Urgent Release: My Special Report on How to Trade the Coronavirus Crash
Is this government scheme killing rural jobs in India?
In this issue:
» CVs take the cake in 9mFY12
» What a shrinking conglomerate discount means
» Delisting for MNCs is getting expensive
» Should the US continue to head the World Bank?
» ...and more!
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Almost eight years later, many of these concerns still remain and some more have come to the fore. The scheme has been attacked for many reasons. Some of these are bloating rural wages, corruption, lack of asset creation for money spent, and making farming uneconomic. But the real problem is that the scheme may be destroying the work ethic and jobs in general. According to a research paper by the Indian School of Business (ISB), the scheme has done its bit to alleviate poverty. But it is also raising people's dependence on government and killing off micro enterprises. The data provided by the National Sample Survey Office also paints a telling picture. Between 1999-00, there were 92 m small jobs created. This figure stood at a paltry 2.2 m between 2004-05 and 2009-10. Not just that, during the latter period, there were 27.7 m new jobs created, which was offset by a drop of 25.5 m in the self employed.
Is this such a bad sign? After all, the drop could partly be explained by more people pursuing higher education. Or more women dropping out of the workforce altogether. Also, people cannot be blamed for opting to quit tough farming jobs for employment under the NREGA. This then raises the question whether jobs under the NREGA are productive in the first place. Are they adding much to the growth of the economy? With corruption ruling the roost, one would hardly surprised if many are getting paid without doing any work at all.
The government's intention behind this scheme to eradicate poverty can be appreciated. But maybe it is time now for the same to undergo a serious overhaul. Already the government's finances are under tremendous pressure. Thus, allocating vast sums of money to schemes which are not contributing much to the overall economic growth and improvement in standard of living does not bode well in the long run.
Do you think the NREGA has done a good job in reducing poverty in India? If so, do you invest on the basis of their fundamental strength or go by the movement in prices? Share your comments with us or post your views on our Facebook page / Google+ page.
01:26 | Chart of the day | |
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| Data Source: SIAM |
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Conglomerate discount is nothing but a discount that is given to the share price of conglomerate companies as opposed to smaller, more focused companies. This is because the latter are believed to be more nimble, more transparent and easier to compare with peers. The whole study is rather redundant we believe. For valuations depend on factors like competitive advantages and the management of the firms. The fact that a firm is a conglomerate or a standalone entity does not really matter. As long as it will continue to create value for shareholders, growth in stock price will follow. The rest should be discarded as mere noise as per us.
02:36 | | |
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A number of big names in the banking space such as UBS, Credit Suisse and Morgan Stanley could see their long term credit ratings drop by three notches. Barclays, BNP Paribas, Deutsche Bank, Goldman Sachs, etc could see a two notch drop. Out of the 114 European financial institutions being downgraded a number of them are in Italy and Spain. A few are in France and Germany as well. Investors and companies alike are paying heavily for Government excesses. And there seems to be no end in sight or no real solution in the offing.
04:15 | | |
No doubt, India has potential to become the third largest economy in the next two decades. However, all this definitely calls for an agile and proactive leadership at the centre. Without this, it may take longer than the set timeline.
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04:56 | Today's Investing Mantra |
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29 Responses to "Is this government scheme killing rural jobs in India?"
Madhav Pande
Apr 25, 2012Be it as it may but it has empowered and added bargaining power to the very poor man who was so far exploited by the Zamindars and large farmers. Therefore the scheme is doing good. If there are any lacuane those need to be corrected as we go along. Experts can do further socio eco. research of the scheme and suggest improvements.
Ragini Ghanekar
Mar 20, 2012It is true that such schemes are making rural farming uneconomic. Such scheme should not be seen as a charity. It should have counter checks and cross checks in place before they are launched. they should be productive and an asset should be created which will help to create further asset creation and continue the chain. But our leaders do not have any long term view in these matters or care about real prosperity of the nation. They are only after populist measures and vote bank politics. Probably they do not have a vision at all like Mamata Banergy who has guts to sack her own minister for doing something right just to satisfy her ego and not having such a vision herself. Our political field is full of such people along with goondas. True talents do not enter politics. That is tragedy of democracy.
