The passage of the national rural employment Guarantee Act (NREGA) by Parliament on August 23 has divided informed public opinion in the country right down the middle. On the one hand proponents of the Act believe this legislation which guarantees 100 days of employment at the minimum daily wage of Rs.60 to every rural adult (one per family) who applies for it, is a long overdue gesture of solidarity with the nation’s rural population which has been almost completely bypassed by the boom conditions which the Indian economy has been experiencing following the liberalisation and deregulation initiative of 1991. 

On the other hand not a few respected economists and intellectuals believe that the Act which will involve a payout variously estimated between Rs.40,000-60,000 crore per year at a time in the history of the nation when the consolidated national deficit (Centre plus states) is approaching the danger 10 percent of GDP plimsol line, could well bankrupt the Central government and uncork the genie of inflation. Suffice it to say that when the law is extended to the entire country, it may complete the (Central) government’s descent into bankruptcy, warns the well-known economist-journalist Prem Shankar Jha writing in Outlook (August 15). 

There’s no denying that such apprehension is justified. The track record of the Central and state governments in project completion and implementation during the past five decades since independence is abysmal. Therefore there’s every possibility that the huge annual outlay NREGA will require could disappear into a black hole without the economy having anything to show for it with the rural poor whom the legislation is intended to benefit hardly any better off. 

Nevertheless precedent has to be weighed against the potential of NREGA nor does a predatory bureaucracy justify a safety-first response. Given the hard reality that rural India continues to languish in unimaginable deprivation and despair, inability to devise ways and means to deliver an embarrassingly modest package of 100 days work per year per family at the minimum wage is a shameful admission of failure of the Indian state and society in general. 

Past experience of the mismanagement of the National Food for Work Programme, the public distribution system and other poverty alleviation programmes has proved that their failure is rooted in careless policy implementation rather than formulation. Given political and societal will it is perfectly feasible to design and introduce systems to maintain strict and verifiable records of people registering for employment, eliminating on-site bureaucratic discretion and facilitating free public access to employment registers. Moreover recent experience in rural Rajasthan has proved that on-site local community and NGO (non government organisation) supervisory-cum-appellate committees can ensure that the twin objectives of creating rural employment and building rural infrastructure are attained. 
Advancement of the argument that pitifully minimal poverty alleviation programmes which are moral imperatives should not be essayed because they have failed in the past due to official corruption and middle class indifference, is unacceptable defeatism. Faint-hearted intellectuals who argue to the contrary are exhibiting excessive pessimism. 

High cost of non-performing government 

The common feature of the unprecedented rain (94 cm in 12 hours) and consequent flooding of Mumbai on July 26-27 which inflicted water-logging damage estimated at 435 deaths and Rs.20,000 crore upon the 15 million residents of India’s commercial capital and the simultaneous flooding of rural Maharashtra and Karnataka, was the almost complete non-performance, indeed abdication, of government personnel in moments of crisis. Citizens in all affected areas are unanimous in their condemnation of the paralysis of otherwise ubiquitous government servants who are under contractual obligation to subserve and protect the public interest. 

The recurrent failure of the Central and state governments in moments of crisis raises the important issue of the high cost of big government which is a dominant characteristic of post-independence India’s socio-economic development model. Translated into lay language the “revenue deficits” of the Union and state governments which are routinely condemned by all and sundry, means that governments at the Centre and in the states are unable to meet their own establishment expenses from the revenue collected from the people of India by way of taxes. Repeated lamentation about runaway revenue expenditure by virtually every finance minister on budget presentation day (and hardly ever subsequently) is tacit admission that the very first charge upon the taxes collected from the people is of the country’s 20 million government employees (Centre plus states) whose carefully concealed salaries, perquisites of office and establishment expenses aggregate a massive estimated Rs.803,556 crore per year (80 percent of total revenue expenditure). 

Contrary to establishment propaganda, this annual payout to the country’s lackadaisical, non-performing 20 million government servants is not small potatoes. It is equivalent to the combined annual outlays for defense, education (Centre plus states) healthcare and interest. Since the official establishment, i.e politicians and bureaucrats, incur a per capita expenditure of Rs.4 lakh annually for delivering next to nothing, it’s hardly surprising that the best it can do for the country’s 375 million children is a niggardly Rs.2,860 per capita for education. 

Viewed from this perspective, it’s painfully obvious that the Indian economy and the nation’s dirt-poor majority in particular, cannot afford big government. It has to be downsized to reduce the combined fiscal deficit of the Central and state governments, which is crowding out productive investment. 

Quite obviously despite extracting such a heavy price from the people, government can’t deliver minimal services as evidenced by the mess and stink of official malfeasance and neglect as rainwaters drain from India’s commercial capital. Surely the time is nigh for the nation’s intelligentsia (if any) to seriously question and reappraise the rationale of the high-cost, big government development model which is draining the Indian economy.

Also read: Purposeful employment creation