NREGA – Good politics Bad business

While the government is basking in the success of the NREGA (National rural emaployment Guarentee Scheme) and the opposition is crying fowl from the rooftops,the real  impact of this scheme on the economy is something no one seems to be bothered about.

Many years ago IBM computers was in the dumps and it had to do something drastic to turn around its dwindling fortunes.They had a huge workforce which they could neither fire right away nor could keep for always in its current form.Driven to the wall the team at IBM told its employees that we would like to retain everybody so long as they can prove themselves to be employable.This simply meant that there are no free lunches and whoever contributes can be a part of the party.This simple idea turned out to be one of the most important case studies in HR history as it brought back IBM computers from the brink of bankruptcy to the centre stage of IT revolution as we know it.

Professionals like us  have no issues with sharing our destiny with our less fortunate brethren but the only worry is that can we sustain it for long.If the dog starts biting the hand that feeds or in softer words if we cut the branch on which we are perched its going to be sad tale of foolhardy for all of us.On one hand the money is being ill spent and on the other the sources from which it came are being attacked at the same time.

Lets look at some very compelling situations which I am putting here not for starting a debate but to sound a red alert for ‘fools’ who keep living in their own  paradise :

1.Today you go to any of the Industrial cities such as Ludhiana , Moradabad, Tirupur ,Kanpur,Cochin etc and there’s one thing you will find common on all factory gates – a sign declaring labour required for packing,polishing stiching,cutting,weaving and so on.So what’s new ? well there is no labour !

And where have they all gone ?? Nowhere.They have just not turned up.Who would bother to lead a harsh life of hard work when you can enjoy the fruits of someone else’s labor for free at home.A share has to be given away in bribes but that’s OK.I did not do anything do deserve it anyways.

2.NREGA may be a great scheme but its implementation is seriously flawed.Has the government come up with a white paper on how the country has benefited by keeping the nations working hands tied up to their place of origin.Displacement to urban centers could have been a problem but is this the right solution.What are the metrics applied and how the performance of the workers,supervisors and babus is being measured.NREGA is supposed to build check dams,community roads,wells etc but how have the parameters for achievement been set against the work being done by a private contracter.

3.In order to be ’employable’ by world markets our industry needs to be competitive.But we have floating exchange rates compared to China’s fixed ones,we have all kinds of industrial policies that hinder free flow of men and material,we have excise duty which encourages export of raw material and discourages export of finished goods,We have labor laws that were fit for the 1950’s but no one has bothered to change them,we have the lowest productivity of workers and highest cost of transport and duties.

4.India is touted to be on the growth path as more than 70% of its population is under 35 years of age and we have the largest pool of working population.But with schemes like NREGA we must question if the working hands are getting utilized optimally.Whats the differential when you have a skilled tailor work on a machine producing merchandise for exports vs. the same guy working in his village and digging a canal.

5.Those who earn much more that what NREGA offers and have skills which are far beyond will continue to rise on the economic path but what is the government doing to upgrade the skills of those who work for NREGA ??What about those who have under utilized skill sets.I am sure their numbers far exceed those of the few software engineers we keep talking about.

6.If the factories cannot produce goods for shortage of labour or become uncompetitive in world market place who will take the responsibility and how will the deficit in export earnings be made good.What are our options and what are we doing about mechanizing processes that are labor intensive.Is the government giving incentives to SSI’s and Exporters so they do not suffer due to lack of cheap labor which has been their competitive advantage for so long.

I am not predicting a doomsday scenario here but if you go to one of the centers of export excellence above you will be as aghast as I was when I saw half the units either closed already or on the verge of it.

When last season our supplier in Ludhiana told us that he can’t supply the goods due to shortage of labour we went to an importer and bought Chinese sweaters.I wonder what will hold the buyers in other countries to act any differently if we in India continue on this path of self destruction.

The Link below to NREGA website does not measure any of the stuff I have mentioned but interestingly shows the lowest levels of Funds utilization and sanctioned in states like Goa,Himanchal  and Uttarakhand which have done far better on the industrialization and improving quality of life for their people.

10 comments on “NREGA – Good politics Bad business

  1. aahang says:

    Some of the users seem to be aghast with my comments.I am thankful to Mr Avanish for his comments.You can read his views here in the economic times:
    and Also to Mr Arsen Darnay who has help several positions in the US government and Industry working closely with all class of workers in developed and developing economies.
    I guess they have seen the light….

  2. naveen says:

    hey i think you are going a little overboard here with naxals and stuff… first of all NREGA is in no way contradictory to skill development of men required for factory works like masons,black smiths, tailors and other semi skilled labour…. i agree with you on the point that there are a lot of leakages and some babus misappropriating money illegally…. but that does not mean that you criticize the scheme itself.. and another point is all tax payers dont think in the same manner so please do not assume that… i am very much in favour of NREGA… i think the government or the industries who need labour should themselves start or provide the training facilities.. i do not believe there is any kind of dearth of manpower, it is the lack of training and lack of skills. having said that we have to make a note that no one is a born software engineer or a born doctor . every one received training at some point in their lives.. so unless we give training opportunity to people to be employed by the industries they cannot be fruitfully employed…. we are heading towards a peaceful democratic nation which is slowly progressing toward its goal…. so its time to be patriotic and stop cribbing….

    • aahang says:

      Dear Naveen,

      Did I mention Naxals anywhere in the post ? Couldn’t find it in a quick read.Anyways I think in your patriotic fervor you completely missed the point.While I have tried to support my view with facts you have just made your comment turn into an emotional over cry.Your note is a random crib my friend not mine.And I sincerely cannot fathom how applauding NREGA makes you feel more patriotic than me.
      Your idea of a peaceful democratic nation slowly progressing towards its goal had me in splits 🙂 Anyone wants to lead the march ??

