Monday, February 11, 2013

Employing India: Guaranteeing jobs for the rural poor

Here are highlights from one of the latest published reports (Employing India: Guaranteeing Jobs for the Rural Poor) yours truly was involved in. It is about Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), probably the largest social protection programs in the world -- directly employing members of around 50 million rural households at a cost of less than 0.5% of GDP.

  • India faces persistent poverty and inequality despite burgeoning growth. Between 1988 and 2005 the country’s GDP almost tripled, but its poverty rate only decreased by 30 percent, underscoring the need for poverty reduction policies.
  • Under the program, members of 50 million households worked a total of 2.5 billion days in 2011.
  • The act looks to empower women, widen opportunities for marginalized population groups, and reinvigorate community decision-making bodies.
  • The program is meant to operate transparently and fight corruption, but corruption has been seen in the act’s implementation.
  • The act is having a significant impact on the lives of the poor with rural wages increasing, but its effectiveness varies according to activity and location.
  • Simulations using an economy-wide model indicate that the act has a positive macroeconomic impact, leading to increases in GDP and trade.
  • As the program shifts purchasing power from the urban rich to the rural poor, the structure of demand changes. Economic activity in agriculture, processed food, and light manufacturing increases and activity in heavy manufacturing and services declines. Likewise, the demand for unskilled labor in urban and especially rural areas increases, while the demand for mainly urban skilled labor decreases.
  • Poor households benefit from added employment opportunities, while high-income households might suffer from weaker demand.
  • The act is likely increasing land productivity, which boosts GDP and opens the opportunity to introduce incentives to investment while keeping tax rates constant.
  • Given India’s weak institutional setting, a new way of doing business is necessary to implement the act’s detailed and ambitious procedures. Institutions must solidify processes for making information transparently available, and communities need to be involved in creating and managing projects.
  • The act is a work in progress that needs ongoing evaluation to fully succeed and keep the corruption affecting the program’s implementation in check.

Below is a brief of the report:

I will have more from the report in another blog post.