What's the National Rural Employment Act?

What is the National Rural Employment Guarantee Act? The National Rural Employment Guarantee Act proposed by the UPA government seeks to provide employment to one person in every rural household for at least 100 days in a year. The persons employed under this programme will be utilised on asset creating public works programmes at minimum wage. What is the cost of implementing the Act? Each person-day of employment costs Rs 100. Of this, Rs 60 is the minimum wage and Rs 40 is the non-labour component, inclusive of administrative costs. Since employment will be provided for 100 days, the cost of providing employment for one household over the course of one year is Rs 10,000 (Rs 100 x 100 days). Assuming that at least every household below the poverty line will avail of the scheme and there are 4 crore such rural households, the total cost is Rs 40,000 crore. This works out to be 1.3% of Indiaâ€™s GDP. How affordable is the programme? Proponents of the scheme think that sparing one percent of the GDP is well worth it considering the stakes involved. If the programme is implemented in a phased manner over the next four years, it will run into the Eleventh Plan. This will give the government ample chance to restructure its plan expenditure in a manner that provides for the employment guarantee scheme. Also, Indiaâ€™s tax to GDP ratio is low compared to that of other countries. If this ratio is raised by just one percentage point, there will be far more funds available to spend on public expenditure. How will the costs of the programme be shared? The Centre will bear the labour costs and 75% of the material costs for the scheme. States, meanwhile, will bear 25% of material costs of the scheme. State governments will also have to dole out unemployment allowance to those who have registered under the scheme, but are not provided jobs. It will initially be implemented in 150 districts across the country, at a cost of Rs 8,000 crore. Can the costs be reduced? The current calculations estimate that the labour-material ratio is likely to be 60:40. However, from Maharashtraâ€™s experience it is seen that material cost can be reduced to just 25% of total cost. If the ratio can indeed be changed to 75:25, then unit cost will decline to Rs 80 and overall cost to Rs 32,000 crore from Rs 40,000 crore. There seems to be scope for labour intensive activities such as environmental conservation and restoration. Labour intensive techniques can also be used for existing programmes like construction of roads. How far will the programme impact poverty? If each household below the poverty line receives Rs 60 for 100 days of a year, its income will rise by at least Rs 6,000 per year. Considering the 1999-2000 poverty levels, this means that 75% of rural households will cross the poverty line. However, it needs to be noted that some income earning avenues may be displaced as a consequence of the current move. What would be the other positive impacts of implementing the National Rural Guarantee Programme? The fact that larger number of workers receive minimum wages for work would result in increased demand for goods and services from rural areas. This would create multiplier effects in the economy. If rural demand rises, then producers would increase their production, thus providing more employment and generating greater demand. Also, the workers employed will create assets for the economy.

What's the National Rural Employment Act?

The National Rural Employment Guarantee Act proposed by the UPA government seeks to provide employment to one person in every rural household for at least 100 days in a year.

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