In 2011-12, roughly 100 million rural Indians sought work under the Mahatma Gandhi National Rural Employment Guarantee Act, which increased to 130 million last year. Expenditure on MGNREGA has increased 2.5 times in the last decade. Contrary to belief, this expansion of the scheme is not something to be proud of. Success of MGNREGA implies a failure of India’s economy. And this failure now has been disguised with a new tongue-twister of a name—Viksit Bharat Guarantee for Rozgar and Ajeevika Mission Gramin (VB G RAM G).
MGNREGA is a unique, world-class, Nobel Prize-worthy welfare programme whose success lies in its minimal use. Paradoxically called ‘employment guarantee’, it is, in practice, an unemployment insurance scheme. An individual in utter despair with no means of income can demand work and toil a whole day for minimum wages, guaranteed as a legal right. It is an elegantly designed, demand-based social safety insurance for the truly desperate—not a productive asset-creation scheme—that protected hundreds of millions of poor Indians during Covid.
If the nation’s economy was robust enough to generate an adequate number of well-paying jobs for unskilled labour, there would be minimal demand for MGNREGA. Only when the economy does not generate enough jobs for India’s vast labour force, will an unemployment insurance-type programme see strong demand and growing expenditure.
In 2015, Prime Minister Narendra Modi ridiculed the programme. Much to his chagrin, a decade of abysmal economic performance has resulted in a rapid expansion of MGNREGA. The fact that 60 million households demanded and received work under the scheme last year—the highest in a non-Covid year—is a reflection of the grave unemployment situation. The rural poor’s demand for work and, consequently, the greater need for MGNREGA funds remain unabated.
If the PM wanted to fulfil his promise to abolish MGNREGA, it could have been done only by generating enough jobs. Unable to do so over a decade and caught in a quandary, the Modi government has finally decided to palm this vexatious issue off to the states through the new G RAM G legislation that will replace MGNREGA. It is a ploy to forcefully reduce the demand for MGNREGA, since the Modi government has failed to do it naturally. G RAM G achieves this by forcing most states to bear 40 percent of the wage expenditure when they bore none under MGNREGA. This is a huge fiscal burden on the states.
If, in a particular year, the economy is so bad that demand for work soars across the country, the higher financial burden will be shared by the states. On paper, G RAM G continues to guarantee the right to employment. But most states don’t have the money to fulfil this guarantee. They will be forced to artificially reduce the demand for work to avoid paying for it, or they default on their obligation to provide work when demanded, in which case it is no longer a guaranteed safety net. So the Union government gets away with reduced MGNREGA demand and transferring the blame to the states.
Managing the economy is primarily the responsibility of the Union government. By corollary, mismanagement is also its sole burden. Economic shortcomings such as jobless growth result in the need for greater MGNREGA funds. Then, how can states be responsible for the financial burden? States have little or no control, but are expected to pay for it.
It is wrong to argue that G RAM G is like other centrally-sponsored schemes such as Swachh Bharat Mission, which states choose to implement and receive partial funds for. This is a legal guarantee of employment, unlike other optional schemes.
The new legislation also bestows enormous powers on the Union government to decide the normative fund allocation for each state, which further exacerbates the mistrust between the Centre and the states. In essence, under G RAM G, the Union government will provide a guarantee of employment to the people who need it, decide when it will be applicable, determine how it will be implemented, and still get the states to cough up 40 percent of the money. This is like a father promising a house for his young son, unilaterally choosing the location, cost and type of the house, but asking his son to pay 40 percent of its cost. The son will call his father’s bluff on the insincere promise.
The crux of the issue with G RAM G Act is it pits the Centre versus the states. Other features such as reducing the bargaining power of agriculture labourers by halting the scheme during agricultural seasons only further serve to indirectly reduce demand, which seems to be the primary intent.
Civil society activists are wrong to celebrate and demand an ever-expanding MGNREGA. None of us should want growing unemployment insurance for our nation’s youth. Just as one would hope to minimise the need to use one’s personal medical insurance, it should be the nation’s economic pursuit to strive for as little demand for MGNREGA as possible by creating enough good jobs.
G RAM G is an attempt to hide economic failure behind the ghoonghat of federalism, without seemingly altering the idea of employment guarantee. Forcing the states to pay for the Union government’s ills and guarantees is an attack on India’s federal structure. All States, governed by the BJP or otherwise, must get together and resist this.
MGNREGA is an exogenous indicator of the grave unemployment situation in the country, not its cause. Reducing demand for it mischievously to hide the deeper malaise is like cutting one’s feet to fit into smaller shoes. Neither Mahatma Gandhi nor Lord Ram would approve.
This story is reported by of Praveen Chakravarty The New Indian Express.