The National Rural Employment Guarantee Bill, 2004, as currently envisaged, is vulnerable to objections from many angles. On the one hand, critics suggest that it is woefully inadequate. It does not guarantee employment to all those who need it, its scope is limited, its further expansion is dependent upon government discretion, and the flexibility in wages it envisages will not help push people above the poverty line. On the other hand, critics charge that even in its present form, the scheme is too expensive and entails large opportunity costs. For one thing, it is financially unsustainable. It is not that the government does not have the resources to finance it. It is simply that the government has not made it clear where the resources to finance it over the long run will come from.One obvious source would have been to cut other subsidies which go largely to the privileged, but the government has so far refused to do so. Under such circumstances the scheme is likely to adversely affect the fiscal deficit, which will have a long term detrimental effect on the economy. Ironically, this could end up hurting the very people the Bill is trying to help. It could crowd out other forms of public investment in health and education that are badly required for the very groups being targeted. As with many well-intentioned schemes, design and governance issues have been under specified or simply ignored. Will the benefits of the scheme reach the people it is meant for? How will the selection process take place? Will the scheme create actual assets in rural India? Or will the capital part of the investment vanish? These questions ought not to be used as an excuse for not rising to the challenge of creating rural employment. But the fact that they have not been adequately addressed gives ammunition to the Bill’s critics.Normally, when a proposal is attacked from all sides, it suggests that there might be something to be said in its favour. But the criticisms of the current Bill appear to be mostly warranted. This is because the fundamental problem is that the scheme is a response to a political exigency. Such a commitment was part of the Common Minimum Programme of the UPA and there was great pressure to appear to be doing something. But a more ambitious intervention of its kind would have been economically implausible. On the other hand, not doing anything would be politically fraught. Thus we have the compromise that the current Bill embodies. We would have been better off if this intervention had been embedded in two larger concerns: an overall development strategy and a sustainable vision of social security for all Indians. The fact that it is hurriedly being introduced as a stand alone scheme, suggests that it is more of a political palliative, than an imaginative and sound economic scheme.
