Employment Guarantee: An Act to Salvage Democracy
As
the time to table a Bill on employment guarantee in the Parliament draws
near, the initial euphoria over its inclusion in the Common Minimum
Programme seems to have been replaced by a growing skepticism as powerful
forces work to dilute the provisions. The paradox is that the same underlying
factors that provide the compelling reasons to enact such legislation
also fuel the opposition to the Act. These arise from the neo-liberal
policies that serve the interests of finance capital and are pursued
with equal vigor by the NDA and UPA governments.
Broadly
speaking, three different positions are being taken on this issue. One
regards universal employment guarantee as an engine of growth that will
revive agriculture and the rural economy by the creation of productive
assets and the multiplier effects of demand expansion. Another opposes
it on the grounds of non-affordability, corruption, and preference for
infrastructure-led growth models.
Yet another position, which lies somewhere between the other two, is
taken by those who regard employment guarantee as the 'human face' of
globalization. Though they advocate the need for an Act, they are ambivalent
towards neo-liberal macroeconomic policies. The divergence lies only
in their disapproval of the 'social exclusion' of some from the 'benefits'
of globalization while the dubious 'benefits' in terms of growth and
good governance are almost never questioned. Like their opponents, they
too view globalization as an opportunity and a challenge but differ
over the degree of 'humanization' that is politically and financially
feasible.
The decisive political verdict of the Indian voters against neo-liberal
policies produced a brief period of consensus on the need for an Employment
Guarantee Act (EGA). While the neo-liberals realized its political necessity
in the interests of a stable democratic system, for the 'humanizers,'
it was a means to fight hunger and provide a 'social safety net'. There
were also those who valued the potential for broad-based equitable growth.
By its very nature, the consensus was fragile. It has broken under the
weight of its own contradictions.
While the momentum of the movement for an EGA is pushing towards a more
substantive and effective legislation, the neo-liberals are willing
to agree to cosmetic and superficial measures only. An EGA stands in
direct conflict with the interests of finance capital, whose ideologues
within and outside the Government have become suddenly active. Financial
interests are extremely wary of inflation. Any policy measure that increases
expenditure in the economy and moves the terms of trade in favour of
agriculture is detrimental to their interests. Thus, their ideologues
prescribe policies that worsen the relative position of the peasantry
and agriculture in the Third World along with a slowdown in overall
expenditure. Then there is global agribusiness that is looking to shift
tropical and sub-tropical agriculture out of foodgrains and into exportable
commercial crops of their choosing. They were to some extent successful
in influencing policy in India, and these policy changes introduced
after 1990 resulted in widespread rural distress.
By the Fourth Plan, it was painfully clear that food self-sufficiency
was strategic to self-reliance since the US had already started using
the PL 480 programme to exert pressure over policy in India. India has
made significant advances in agricultural (including food) production,
due to active state support through public investment in infrastructure;
limited land reforms; the introduction of the HYV package; minimum support
price and procurement of some crops; expansion in agricultural credit
and extension services, etc. The home market and peasantry were protected
through tariff and non-tariff restrictions on trade.
Despite these achievements, some fundamental problems persisted in agriculture.
These included the inability to carry out effective land reforms; the
exclusive technological focus on groundwater extraction and high dams
for irrigation; the high degree of regional and class concentration
of gains from the Green Revolution; lack of accountability and transparency
at the local level; environmental degradation; non-implementation of
a minimum wage legislation for agricultural labourers, etc.
The present and growing crisis in agriculture has little to do with
these weaknesses, and is clearly an outcome of trade liberalization,
deflation and specific structural adjustment measures undertaken in
the agrarian sector since 1990. Government rural development expenditure
declined as a percentage of GDP, from 14.5 per cent in the Seventh Plan
to 6 per cent in the Ninth Plan period, implying a projected decline
of Rs 50,000 crore in 2000-01 on this count alone.
Rural banking by the Scheduled Commercial Banks (SCBs) worsened in all
respects, and the very concept of priority sector lending was severely
diluted. The rural branches of SCBs report a falling credit-deposit
ratio from 69 per cent in 1991 to 40 per cent in 2001. The number of
rural branches fell by 1543, rural branches' share in total credit fell
from 14.2 per cent to 10.6. Commercial bank credit has moved out of
rural areas, backward regions, agriculture and small-scale enterprises.
Furthermore, farmers pay far higher interest rates than the middle class
pays for loans to finance luxury consumption!
The Government of India lowered tariffs and opened up trade before required
to under WTO. This was at a time when world prices had begun to crash
due to mounting subsidies given by the advanced capitalist countries
to their agriculture. This exposed Indian farmers to unfair trade, global
price volatility and recessionary international markets. World prices
peaked in the mid-1990s, and then fell for most crops to below pre-peak
levels. However, Indian farmers did not anticipate this, and in the
hope of making large gains, they moved to high-value exportable crops,
undertaking huge loans in the process. However, the prices in the domestic
market were no longer insulated and farmers could not compete with the
artificially cheaper imports. Instead of being offered the same subsidy
or protection as that in Europe and America, our farmers were left to
the mercy of global big agribusiness. Worse, under the structural adjustment
programmes and conditionalities imposed by the Bretton Woods institutions,
the Indian government withdrew subsidies and extension services.
User charges were raised substantially, without reducing costs and slack
in the system (transmission and distribution losses in the power sector
are a good example of this). The government reduced subsidies on all
agricultural inputs, including seeds, water and electricity charges,
fertilizers, pesticides, and agricultural implements. The result is
that after a steady increase till the mid-1990s, power consumption by
agriculture first stagnated and then declined. It has never exceeded
agriculture's share in national income. The rise in prices of fertilizers
and power has resulted in stagnation of area irrigated, fertilizer use
and yields of foodgrains.