      • naveen says:

        well you are speaking from a practical economic point of view.. i definitely agree that small scale industries have to be aggressively supported and entrepreneurs should be encouraged.. i would propose setting up of vocational training schools for skill development.. that is also precisely the point mentioned in the article u have mentioned above.. he has also given some good insights into the percentage of vocationally trained workers in japan,korea, canada etc.. so the simplest thing we can do is learn from them… it should be done by the government or the industries themselves should take the initiative.. we need an industrial revolution in our country.. and my friend whats wrong in being a little optimistic and a little patriotic.. that surely helps the cause.. and as for the detractors , they will always be there..

  3. mclodha says:

    Hi !

    I have a different point of view on your post.

    1. I did like to talk about individuals or say microscopic view. How many of us are in control of our life. The size of family to education of child to sexual abuse .

    2. How many do think ? Infact do people know to think at all. Just being bias or self centered is not thinking that is sinking self and the nation.

    3. why blame the government or others, when we will take the responsibility? Why government? Why not us ?

    To conclude, ethos are just in the books. If Indians ,practice ethos , we will be all together a different nation.

    Who wants to be uncomfortable? who wants to go play hard way? No one.

    Thank you government for coming up with NREGA, and will we blame you any way.

    • aahang says:

      thanks for your comment and i do respect your point of view.To make my stand clear :

      1. I pay 30 % of what ever I make to the governrment no questions asked so I have the full right to question how my sweat and blood is being squandered to buy votes.

      2. I have given links to the websites which is governments way of telling wat is happening with taxpayers money.But as you can see apart from what has been spent there is no record of how many roads,bridges, check dams etc have been made and of what quality and standard.also whether they have been made as per the usual project management techniques or people are working as per the leisure and convenience.

      3.Again the saddest part is that there are no efforts to upgrade skills or even test them so a boy can be doing a labourers job for 100 rs per day for 100 days for 100 years !!

      4.and all this at what cost ?? By depriving the SME’s sector which in many cases is not being able to compete in the world market and would have got in precious foreign exchange to make our “nation” stronger.

      Hope I have been able to make some sense.I am not criticizing NREGA but the way it is being executed.

      Hungama khada karna mera maqsad nahin , meri koshish hai ke soorat badalnee chahiye

  4. Avanish says:

    yes, NREGA has become a double-edged sword – rewarding laziness, unproductivity on one hand and depriving labuor where it is needed. Are we not simply giving doles to people for whatever work or ‘no-work’ they do (becoz assets created under NREGA are no means sustainable!!).
    While NREGA might have noble intentions (nobody dies of hunger if at least 100 days of work is assured!!), it should also not incentivize ‘staying at home’. A skill building programme should go hand-in-hand with the NREGA work so that the persons enagaged in this work are employable for higher skill jobs, thus getting them more money.
    Another idea could be that when a person applied for NREGA work, he/she is given opprotunity for much better paying work in factories in urban areas close to home, where they also learn a skill. THis will also help them to be employable all-thru the year rather than just 100 days.
    Another deterrent for stopping people to misuse NREGA could be to see whether people went for outside jobs or not. And anybody not doing things justifiable to end his/her unemployment is not given ‘dole’ thru NREGEA also.
    There should also be a freeze on for how many times and how many years a person can keep getting NREGA benefit. THis should act as a ‘last alternative for survival’ and not the first. It will make people work where the opportunity is and ‘utilize’ NREGA only when in dire straits. It can be like the LTC benefit – twice in 4 yrs, and that again with some terms and conditions.
    There are many thoughts about this and it can take a blog to write them so I will stop here.

    • aahang says:

      The worst hit industry will be exports and SSI’s both of which are breeding grounds for The famous Indian entrepreneurial spirit.We loose precious foreign exchange and also make sure that large enterprises are not born out of the SSI sector.

  5. Arsen Darnay says:

    Fascinating article, Aahang! Fascinating. I was struck especially by your comment about China–because it seems to me that, at present, the Chinese are the only people who seem to be doing things right. They manage their economy more rationally than anybody else (of the same size and importance).

    We’re all collectively facing a major dilemma. It is that modern economies do require management, which says that the market does not do the job well all by itself. But that management must be rational and mustn’t sprout any-which-way from the fickle reactions of ever-changing democratic majorities.

    Feel for you. Here (USA) we have different problems in detail–but exactly the same problem in the fundamental sense.

    • aahang says:

      The universal adult franchise enshrined in the Indian constitution is idealistic in the sense of saying that all men were created equal.But that applies when you are talking about being God and natural justice not so much when you are talking economics.For a nation’s progress and development a certain weight has to be given to those who have proven themselves to contribute more to the nation building exercise than the others.Sure while we do that we must ensure that everyone gets an equal chance and opportunity to prove themselves as being worthy.
      Might not sound very moralistic but in a country where illiterate votes are bought with the lure of money and alcohol it does make a lot of sense.The whole electoral process which is a number game rather than a gathering of Public opinion ensures that mass shrouds the class and alienates worthy citizens from politics.
      The whole industry is suffering whether its infrastructure,exports,textiles but the government is busy patting its back and prepairing ground for the next election.
      The big question still looms large who will fund the largesses being doled out? If the government could do a good job of even distributing what it has flinched as taxes and making people who sit at home doing nothing we would still be left to live in peace.But it cannot even do that as the Babus and politicians take the lions share giving rise to Naxals who are hell bent on running their own government.
      The moment you put on a little weight you can see the vultures gathering over you.We are surely heading towards a Jungle Raj.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s