next day.
That is a perfect recipe for unscrupulous operators.
Definitional: In India, poverty is measured by the poverty line, which, in turn, is measured by hunger. Poverty has many other dimensions such as lack of access to water, energy, sanitation, shelter, transport, education, healthcare or Internet. Poverty should be designated by a Poverty Radar and not by a simplistic poverty line.
Operational: It has no element of competition; in each village, the operation is monopolistic.
Social: It is a common experience that when the poor are provided a decent dwelling, they sell it away and return to their old hovel. That will not happen only when both the poor and the not-so-poor are enriched simultaneously. The REGS incorrectly assumes that the poor can be enriched in isolation.
Economic: Many amenities that the poor lack can be supplied only in large-size markets. The scheme has no scope for developing large enough markets, which alone can sustain such services as quality healthcare, education or transport.
Financial: The poor have some income but zero (or even negative) capital. Hence, their need for financial capital is even greater than that of income.
Organisational: Villages lack human capital even more than financial capital. The scheme has no provision to attract much needed skilled persons.
The Employment Scheme has been opposed by many on political grounds. The political objection is relatively a trivial one. The critical flaw is elsewhere: The Scheme does not check the ever increasing rural-urban disparity. Growing disparity is in-built in our development policy. For decades, expert opinion has been virtually unanimous that:
Both these have now attained the status of ideology. In spite of substantial subsidies based on this ideology, rural disposable incomes are three to ten times lower than the urban average. Worse, that disparity is worsening continuously without check. As the Table indicates, this situation throws up several unpalatable facts, each one raising unanswered issues.
Appropriate Technology that is fashionable among rural developers may have higher productivity than that of existing practices, but not much more.
The idea that "rural technology" should be labour-intensive while "urban technology" should be capital-intensive is a recipe for perpetuating, even enhancing the rural-urban divide. This policy is bound to destroy rural peace and national stability too sooner than later.
Unfortunately, these arguments enjoy little support. In our culture, established ideas are sacred; new ones are heresy. In a recent discussion, some highly respected and very sincere intellectuals insisted that the Employment Guarantee Scheme will do much good even if 30-50 per cent of the money is wasted, even if 30-50 per cent of the assets that will be built are washed off.
They were confident that with devolution of powers to panchayats and with the Right to Information Act, leakage will be nowhere near the 82 per cent that the former Prime Minister, Rajiv Gandhi, estimated.
An effective rural development programme should meet two basic objectives:
Two sides of same coin
For competing effectively with cities, as well as for providing basic needs, the rural areas should attract both financial and human capital. In turn, they will attract both financial and human capital once they supply all basic needs. Thus, the two objectives are not truly independent; they are two sides of the same coin. This is a chicken and egg problem. One cannot begin without the other. Therefore, both capital infusion and installation of basic needs should start simultaneously.
Let us consider how the Employment Guarantee Scheme may be modified to move towards this twin objective. If the annual payments under this scheme are capitalised, that would secure credit worth about Rs 1.5 lakh per family. Then, instead of paying the poor family in small amounts every year, let us provide them at once as wealth in the form of the eight basic needs listed above. That is best done by dividing those needs into two parts. The first part will comprise a well for water (including water treatment as needed), biodigester for sanitation and smokeless fuel. These may be given in micro-groups of shelters for five to ten families. Education, healthcare, Internet Café and transport to a large market may be provided by combining a few thousand families in macro-groups. Both parts can be offered within the capitalised value of the annual wage guarantee.
It is more than likely that the poor will be happy to exchange an assured and permanent asset here and now in place of a promise of continued payments (of doubtful credibility) into the far-off future. Constructing these facilities will create directly much employment too, though that may not be (directly) as much as it is promised at present.
To complete the picture, we should invite private capital too to supplement what the state provides. This experiment may be sanctioned on condition that Above Poverty Line families invest in the same micro-amenities (shelter with water supply and sanitation) that the poor will get. Then, more capital is injected; more jobs are created to set up a faster growth trajectory. More important, it reduces the probability that the poor will sell their dwellings and move back to their huts,
REGS pays wages for developing public goods. As public goods are nobody's baby, misuse is highly probable. In the alternative suggested here, the poor benefit directly and so do their richer neighbours. Will that not have a higher probability of success? Is there anyone willing to verify whether that proposition is correct?
(This is 157th in the Vision 2020 series. The previous article was published on August 22.)
(The author is a former Director of IIT Madras. Response may be sent to: email@example.com)
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