Rethinking NREGS

Rethinking NREGS

When NREGS/NREGA was launched in 2005 it was seen by many as another well intentioned idea destined to be wasteful. However, it has proven to be popular and successful to some extent. Now, some of the unintended consequences are coming to light.

Ever since the start of the program, which guarantees 100 days of work a year for rural households, the flow of migrant labour to Punjab and Haryana states has dropped to a trickle, forcing farmers such as Malik to hike farm wages massively, and still he cannot find enough workers.
"Four or five years ago, it used to cost Rs 500-800 ($11-$18) to plant an acre of paddy. Last year the labourers took a tenth of the paddy and Rs 3,000-4,000 ."
This rise in wage levels and farm costs in rural India is worrisome, with evidence it might be feeding into the high inflation that is the government''s biggest economic headache and prompting a hawkish stance at the Reserve Bank of India (RBI).
Critics say MNREGS is wasteful and riddled with corruption, and the infrastructure created is of shoddy quality.

A recent World Bank study on welfare programmes in India including MNREGS said they did not give the "bang for the rupee" warranted from such huge spending.

NREGS now costs about 1 percent of GDP, that is roughly in the range of 10 to 15 billion USD a year. It begs the question, Is it the best way to provide jobs to unemployed?

A better alternative could be the kurzarbeit model that was implemented in Germany. It is a program where the state pays some part of the salary when an employer retains or hires a worker. India could bring about the much needed labour reforms and couple it with incentives for employers to hire and retain workers. That may prove a better alternative to the current form of NREGS.