MNREGA – Unemployment dole

August 28th, 2011

The RBI in its recent report on the state of the economy, while cautioning about the growth rate, has clearly mentioned that inflation needs to be controlled. One of the important reasons for inflation is the rise in base wage rates in the country without a corresponding increase in productivity.

This is a direct attack on MNREGA (obviously without naming the scheme), which happens to be the flagship social sector scheme of the UPA.

The MNREGA may be helping the rural poor in inching above the poverty line but it is surely not helping the nation as a whole. The scheme, as the name suggests, is required to guarantee a certain number of days of employment to every beneficiary. It is true that employment is provided, but unfortunately, the employment is not into any productive avenue. This results in a situation where the beneficiaries are in disguised unemployment. The money provided to such beneficiaries is nothing but an unemployment dole.

The success of MNREGA has resulted in money being pumped into the economy without a corresponding increase in the production. This is an indirect way of monetising the economy and will obviously result in inflation.

In certain industrial clusters, the MNREGA has resulted in a reverse migration of workforce. Menial unskilled labour is now in short supply. The labour force now tends to migrate to its homeland and get itself enrolled into MNREGA rather than sweat it out in the work place. Most of the industrial units in such clusters today have a permanent board outside there factory gates – LABOUR REQUIRED. This has resulted in either stoppage of production or increase in the wage rate above MNREGA – Both results again leading to inflation.

Last but not the least, the continued success of MNREGA over a longer period of time will have a very damaging impact on the social structure of the Indian rural household. The beneficiaries would continue to earn income without any corresponding hard work. Such households would never value money and if they remain beneficiaries under the scheme for a number of years, would end up being a lethargic lump of flesh and bones who would be accustomed to earning income without any effort. A nation looking forward to becoming a manufacturing hub for the entire world would surely not want a labour force of this kind.

In the good old days of the USSR, the Soviet Republic use to boast of full employment. This used to be explained to us by way of a joke in our economics class – In Moscow two people are required to operate an escalator – one sitting at the bottom to switch on the escalator the moment a person steps on it and the other at the top to switch it off the moment the person steps off the escalator. This takes care of two employable hands that are compensated by the state. Glasnost and Perestroika showed us the true colours of this full employment myth.

India cannot afford to follow this path. Immediate corrective steps are required to ensure that the beneficiaries of MNREGA are put to productive use; be it in the development of infrastructure or industries. If such steps are not taken now, what the RBI has hinted obliquely will become a major reason for some of the economic ills the country would face in the future.

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Public opinion and policy formulation

August 23rd, 2011

Indian democracy is facing a crisis of a very unique kind. The Parliament -– the ultimate symbol of Indian democracy and the place where laws are formulated -– is under siege.

The Parliament is also known as the house of peoples’ representatives. The people of India are represented by these handfuls of Parliamentarians, whose main work is to ensure that the voice of the people whom they represent is heard in the Parliament. Through these representatives, the Indian public becomes a part of the law-making process. This is the basis of our democracy.

The current controversy surrounding the Lokpal Bill has shown that there is a total disconnect between the public and its representatives. In fact, going by the growing support for Anna at the Ramlila Maidan, it appears that the peoples’ representative have no clue of what the people whom they represent want. If this is true, it would not be unreasonable to conclude that the peoples’ representatives once elected to the Parliament get so overwhelmed by the arrogance of power that they forget about the people and go back to the people only when the time for the next election comes up. This is an extremely dangerous sign for a democracy.  If this condition persists for a little longer, arrogance of power results in the birth of an authoritarian political class which believes that its only object is to beat the people into obedience. And the best way for an authoritarian regime to ensure that it is obeyed is to instil fear into the minds of the people.

The recent turn of events including the government response to them (including Anna, Ramdev, etc.) clearly show that the Indian Parliament has turned into a den of authoritarian politicians who have no respect for the opinion of the very people whom they are supposed to represent.

What is most amazing in this transformation is that how could the politicians think that they would get away? It is sociological law that the more information you give people, the more government policy becomes dependent on public opinion. Perhaps this may be pitching it a bit too far, but this is good generalisation.  With so much of free flow of information in the country, the politicians should have realised that they have to be more and more responsive to public opinion and there actions would be subjected to even greater public scrutiny. Unfortunately the Indian politicians thought that policy formulation can be done without considering public opinion and in total disregard of the sociological law. As a result of this, the people of India have taken it upon themselves to formulate the policy and force their representatives to enact it into law. In a democracy, public opinion has to find place in policy making, either through the peoples’ representatives or directly as is now being done in India.

