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Wrong numbers: Attack on NREGA is misleading

Written by Nikhil Srivastav on November 10th, 2014

recent article in the Times of India by Dilip Abreu, Pranab Bardhan, Maitreesh Ghatak, Ashok Kotwal, Dilip Mookherjee and Debraj Ray poses a rational argument against phasing out the National Rural Employment Guarantee Act. Here are some of the excerpts from the article.

The author’s say, “If, for the sake of argument, workers do currently earn Rs 80, it is only true that the gain for the NREGA worker is Rs 50. However, what matters is the gain, direct and indirect, for all workers. In this scenario, there will typically be a wage increase (though not “by leaps and bounds”, as attributed by BP to mysterious propagandists), which benefits all employed workers. This is possible even when NREGA employment is wholly concentrated in the slack season (if higher slack earnings tighten peak labour supply). Even small increases in the market wage translate into large aggregate benefits, given the size of the labour force under consideration.”

They also talk about the other non-transfer benefits of NREGA like assets creation and empowerment of women who work for NREGA, “Rural roads, soil conservation, flood control, groundwater recharge and land improvement projects may not shine as brightly as the smart cities BP so enthusiastically endorse, but they do contribute to India’s development. A recent study of over 4,000 NREGA assets across Maharashtra, by the Indira Gandhi Institute of Development Research, found that most of them are valued by local residents…. for instance, empowerment of women who work in large numbers, reduction in distress migration and impact on schooling achievements.”

A lot of literature similar to these arguments is available for one to read. For instance, Jean Dreze and Amartya Sen in their book ‘An Uncertain Glory: India and its Contractions’ write, “There has been a major slowdown in the growth of real agricultural wages in the post reform period: from about 5 per cent per year in the 1980s to 2 per cent or so in the 1990sand virtually zero in the early 2000s. It is only after 2006, when NREGA came into force, that the growth of real agriculture wages picked up again, especially for woman.”

In a different paper ‘Equilibrium Distributional Impacts of Government Employment Programs: Evidence from India’s Employment Guarantee’, Clement Imbert and John Papp write, “The introduction of the program, public employment increased by .3 days per prime-aged person per month (1.3% of private sector employment) more in early districts than in the rest of India. Casual wages increased by 4.5%, and private sector work for low-skill workers fell by 1.6%.”

You can read the full article published in the Times of India here.