Letter to PM on NREGA from Development Economists

Dear Prime Minister,

We are writing to express our deep concern about the future of India’s National Rural Employment Guarantee Act (NREGA).

The NREGA was enacted in 2005 with unanimous support from all political parties. It is a far-reaching attempt to bring some much-needed economic security to the lives of millions of people who are on the margin of subsistence.

Despite numerous hurdles, the NREGA has achieved significant results. At a relatively small cost (currently 0.3% of India’s GDP), about 50 million households are getting some employment at NREGA worksites every year. A majority of NREGA workers are women, and close to half are Dalits or Adivasis. A large body of research shows that the NREGA has wide-ranging social benefits, including the creation of productive assets.

Recent research also shows that corruption levels have steadily declined over time. For instance, official estimates of NREGA employment generation are very close to independent estimates from the second India Human Development Survey. While corruption remains a concern, experience shows that it can be curbed, and the battle against corruption in NREGA has helped to establish new standards of transparency in other social programmes as well.

No doubt, the programme could and should do even better. But the gains that have been achieved are substantial and amply justify further efforts to make it a success.

Against this background, it is alarming to hear of multiple moves (some of them going back to the preceding government) to dilute or restrict the provisions of the Act. Wages have been frozen in real terms, and long delays in wage payments have further reduced their real value. The Act’s initial provisions for compensation in the event of delayed payments have been removed. The labour-material ratio is sought to be reduced from 60:40 to 51:49 without any evidence that this would raise the productivity of NREGA works. For the first time, the Central Government is imposing caps on NREGA expenditure on state governments, undermining the principle of work on demand.

Last but not least, the Central Government appears to be considering an amendment aimed at restricting the NREGA to the country’s poorest 200 districts. This runs against a fundamental premise of the Act: gainful employment that affords basic economic security is a human right. Even India’s relatively prosperous districts are unlikely to be free from unemployment or poverty in the foreseeable future.

The message seems to be that the new government is not committed to the NREGA and hopes to restrict it as much as possible. We urge you to reverse this trend and ensure that the programme receives all the support it requires to survive and thrive.

Yours sincerely,

Dilip Abreu (Professor of Economics, Princeton University), Pranab Bardhan (Emeritus Professor of Economics, University of California Berkeley), V Bhaskar (Professor of Economics, University of Texas at Austin). Ashwini Deshpande (Professor of Economics, Delhi School of Economics), Jean Drèze (Visiting Professor, Department of Economics, Ranchi University), Maitreesh Ghatak (Professor of Economics, London School of Economics), Jayati Ghosh (Professor of Economics, Jawaharlal Nehru University), Deepti Goel (Assistant Professor of Economics, Delhi School of Economics), Himanshu (Assistant Professor of Economics, Jawaharlal Nehru University), Raji Jayaraman (Associate Professor of Economics, European School of Management and Technology), KP Kannan (former Director, Centre for Development Studies, Trivandrum), Anirban Kar (Associate Professor, Delhi School of Economics), Reetika Khera (Associate Professor, IIT Delhi), Ashok Kotwal (Professor of Economics, University of British Columbia), S Mahendra Dev (Director, Indira Gandhi Institute of Development Research), Srijit Mishra (Associate Professor, Indira Gandhi Institute of Development Research), Dilip Mookherjee (Professor of Economics, Boston University), R Nagaraj (Professor of Economics, Indira Gandhi Institute of Development Research), Sudha Narayanan (Assistant Professor of Economics, Indira Gandhi Institute of Development Research), Pulin Nayak (Professor of Economics, Delhi School of Economics), Nalini Nayak (Reader in Economics, Delhi University), Bharat Ramaswami (Professor of Economics, Indian Statistical Institute, New Delhi), Debraj Ray (Professor of Economics, New York University), Atul Sarma (former Vice-Chancellor, Rajiv Gandhi University), Abhijit Sen (former Member, Planning Commission), Jeemol Unni (Director, Institute of Rural Management, Anand), Sujata Visaria (Assistant Professor of Economics, Hong Kong University of Science and Technology), Vijay Vyas (former Member, Economic Advisory Council to the Prime Minister)

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