DHAWAL AMAR SINGH
Mar 2, 2012The basic management principle to manage the projects is totally absent under the Act. The Central Government is providing the funds and has no control to monitor for its effective implementation. The results are bound to increase corruption and direct loss to the country. Unfortunately, there seems to no means to assess the expenditure against the out put achieved in terms of money. In case, this money is spent to increase the irrigation and other means to achieve the higher out put from the fields would help the increase of growth rate in the agriculture, thereby making the population self dependent rather to make them to depend up on the Government Tax collected money every year for living by working 100 days. Thus, we are making the nation lazy and more dependent of the government money. An extremely discouraging approach in the long run and only beneficial for the seeking votes.
saarat paalt
Mar 1, 2012The scheme is nothing but an eye wash. The scheme is to provide employment for 100 days in a year. What about the rest of the days? Where these people will go? All of us are very clear of the condition of agriculture sector. One of the main reason for lower productivity in this sector is non availablity of labour. Why can't we divert these labour force to there. Employment for employment and the production also increase. On top of that the Government which is already burdened with fiscal deficit and subsidies could save a lot. As it stands it is a sheer waste of money.
Georgy
Mar 1, 2012I do not understand why the planner's of India cannot see through the defects in a scheme. I fully agree with the article regarding NREGA. The most indirect ill effect will be the EROSION OF WORK CULTURE in the soceity. All jobs has its difficulties - if farm labour is strenuous, it will fetch you good health physically. Office job has got its quota of tension leading to hypertension and diabetics. Also this scheme is generating a lot of corruption.
S.K.Damani
Feb 29, 2012I have read all the reviews given above AND FULLY AGREE with them. NREGA is nothing but the biggest scam, may be bigger than the 2G & g scams of Raja. Worst it has made the rural folks absolutely lazy and just not interested in work of any type. Farm labour is tough. 6 to 8 hours in hot sun is extremely difficult and if you can get free money from the govt. what more does any of these labourers want. And ofcourse there is corruption. EVEN IF THE INTERMEDIATERY PAYS 50% IT IS GOOD ENOUGH. SUFFICIENT TO BUY THE DAILY QUOTA OF LIQUOR AND ENJOY LIFE. NO WORK NO AMBITIONS, JUST DRINK AND LIVE LIFE TO THE FULLEST EXTENT.
Farm labour is not available at 180 - 200 per day also. We know it as we live in rural areas, in acity with a popn of 5L and visit the nearby villages regularly.
This scheme is only for making money for the politicians, and best part is it gets them the votes also.
Thanks Damani
shirish patwa
Feb 29, 2012There is no easy way out.You just cannot erase the curse of unemployment by some charity and subsidies.Unemployment is a economic problem and is to be tackled by economic means only.There are no shortcuts like NREGA.If you are not creating assets worthwhile by funding such schemes,it will go into drain only.Its people's money which is being frittered away.This is being done through deficit financing which is the worst type of taxation as it affects the poor the hardest.The corruption such schemes generates is a parasite,a leech that sucks the blood.
parshuram agarwal
Feb 29, 2012i agree it is just like any other of their projects, now the govt. has announced free
medicines to all citizens just watch out what will happen.
parshuram agarwal
Feb 29, 2012i agree it is just like any other of their projects, now the govt. has announced free
medicines to all citizens just watch out what will happen.
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HARSHAD PANDYA
Apr 6, 2013NREGA HAS DONE VERY BAD JOB IN REDUCING POVERTY IN INDIA.INSTED OF THAT REQUIRE PROGRAM OF FREE EDUACATION TO ALL INDIAN STUDENTS UPTO GRADUATION.REFER MY PETITION ON CHANGE.ORG AND FILE YOUR PETITION.THANKS.