MacroScan - Employment Guarantee: A Distant Dream

The Common Minimum Programme did strongly foreground the issue of employment generation and the necessity for a pro-active public policy geared towards this all-important objective. Yet the 2004-5 budget, the first budget of the non-NDA coalition government reflecting its actual macroeconomic priorities as against its own popular rhetoric, has not addressed the issue of employment generation at all.

Data emerging at the end of the nineties showed the dismal performance of the employment indicators over the decade. Annual growth of rural employment was around 0.5 per cent per annum between 1993-94 and 1999-00 as compared to 1.7 per cent per annum between 1983 and 1993-94. The daily status unemployment rate in rural areas increased from 5.63 per cent in 1993-94 to 7.21 per cent in 1999-00. (Dev, 2003) Growth of agricultural employment which still accounts for more than 60 percent of overall employment declined in absolute terms over this period (see graph below). Rural non-farm employment growth, where the large number of residual workers from agriculture transit, also showed slower employment growth (3.28 and 2.14 percent per annum during 1983-93 and 1994-2000 respectively). The overall employment growth in the economy dropped from 2.04 per cent during 1983-93 to 0.98 per cent per annum during 1994-2000. Ostensibly, the strong growth in the urban services sector failed to make up for the tardy employment growth elsewhere in the economy.
Chart 1: >>

The deceleration in employment growth was further reinforced by a sharp cutback in public spending on rural employment programmes since the mid-nineties. Dev (2002) notes the marked fall in the share of rural employment programmes in center's expenditure on social sector. As a percentage of GDP, expenditure on both rural wage employment programmes and special programmes for rural development, which includes the traditional self-employment programme Integrated Rural Development Programme and its new incarnation Swarnajayanti Gram Swarojgar Yojana, declined since the mid-1990s. Central Allocation on rural wage employment programme came down from 0.40 percent of GDP in 1995-6 to 0.13 percent of GDP in 2000-1, and that on special programmes for rural development fell from 0.08 to 0.03 percent of GDP. Official justification for the cutback in public spending on these programmes was sought in the shift in accepted paradigm among the multilateral donors from traditional methods of addressing poverty through employment generation to basic needs intervention. Social sector expenditure would henceforth be directed towards basic provisioning of education, health, drinking water, while markets could take care of employment generation. Of course, the whole social sector would increasingly be treated as residual that would absorb shocks on behalf of fiscal disciplining.

The initial three years of NDA rule were some of the worst years to witness alarming declines in public outlay on rural employment programmes in absolute terms (see Table below). It was only in 2002-3 that the budgetary allocation (BE) on wage employment programmes returned to the 1998-9 level (crossed Rs 4,000 crore). The severe all-India drought in 2002-3 and the natural calamities affecting 12 states in 2003-4 forced a revision of the budget for this head by substantial amounts in both the years. This is reflected as adjustments in foodgrain component and special component of Sampoorna Gramin Rozgar Yojana in the revised statement of the budget whereas the ex ante allocations (budget estimates) did not respond to the increased demand for employment.^[1]
Table 1: >>

The promise of 'assured 100 days employment to the breadwinner in each family at the minimum wage' in the Common Minimum Programme did raise expectations of reversal of this regressive trend. But all that the budget pronouncements have done is to promise to reify the assurance through a formal legislation - the National Employment Guarantee Act - in the future. The budget has not made any extra allocations for 2004-5, over what was announced in the interim budget. Even if the entire sum of Rs.10,000 crores, the gross budgetary support, be used in employment generation, it would not be sufficient to guarantee 100 days of employment to each family in need of employment in the country.^[2] And obviously, there are many many other assurances in the budget that the sum of Rs 10,000 crore would be expected to fulfill.

The 2004-5 budget has announced a new Food for Work programme in 150 districts classified as most backward and identified as areas in immediate need of such a programme. This programme is to be funded by cutting down allocations under the existing rural development programmes. Targeting of public expenditure is a salient feature of neo-liberal fiscal strategy, and the big move towards this strategy in India was observed with the transformation of public distribution system to targeted public distribution system. The new Food for Work programme without any budgetary provision mirrors the same logic. Targeting spending towards the poorest, a concept popularized by the World Bank in the recent years, increases the benefit derived from the same volume of public spending and therefore maximizes the so-called efficiency of public spending. More targeting then becomes consistent with less spending!

While the budget of 2004-5 proclaims an universal employment guarantee, the present set of policies on direct employment generation through public spending forebodes an exactly opposite scenario with restricted and targeted public spending. Let us not be mistaken in thinking that this is the beginning of a major turnaround.

References:

Dev, S. Mahendra and Jos Mooij (2002) ''Social Sector Expenditures in the 1990s: Analysis of Central and State Budgets'' Economic and Political Weekly, March 2.

Dev, S. Mahendra (2003) ''Agriculture, Employment and Social Sector Neglected, Economic and Political Weekly, April 5.