India: Employment Guarantee Act (NPR)

NPR has been good on India lately.

The latest: India is considering an act that would guarantee one person in every poor household employment 100 days out of every year. They call in everyone's favorite free-market enthusiast, Gurcharan Das, to pour cold water on the idea as "socialist interventionism, doomed to fail."

SACW has a draft of the act.

The idea of doing this does sound a little questionable to me in some respects; there are too many ways for it to turn into yet another government scheme hampered, as so many Indian government schemes are, by too much bureaucracy and too little efficacy. But then: something like 400 million Indians continue to live in poverty. The trickle-down effect promised by liberalization advocates isn't working the way it should. Among the very poor, way too many people are unemployed. Moreover, the rural poor are moving to cities in India at alarming, even dangerous, rates. This might help slow that a little.

Though India is certainly not in the midst of a Great Depression (more like: the Great Endless Insufficient Progress), if this were well-managed, it might have an effect along the lines of that great American institution, the WPA, of generating lots of jobs, and some really impressive , lasting public-works projects along the way.


Quizman said...

You write of rural to urban migration as if it is a bad thing. It is not. For instance, check my post on literacy. Actually, urbanization couple with a free market economy will probably guarantee reduction in poverty more than any government scheme can. Heck, even China is testament to that fact, as the Economist has argued in its latest issue.

Quizman said...

couple = coupled. Typo.

Quizman said...

And this statement "The trickle-down effect promised by liberalization advocates isn't working the way it should" is inaccurate too.

electrostani said...

About urbanization, what about the 8 million people in Bombay living in illegal shacks? I don't see how that's a good thing, for Bombay as a whole, or for the particular people involved. [admission: I haven't checked out your post... will do so soon...]

And about trickle-down economics, why is it inaccurate? The middle class is growing, but unemployment is still way too high. And opportunities for poor people are still very limited.

Why do you say that it is working?

Quizman said...


Sadly, you use the same arguments of citing the oft-used reason: "There are too many poor people in India" to correlate it as a causal factor of the lack of effectiveness of liberalization. Instead, you need to look at hard data on the actual decline in the numbers of poor. While absolute numbers remain large, there has been a clear post-liberalization decline. Research after research has come to that conclusion.

In addition to my blog post, see:
1. NCAER paper

2. Research by Dr.Surjit Bhalla

and many more....that have stuff on unemployment.

You are mixing up three different issues which do not have anything to do with liberalization. Lack of affordable housing is caused by other factors including, but not limited to, the Rent Control Act in Mumbai. Especially laws! See De Soto, for example.

You contradict yourself when you say that the middle class is growing and yet question whether liberalization works? All in the same sentence, too. :-)

Let me ask a counter question. If you think liberalization has failed, what would you do if you were the Indian FM?

electrostani said...

I didn't say that liberalization had failed, but that trickle-down economics isn't working the way it is supposed to.

My comment about the growth of the middle class and unemployment, also wasn't so much self-contradiction as it is an observation about the contradictory nature of the current situation.

It was economics -- rural unemployment, as I understand it -- that brought down the BJP government in Andhra Pradesh last year. If nothing improves for the 400 million Indians living in poverty by the next election, Congress will face the same "throw the bums out" backlash. (And this is after five years of some of the best economic growth -- at the top of the income ladder -- in Indian history: "India Shining").

This proposal may or may not work, but it's better than sitting and waiting for that to happen. (Quick question: are you opposed to the EGA act being proposed? It sounds like you are.)

I do think that liberalization is a success. But its effects need to be broader.

Enough -- I need to go and read some of your links before this goes on much further.

kuffir said...

a correction: bjp didn't lose in ap because it wasn't in power there.
one of the major reasons why the tdp lost was because of five years of continuous drought, rise in agricultural input costs coupled with the fall in output prices- a phenomenon you'd notice everywhere in the world (but more lethal here because of the drought), which resulted in largescale distress in the countryside. chandrababu naidu
managed to secure a large package of (foodgrains) aid from the nda regime(a deal which, because of its size,was noticed and commented upon adversely by a large section of the media and the political classes in other areas) and used this for distribution in the state as a part of the food for work programme. despite his renowned managerial and organizing skills, naidu managed to make only a marginal dent in the hunger situation in the state.the programme leaked like a sieve and a large part of the grain ended up in the godowns of his partymen and even now surfaces in sundry rice mills, surreptitiously being resold to the fci, and also,amazingly, sometimes in dockyards being hauled into outbound carriers in bags bearing the original fci markings!
the reason i mention this distasteful fact is because the nffwp, which shall now give way to the egp(each state would have to formulate its own programme), was conceived with an equally intense evangelical zeal and failed to deliver even the magical 15%(the rajiv gandhi benchmark) of the original govt., spend to those it was intended for.
the ega is an attempt by the left in india(ever wondered why it gets younger as its leadership grows older?) to pin the manmohan singh government down to an impossible guarantee, entangle it in the tightest fiscal knot and take it on a fantastic voyage whose destination is as nebulous and as foolishly conceived as the travels of legendary midaeval sailors.
along the way the pm would have to drop whatever plans he himself might have had for putting the country on a new course. in the wake, of the ega and other inventions of the infantile left, you'd also find the tattered remains of liberalisation and the hope it had kindled among the young of the country (even students from mofussil colleges in the southern states have learnt to take in their stride visits from recruiters!).
the ega would have to combine the agility of jackie chan, the nerve of james bond and the superhuman abilities of the fantastic four to survive the babus, the contractors, the political interest groups and the ever-crescendoing whining of the left to even reach, i repeat, the magical 15%.
the ega is supposed to bestow on the great unwashed the right to work. what about the much older right to education? why not a straightforward dole that ensures that the recipient sends his children to school? that would be too unelaborate and too unromantic for the left. moreover, it wouldn't relish putting some teeth into legislation which strengthens the rights of non-voters, i suppose. not even when it would achieve the same degree of abatement in poverty as the ega and would also keep the grasping hands of the contractors, the politicos and the babus off the cookie jar(because it wouldn't be there). why? because, as ashok mitra would say, the revolution isn't a tea party.

Anonymous said...

Agriculture alone is insufficient to support the rural population in India. After a point, agricultural employment cannot grow. Hence, migration to urban areas is an inevitable
and often painful transition.

With regards to the EGA, I do not think it will really slow the rate of rural to urban migration-the employment is more plentiful and the rewards perceived to be higher. It is also not clear that the trickle down effect is completely absent in India. Absolute poverty in India has fallen faster in the last 10-15 years than previously in independent India's history. I agree with you that there are too many poor people in India, and that there is chronic under and un-employment. However, a scheme which guarantees employment for 100 days without being specific is ripe for abuse and corruption. It is also hard to argue that this can be avoided by honest implementation, since the incentive for corruption among the officials implementing the scheme is, in general, too great. It is, in my view, a poorly drafted scheme which is going to benefit a lot of politicians, especially the communists, by swelling their coffers. If the idea was to create employment guarantees, a better scheme would be to tie the employment to specific infrastructure and other projects-e.g local building of schools, roads etc. This is closer to what FDR did during the great depression. In this way, the effectiveness of the scheme is more easily monitored. I am personally very disappointed by this bill and the govt's haste in getting this bill passed.