The above proposal has evolved out of conversation with Warren Mosler & the verbatim extract of the correspondence is given below:
Warren Mosler: Thoughts on proposing to make the rural poor employment program universal and with a somewhat higher wage?
Rajendra Rasu: The employment program for rural poor is called NREGA (National Rural Employment Guarantee Act) program.
WM: Ok
Raj: We need to carefully look at the situation. Indian context is unique, compared to developed economies. It has an extremely high share of informal workers, 94%.
WM: Is the NREGA wage above informal sector wages?
Raj: NREGA wage has been increasing every year, presently it is at Rs 200 ($3) pet day. It is lower than prescribed minimum wage which is Rs 300 per day. Informal wage varies hugely state to state, based on demand & supply. In Tamilnadu, it is very high Rs 600 per day for men, Rs 400 for women. Other Southern States closer to this. In North, where jobs are few, it is close to NREGA or minimum prescribed wage, except in Punjab.
WM: So initially the wage could remain at 200/day to avoid flooding the system and then be increased over time probably to 500 ultimately (inflation adjusted).
As long as loose enough fiscal is maintained the NREGA pool won't grow all that much as workers transition to private sector employment etc.
Raj: Agreed. Rural population is 980 million, out of which 750 million needs to be uplifted, we can call them poor & lower middle class. Dependence on agriculture & related activities are at least 65%.
WM: Ok, agriculture probably could have the same output with a lot less employees? If so, the trick is to transition those who want to transition to other/better employment?
Raj: Exactly. Everybody want to transition to better employment, but problem is lack of choice in villages. So, they become migrants, live in pitiable conditions in cities as their work is not valued much wherever they work. Also, as big farmers shifted to mechanisation, small farmers & farm labourers move to other States for few months in a year to earn a little, leaving their family behind. Ideal solution is providing better employment in village itself, as the size of rural workforce is humongous & there are many issues connected to migration.
WM: Exactly
Raj: One, is to ensure food & water security in the long run, two, migration makes them live in unliveable condition in cities, three, cities are overcrowded, four, pandemic time all came back to villages, they are reluctant to go back, five, agriculture produces don't get good price, six, middlemen & retail shops gain at the cost of farmers, workers & consumers.
WM: Increasing agricultural yields via investment and economies of scale can mean more food with fewer employees. That kind of productivity gain is critical for an improved standard of living. Too often productivity is conflated with unemployment to the detriment of all.
Raj: Yes. So, in the above context, if we
make NREGA universal, challenges are:
1. Size. Even though it is a demand based guaranteed program, presently only 50 million are employed for 60 days in a year, even though scheme is for 100 days
WM: A low enough initial wage might keep the initial size down, and wages increased as management is developed?
Raj: I meant that the size is Himalayan, in
billions.
There is space for creating productive, social and core infrastructure in all parts of the country, particularly in villages, as the existing infrastructure is very limited. If all the 640,000 villages are going to have these infrastructure, then that will provide the impetus for private enterprises getting promoted to meet the needs of the people.
Rural enterprises owned by villagers producing value added food products & essentials could provide employment to most of them. Allied enterprises could be in water storage (only 8% of rainfall is stored & it is predicted to have huge water problem)(my Oct 9th proposal has complete details on bringing water security) & other activities as you listed in the last point.
WM: Yes, water storage issues need to be addressed immediately.
Raj: 2. Quality of assets created. Very low.
WM: Not a problem as the purpose will be to facilitate the transition to private sector employment, which it will do.
Raj: Food security has to be ensured. Now, farmers get pittance because they sell their produces as such. Value addition is done by middle men. Do that value add in village through villagers owned rural enterprises. We need to see this little differently from typical PV. Profit has to go to workers rather than nonworking private promoters. This will keep the prices also lower. It should have district administration continuous role play, for planned production on macro & micro level to avoid waste & excess, price control, management help, etc. Amul in Gujarat is a world class company, owned by milk farmers (https://en.m.wikipedia.org/wiki/Verghese_Kurien)
WM: Good points.
Raj: 3. Only assets are created, no production.
WM: Not a problem, as above. The large pool of employed will act as an employment agency for the private sector, allowing fiscal relaxation to increase aggregate demand to attract NREGA workers.
Raj: Yes. Not only workers, Govt & its arms would get convinced, once it rolls out and provide more support. Once the benefit is seen, program also will evolve.
So, a very clear district wise planning is required, involving the entire administrative machinery, to build food based enterprises, producing all food products(value-added) including farming, and other essentials.
WM: I would suggest a move to higher agricultural efficiency- more output with fewer workers- via investment by private sector farmers, and investment in educational facilities/research facilities/health facilities/supporting infrastructure to promote high quality/emission friendly service sector expansion and greatly enhanced real wealth/higher standard of living without adding to emissions, etc.
Raj: Agreed totally, this could bring in food, water, energy security, meet their health, education & recreational needs.
Thanks Warren.
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