Guest Post by AMITAVA GUPTA
Concerned about the approach of the central government toward the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA), 28 development economists wrote a letter to the PM, urging him to stop tampering with the scheme. The letter, as one might have suspected, did not go down well with Jagdish Bhagwati. He, along with his Man Friday Arvind Panagariya, was quick to put forward a rebuttal. Though Bhagwati’s credentials as a trade theorist cannot but be acknowledged even by his bitterest critics, he is hitherto not known for his contribution toward development economics. Panagariya would merit even lesser mention. But, that should not ideally deny their argument a fair scrutiny.
The central government announced a set of measures over the last couple of months or so. Those include restricting the scheme to the poorest 200 districts; reducing the labour to material ratio from 60:40 to 51:49; freezing the real wage rate; imposing cap to state expenditure on the scheme. Put together, those measures deliver a lethal blow to MNREGA. Bhagwati and Panagariya extend unconditional support to this rather brutal amputation. What they essentially do is to summarize the standard arguments against the scheme. The arguments can be clubbed under two heads— i) the scheme is marred in corruption; ii) it does not generate revenue to justify the spending from the exchequer and hence, it should be done away with. It is worthwhile to check whether any of these arguments has some merit or these are just political salvos packaged as economic wisdom.
Continue reading MNREGA’s Swan Song – Not everyone’s idea of ‘achche din’: Amitava Gupta