February 24, 2005

(Note Submitted to the UPA-Left Coordination Committee by the Left Parties)
The Rural Scenario
An unparalleled and comprehensive crisis has taken firm root in rural India, resulting in impoverishment, food shortages and hunger. Growth of agricultural production fell from 3.5 in the 1980s to 2.0 per cent per annum in the 1990s, and real income growth fell from 4.5 to 2.5 per cent per annum over the same period. By 2001, per capita foodgrain availability had fallen to lower than that in the 1950s. Workforce participation rates in rural areas have declined, more for rural women than men. The Planning Commission reports a fall in employment growth from 2.04 per cent during 1983-94 to 0.98 per cent during 1994-2000 largely on account of agriculture and community social and personal services, which together account for seven-tenth of total employment. Even though this was accompanied by a deceleration in the rate of growth of labour force from 2.29 per cent in 1987-94, to 1.03 per cent in 1993-2000, unemployment has grown since labour force growth outstrips the growth of employment.
The crisis of unemployment in the rural areas has been precipitated by slow growth of agriculture in general and foodgrains production in particular, combined with substantial cutbacks in rural development expenditure by the Central Government. Rural development expenditure has dropped from an average of 13% of GDP during the Eighth Plan period to around 5% of GDP during the Tenth Plan. The extreme manifestations of this distress are the unabated starvation deaths and peasant suicides.
The Common Minimum Programme
As stated by the Minister of Rural Development, Shri Raghuvansh Prasad Singh in the Statement of Objects and Reasons of the Act: “ Recognizing the urgent need to ensure a certain minimum days of wage-employment, the United Progressive Alliance (UPA) Government has declared in its National Common Minimum Programme (NCMP) that it ‘…will immediately enact a National Employment Guarantee Act.  This will provide a legal guarantee for at least 100 days of employment, to begin with, on asset-creating public works programmes every year at minimum wages for at least one able-bodied person in every rural, urban poor and lower middle class household“.
Main Problems And Necessary Changes In The National Rural Employment Guarantee Bill, 2004
The present Bill falls far short of expectations and is woefully inadequate as a measure to even partially address the rural distress. 
  1. No time-bound extension to the whole of India: (Clause 1(3))along with a temporary and reversible nature of the guarantee (Clause 3(1)
Demand: There should be a time-bound extension to the whole of India within 5 years.  Once an area is brought under coverage, it cannot be denotified.
  1. No universal entitlement: (Clause 3(1) & 2(k))Only those identified as officially poor can avail of the job guarantee.
Demand: Universal entitlement to the job guarantee and to the unemployment allowance, actual employment through self-selection
  1. No minimum wages: According to Clause 6(1) of the Bill, wages are not linked to the statutory minimum wages.
Demand: Statutory minimum wages for agricultural labourers applicable in the State at the time must be paid
  1. Broad and all-encompassing definition of household:  Clause (2(f)) The definition of the household is very wide and one household could include several nuclear families (even hamlets in hilly tribal areas).
 Demand: Household must be defined as a nuclear family
  1. Weak unemployment allowance provision due to its dependence on the economic capacity of the State Governments (Clause 7(2)) and permitting its non-payment (Clause 8) This makes the guarantee ineffective, since all State Governments are in the grips of a fiscal crisis and debt trap.
Demand: The ability of State Governments to generate works depends on the availability of finances and flexible definition of permissible works.  The unemployment allowance entitlement and mechanism must be strengthened in three ways:
i.    Strong measures to ensure timely devolution of funds from the Centre to the States. Economic capacity may be defined as follows: economic capacity is the receipt of funds by the States from the Centre in advance for the EGS.
ii.    Once funds have become available, the State government must either provide work or pay the unemployment allowance. If economic capacity does not exist, the Centre is liable for the associated unemployment allowance payment. 
                                      iii.    Works must be defined in a more flexible manner, as below.
                                     iv.    Loopholes and escape clauses for non-payment of unemployment allowance should be plugged.
  1. Rigid and restrictive over-specification of permissible works (Clause 4(3), Schedule 1(1 and 2)) and conditions for commencement of new works (Clause 5, Schedule II (13)) The Bill is too rigid, limiting productive works to the usual earth works for the creation of durable assets through land and water management. It also requires that there must be at least 50 workers for new works to commence.
 Demand: Flexible and broad-based definition of permissible works that includes productive works, sustainable agricultural practices, improvement in the quality of life and the provision of public services as determined by the state council keeping in mind local requirements
  1. No Safeguards for Women: The Act does not provide adequate safeguards against the exclusion of women from the scheme. This is particularly important since the Act is household-based and does not provide individual guarantee.
Demand: At least one-third of workers employed in a particular Block should be women
  1. Unaffordable and unjustifiable legal and financial burden on the State Governments (Clause 22(1 and 2): The Bill places a huge legal and financial burden on state governments.  It expects the states to shoulder 25 per cent of the material costs (up to the ratio of labour:material of 60:40);  all expenses on administration. The proposed 2% as admissible administrative costs is unlikely to cover all these expenses. Additionally, state governments have to bear the entire burden of the unemployment allowance, irrespective of who is responsible.
Demand: A fully centrally funded programme where:
                                   i.          States’ liability to pay unemployment allowance commences after receipt of funds from the Centre, until which the Centre is liable.
                                 ii.          The Centre must meet the wage component and finance material costs in the ratio of 60:40 labour:material.
                                iii.          To meet the administrative costs of the Programme, the Centre must add an additional component amounting to 3% of the total spending on wages and materials.
  1. Unduly harsh penalty for absence from work (Clause 9) Absentees are presently debarred from eligibility to the unemployment allowance for a three months
Demand: Absentees may be debarred from eligibility to the unemployment allowance for the period of absence only
  1. By-passing of Panchayati Raj Institutions: There is no mandatory devolution of funds to gram Panchayats (Clause 16(5))
Demand: 50 per cent of the funds must be devolved to Panchayats 
  1. Sweeping Discretionary Powers to Central Government (Clause 29) The Central Government can, by notification, at any point of time withdraw, amend, modify and restrict features, entitlements and conditions of the rural employment guarantee by simply informing Parliament of the same.
Demand: The Schedules should only be changed by Parliament
Once these lacunae are removed, the EGA will be a major move in the right direction. It will provide much-needed employment for the rural poor and can become the basis for the necessary regeneration of the rural economy, without which sustainable aggregate growth is not possible.