<div>A day after Prime Minster Narendra Modi ridiculed the mega welfare scheme of the previous UPA government known as the Mahatma Gandhi Rural Employment Guarantee Act (MNREGA) by calling it an ‘epitome of failure’, finance Minister Arun Jaitley in his budget day speech said that depending on tax buoyancy his government will give additional Rs 5,000 crore to the scheme which would be over and above the budgetary allocation of Rs 34,699 crore.</div><div> </div><div>Jaitley also acknowledged the job providing nature of the scheme, saying “Our government is committed to supporting employment through MGNREGA. We will ensure that no one who is poor is left without employment. We will focus on improving the quality and effectiveness of activities under MGNREGA.”</div><div> </div><div>The question arises as to why the prime minister and the finance minister of the country gave opposite views on the scheme within 24 hours.</div><div> </div><div>The answer lies in Prime Minister Narendra Modi’s speech a day before the budget when he said that people might question his economic understanding but there should be no doubt over his political understanding. After calling the MNREGA an epitome of failure for the UPA, he said that he would not shut down the scheme ever.</div><div> </div><div>An analysis of some critical numbers in the past few months indicates that the NDA government’s crackdown on the scheme by way of reducing fund allocation to states had backfired. Rural wages in India registered an average annual growth of 3.8 per cent in November 2014, the lowest since July 2005, according to Labour Bureau data.</div><div> </div><div>The 3.8 per cent year-on-year increase was a significant drop relative to the two-digit growth rates prevailing until June, and the peak 20 per cent-plus levels of 2011. The result of this was visible on the growth projection of FMCG companies like HUL that reported a volume growth of 3 per cent against analysts' expectation of around 6 per cent, which sent its shares lower by more than 5 per cent on the stock exchanges after December quarter result.</div><div> </div><div>A similar trend was visible in the same period in the sale of motorcycles in India. Domestic motorcycle sales contracted 6 per cent to 868,507 units in January 2015. This was the fourth monthly fall from the previous year. One should note that the NDA government came to power in May 2015 after which its first target was the MNREGA scheme.</div><div> </div><div>A set of economists, including Jayati Ghosh, a professor of economics at the Jawahar Lal Nehru University, had even written a letter to the Prime minister telling him about the decline in rural wages due to the lowering of funding for MNREGA from the central government.</div><div> </div><div>The current government has at its helm, free market economists like Bibek Debroy and Arvind Panagariya who have been accusing the UPA government for creating an economy of subsidies that hampered growth. On their advice, the government gave feelers to the state government that it will not release funds under MNREGA. Nitin Gadkari, former rural development minister, had proposed to restrict the rural job guarantee scheme to 200 most backward districts, and dilute the wage-material ratio in favour of the latter.</div><div> </div><div>The confusion of the government on the benefits/harms of the scheme is only affecting the rural workers, as the scheme is prone to corruption and in a negative environment like the one prevailing for the last 9 months has aggravated the problems.</div><div> </div><div>The government which came with the mandate of creating jobs for the poor, should understand that while MNREGA is not the permanent solution for job creation, yet, it is an interim measure to provide the stimulus to the Indian economy suffering from lack of demand. The prime minister should not have any doubt over this.</div><div> </div><div> </div><div> </div>
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