As a result, agricultural production and income growth decelerated in
the 1990s. Growth of agricultural production fell from 3.5 in the 1980s
to 2.0 per cent per annum in the 1990s, and real income growth fell
from 4.5 to 2.5 per cent per annum over the same period. The per capita
agricultural real incomes have declined after 1996-97, due to very low
yield growth and adverse prices for non-cereal crops. Employment growth
fell from 2.04 per cent during 1983-94 to 0.98 per cent during 1994-2000.
The gap between urban and rural incomes widened, with per capita urban
incomes being thrice the rural incomes.
The final blow was caused by the introduction of the targetted public
distribution system (TPDS). The gains made in per capita foodgrain availability
towards the end of 1980s were lost in a decade. By 2001, the levels
had fallen to lower than those in the 1950s, one of the reasons being
the deceleration of growth in foodgrain output. A fall in per capita
production ought to be compensated by release of buffer stocks through
the PDS, release of food stocks by increase in food-for-work programmes,
midday meal schemes, etc. This would protect per capita availability
of food and its absorption by the people. However, per capita absorption
in 1990s declined on account of large additions to stocks and very high
and cheap food exports. This was a direct result of inadequate purchasing
power of the rural population due to rising unemployment and deflationary
policies that are suspicious of any increase in economic activity through
food-for-work programmes, despite comfortable foreign exchange reserves
and foodstocks. Hardly 8.5 million tonnes were sold in 2000-01 as compared
with 19 million tonnes in 1992 despite population growth and falling
production. All these resulted in widespread rural distress.
The existing rural crisis of falling farm incomes, indebtedness, unemployment,
malnutrition and land alienation is thus an outcome of deflationary
economic policies, structural adjustment and trade liberalization. The
central government has promised to enact and employment guarantee, which
has the potential of turning around the agrarian distress to some extent.
It is indeed ironical that the policies that caused the distress in
the first place have created the conditions for their resistance.
In the prevalent conditions, the Act must create a fully centrally-funded
scheme that provides work at the minimum wages to all rural adults close
to their homes when required by them, and a failure to do so should
entitle them to an adequate unemployment allowance, in all parts of
the country. The Act should safeguard the interests of women regard
to availability, location, type and organization of work. This would
mobilize surplus labour in the countryside and unleash productive forces,
which is opposed by finance capital and its apologists. Political compulsions
might not however allow the opponents of the EGA to prevent the introduction
of the Bill in Parliament. But they can deal a deathly blow and dilute
the Act by raising objections acceptance even to well-meaning advocates
for whom the Act is a social security measure.
The two most popular arguments are the inadequacy of central finances
(juxtaposed with allegations of profligacy by state governments) and
the apprehension that the rural elite will appropriate the benefits
of the scheme (evoking images of exploiting rich farmers and landlords
queuing up for the unemployment allowance with the complicity of sarpanches).
The prescriptions recommended are a narrow targeted scheme with limited
household entitlements (present proposal being 100 days) in the poorest
districts whose funding is shared by the Central and State governments
in some ratio (currently being proposed at 3:1). These proposals, if
accepted, will inevitably result in a weak and inadequate Act that does
not address the basic problems it is meant to.
The first casualty is the universality of the scheme, not only in terms
of 'poor' and 'non poor' people and districts but also in terms of gender.
Entitlements fixed at the household rather than individual level tend
to exclude women and push them further into lowly paid arduous work.
Such a provision also works against the poor because poverty and lack
of homestead space tends to make extended families comprising several
households live together.
The policy of targetting is replete with difficulties. Identification
of the poor is far from satisfactory, both in terms of the criteria
and procedure. Wrong exclusion is rampant and leads to far more serious
consequences than wrong inclusion. The livelihoods of vast sections
of the near poor too are extremely insecure what with droughts and even
minor disturbances pushing huge sections into the quagmire of poverty,
hunger and malnourishment. No matter what measure one uses of hunger
or malnutrition, there is no doubt that the majority of Indians suffer
pervasive and persistent food insufficiency. The National Family Health
Survey 1998-99 shows that 47 per cent of children below the age of three
were malnourished by the weight-for-age criterion; the National Nutrition
Monitoring Bureau shows that 48.5 per cent of adults had a Body Mass
Index below the norm in 1993-94, and NSS data for 2000 shows that 75
per cent of the rural population and 50 per cent of the urban population
consumed less than required to meet the minimum calorific norm.
The finances of State governments are reeling under the strain of policies
beyond their control, including interest rate policy, access to borrowings,
etc. At the same time, most social and economic development activities
and the provision of infrastructure are the responsibility of the states.
The failure to design the scheme on the lines of a food-for-work programme
fully funded by the Centre will place it at the mercy of bankrupt state
governments, jeopardizing the scheme itself. Additionally, it is constitutionally
not possible for the Central government to impose a financial burden
on the states without conformity Acts being passed in each State assembly,
a procedure likely to cause long delays.
Democracy
in India has time and again failed to ensure equality and justice. It
is imperative now more than ever to recognize that democracy and distress
cannot coexist indefinitely and we have to salvage the remnants of egalitarianism
even as the rural economy continues to collapse. The people of this
country have clearly voted their preference. Two economists, neither
of whom is accountable to the electorate, are making the rules of the
game. The ball (and Bill) is in New Delhi's court. The question is:
will they play fair?