Moving out of poverty through NREGS seems difficult

Indian congress has won 2009 elections mainly by populist measures they have implemented in last five years. These steps have bring any real good to the poor people remains debatable. When anyone gets a job, that generally does not produce any infrastructure or service, through NREGA (National rural employment guarantee act) it seems good to everyone. But the problem with this kind of scheme are two. First, the huge money spent by the central government does not create any meaningful infrastructure or sustainable employment projects. Second, people who get employment will not be out of their poverty because one need skills and opportunity to come out of poverty rather than giving them life time support that is not sustainable.

Budget allocation for this scheme has been over Rs 50,000 Crore in last two years. It was time of economic boom that helped the government to collect huge tax from the corporation to support this kind of scheme. As the economic boom time is over and many of the Indian public companies are struggling to pay salaries (Air India delays salary by 15 days) and eventually the government will need to come to rescue these companies in the form of bailout. These bailout cannot happen unless the government cuts its spending somewhere. And these cuts will be on the public spending and essential social welfare programs.

Just to illustrate how much could have been done by using the money properly and building something that every poor needs. If the government had used the public land in the villages and town to build 2 bed room houses for the poor home less families then it could have easily build over 50 lakhs houses (a two bedroom unfurnished house does not cost over Rs 1 lakhs when land can come for free from public land of Panchayat and municipalities). This construction work should have given employment to a large number of poor in village though the number might be less than the employment provided by the NREGS. The homeless or people living in mud houses could have been allotted these houses and the government could have charge them a nominal rent per month (lets say Rs 500-1000 per year). This might give income to government in the range of Rs 250-500 Crore per year and this can be reinvested in other social welfare programs.

I have just given one example. But the government can use money for any other program, e.g. public health care or education etc., and directly or indirectly these investment can bring long term benefits for the government and the public at large.

In fact this scheme is flawed in its concept of providing employment for only 100 days. If we know there are poor people who can not find work then how can be expect to guarantee work (or money) only for 100 days out of 365 days in a year? What the people suppose to do rest of the year? Is there any study or empirical analysis that shows that everyone in the country has work for at least 265 days? If not then the poor has to die of hunger or suffer from the hard realities of the poverty and these sort of schemes can only lessen the suffering but not eradicate them.

Biggest challenge for this scheme is to monitor the performance of the scheme. Since all the records are to maintained by the Gram Panchayat, many of them have poor knowledge and motivation to do so. Benefit of the scheme goes to close relatives of the member of the Gram Panchayat and many a time, minimum wages are not paid because the work is on the mercy of the head of the Gram Panchayat. For example, I personally know people who work for the Polio campaign that happens every 6-8 weeks in India. Many of them do not even get Rs 50 per day to work over eight hours and visit door-to-door. Problem is if they refuse to work for this low wages than prescribed by the government of India, another person will come to work. The contractor or middle man never loses, it is the poor who suffers.