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Timely boost for rural development

The stepped-up budgetary allocation for the National Rural Employment Guarantee Scheme (NREGS) — the central government’s flagship programme for rural poverty alleviation and development — carries important policy indications. First, the strengthened commitment to a scheme conceived in the first term of the United Progressive Alliance government and its political success reflect a coming of age of the initiative for rural uplift. In addition to the political gains that are critical to democratic decision-making processes, the scheme’s end result of putting cash in the pockets of the rural poor in exchange for the unskilled manual labour provided reiterates the continued validity of Keynesian stimuli. The support provided by the NREGS is fine-grained, as it boosts effective demand in rural India, which is home to an estimated 73 per cent of the country’s officially computed poor. The policy correction is of paramount importance given the changes in rural India, marked by declining contributions from agriculture and allied sectors to the national income. Another important long-term consequence is the stepping up of rural wages. Finance Minister Pranab Mukherjee’s commitment to the provision of a “real wage of Rs.100 a day” under the scheme, if implemented, will substantially improve the lot of rural wage earners who face wage inequalities and have no social security support.

From a budgetary perspective, two factors explain the allocation of Rs.39,100 crore for 2009-10 for NREGS, an increase of 144 per cent over 2008-09 budget estimates, but not really steep when compared with the interim budget which set apart Rs.30,100 crore. The scheme, which covered 200 districts when it was launched in 2006, is now implemented in 604 rural districts. The increased allocation is inescapable also because Mr. Mukherjee has promised to provide a daily wage of Rs.100 for all workers under NREGS. So, it could be seen only as a necessary or enabling condition for the scheme to work. The NREGS cannot be a permanent solution to rural poverty. The conception of the scheme, with its focus on providing 100 days of guaranteed unskilled manual work, suggests that at best it can be a transient measure, although a vital one. Addressing structural issues that afflict the rural economy, the changing nature of employment, and a focus on durable asset creation through convergence of the NREGS with other initiatives, as announced by the Finance Minister, is the logical next step to make a real dent on massive rural poverty.

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