The Rs 208,000 crore riddle

The first originates with the Ministry of Labour, the second with the National Advisory Council (NAC). Let’s ignore the interim food for work stuff. On the rest, we have to pin down the terms urban poor and lower middle class household. Let’s take the Labour Ministry draft first. “Poor and lower middle class household means those households whose annual income is less than Rs 30,000 for urban areas and Rs 25,000 for rural areas or as may be notified from time to time.” Sticking to the spirit of NCMP, the ministry draft covers urban and rural areas. It also sticks to the NCMP in extending coverage to one adult per household. “At least one able bodied adult member of every poor and middle class family household in rural/urban areas as covered under the Act shall be guaranteed 100 days wage employment every year (at one stretch or in parts) for doing unskilled manual work in some public works creating assets of the state and to receive prevalent national minimum wage therefor on weekly/fortnightly/monthly basis in accordance with the provisions of this Act and the schemes made thereunder.” Sure, this is a draft. But notice the adjective “lower” is also missing in this part of the bill.

The NAC draft is only for rural areas. But it is not restricted to one adult per household. Instead, “Every adult in the rural areas of India shall have a right to guaranteed employment for doing unskilled manual work at the statutory minimum wage, and to receive the wages thereof within ten days, in accordance with the provisions of this Act and the Programme made thereunder.” No doubt, in a desire to do good, the final legislation will incorporate both ideas. Cover urban areas as well as rural areas. And cover every adult looking for a job, rather than one adult per household.

How many households will be covered? Not easy to figure out. Is someone actually going to compute and issue income certificates for poor households? Here is a quote from the Labour Ministry’s draft. “Annual income of the household means the total wage/ salary income receivable for the wage/salaried work done during the previous year by all the wage/salaried family members of the household and the income generated through self employed ventures by the family and the income earned by own account self employed workers or with one or a few partners forming self employed household enterprises. The wage/salary receivable may be in cash or kind or partly in cash and partly in kind. The wages in kind are to be evaluated at the current retail price of the reference i.e. previous year. In short, income through all sources needs to be counted to get the total annual income of the family household.”

This will no doubt delight economists and the National Sample Survey (NSS). But to imagine that such computation can actually be done, or even attempted is downright silly. One might of course argue, as the NAC draft implicitly suggests, that anyone who comes forth for unskilled manual work at minimum wages is automatically poor. This argument would have been stronger had we had wages lower than minimum wages. However, all hell will break loose if you suggest wages lower than minimum wages. Quite apart from it contradicting the CMP quote. So minimum wages it is. In which case, why bother with all the income definitions in the Labour Ministry’s draft?

Do we have a handle on how many poor people there are? We will get into endless debates about comparability of NSS 1999-2000 data with NSS 1993-94 data. Subject to this, NSS 1999-2000 gives us a figure of 260 million poor people, 67 million in urban India and 193 million in rural India. Assuming five persons per household, 13 million urban poor households and 39 million rural poor households. (For rural India, the figure commonly cited is 40 million poor households.) If the scheme is restricted to rural India and one adult per household, jobs have to be found for 39 million. If the scheme covers both urban and rural India, but is restricted to one adult per household, jobs have to be found for 52 million people. If the scheme covers both urban and rural India, but is open to every adult who comes forth, we are probably talking about 104 million people. And remember, these are 1999-2000 figures. Present figures will be higher. Let’s take the worst-case scenario to illustrate the figures involved.

Minimum wages vary from state to state and depend on the occupation. The lowest wages are for unskilled agricultural workers. Within that category, we will have high wages in Goa, Haryana, Punjab and Kerala and lower figures in Bihar, Orissa and UP. Since this scheme will be funded by the Central government, we should really assume Rs 100 per day. That’s just the wages part. There are other material costs, which tend to be more than the wages component. At the very least, we are therefore talking about Rs 200 per day. Rs 20,000 per person for 100 days. If you now have the restricted scheme for 39 million people, you are talking about Rs 78,000 crore a year. If you have the middle scheme for 52 million people, you are talking about Rs 104,000 crore a year. If you have the broader scheme for 104 million people, you are talking about Rs 208,000 crore a year. You may have read about lower figures of between Rs 25,000 and Rs 40,000 crore a year. There are three reasons why my figures are higher. First, those lower figures are restricted to rural India. Second, they visualise only one adult per household in the scheme. Third, they assume minimum wages lower than Rs 100 per day.

The mind boggles at the numbers. But, as one advocate of the scheme reportedly said, resources have to be found. To prioritise expenditure, if employment guarantee is important, how about a moratorium on interest payments and pensions and abolition of all Central subsidies?