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People power

August 17th, 2011

Who would have thought a few months ago, that Hosni Mubarak, the man who ruled Egypt with an iron fist for 20 long years, would one day stand trial in the very country he ruled? But that is exactly what is happening today. The ailing dictator, who was stripped of his powers following a people’s revolution early this year, has been made to attend the proceedings on a stretcher with life-support machines strapped all around. There was a time his country and Hosni Mubarak were regarded as synonmys. Few could have dreamt of an Egypt without the despot. Somewhere down the line, though, Mubarak took his position for granted and forgot that there is something known as ‘people power’. January 2011 demonstrated what this power is all about. And, from then on, a large part of the globe has been getting a taste of this power.

Failure of governance over a sustained period of time is one of the biggest unifying influences over the people. The mind of a thinking human being protests over the failure of governance and, when his protests are not heard, his mind starts to oscillate between murderous and suicidal tendencies – murder the people in charge of governance or commit suicide since bearing failure is no longer possible. The main reason for these tendencies to find place in the mind are generally the brutal use of law enforcement agencies to curb any form of peaceful protest against governance.

Egypt is a classical example of this mindset. People got together — first in a mood to protest in a peaceful manner. The establishment, oblivious to the concept of people power, responded with a heavy hand. People Power got invigorated and converted the peaceful protests into violent ones. The establishment now had a justified reason to use force and thought it could quell the ‘uprising’. Unfortunately, when the only alternative to murder is suicide, people will always give murder a good try before settling for suicide. Obviously the establishment in Egypt realised this and buckled to people power, but only after a lot of collateral damage to life and property.

India is a little different – it is a democracy where the freedom of the people is supreme. Freedom represents the wide range of responses — from any kind of legal behaviour to the practical freedoms of the press and media. It represents choice –– choice to one form of behaviour or another, for the governance or against. The use of law enforcing agencies to curb freedom of any form is considered totally unacceptable in any democracy.

In the above backdrop, the turn of events in India becomes very scary. The government has taken a tough stand and Team Anna has replied with ‘people power’. In fact, global events show that it is always the latter which emerges victorious, but that has a huge cost. The government should immediately convert its confrontationist attitude into one of consensus through continuous dialogue. People power has little patience and understands no reason. It takes little time for this power to be converted into ‘mob fury’ a conversion which needs to be stalled at all costs.

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Who will unfurl the National Flag?

August 12th, 2011

Independence Day is just round the corner and the million-dollar question doing the rounds is: who will unfurl the national flag this Independence Day. The media has joined the speculation too. A strong message is to be conveyed to the general masses about the future leadership of the largest political party in the country. Oh, I have forgotten to mention that the entire concern is regarding the Independence Day celebrations at the Congress party headquarters in Delhi, and not at the Red Fort. The Red Fort function as usual will be dull and drab event (without any message to the masses) to be presided by the Prime Minister. Again it seems I have jumped the gun. The reason why this problem has erupted this year is because the Congress president is unwell and is out of circulation, as she is recuperating from a recent surgery which was successfully performed on her in a hospital in the United States of America.

Well, let me come back to the burning issue -– who will unfurl the national flag. According to media reports, the heir apparent Rahul is supposed to return by the D-Day and perform the rituals at the party headquarters. And it is being speculated that this would be the signal of the changeover in the party where in the party reins will be handed over to Rahul Gandhi.

It has always perplexed me as to why the young scion of the Gandhi family is so shy of taking the responsibility of leading the nation from the front. His penchant for playing the Jumping Jack type of leadership -– springing up in different parts of the country raising pertinent issues and then vanishing is very very frustrating. Be it the issue of tribal welfare in Orissa or the forcible acquisition of land in Noida -– he has always managed to raise the most pertinent issues. Every time an issue is raised, the nation looks forward to a more active and frontline role from Rahul Gandhi. But, alas, the nation always ends up being disappointed.

Rahul Gandhi’s allergy in taking up a formal responsibility in nation-building defeats a rational mind. At the age at which he is now, his illustritious ancestors had taken up leadership positions either in the Party or in the council of ministers.

Maybe this independence day the function at the Congress party headquarters may send a far more important message to the masses than compared to the function at the Red Fort. It may signal the transformation of a boy scout into a full fledged soldier who will take up leadership position and lead from the front in the hour of crisis.

Let’s wait for the answer.

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An economy going adrift?

August 1st, 2011

There is a churn in the mind of every thinking Indian individual today. Most Indians are now getting worried about the economy. Till about late 2010, there was reasonable belief that even as the world economies were battling the prolonged slump they had entered, India was relatively unscatched. It was clear that the Indian economy was not dragged into the worst global economic meltdown in 75 years, primarily because its growth was dependent more upon internal than external demand.

However, both the ground level situation and the mood have worsened over the last six months quite a bit and in fact is now worsening week by week. The continuous hardening of interest rates to contain inflation may play the spoilsport in the domestic demand story. High interest rates are a double-edged sword. They hit the corporate world in terms of high investment costs and the consumer in terms of high consumption costs, leading to lower investment at the corporate level and lower consumption at the retail. The fall in car sales in June 2011 as compared with June 2010 is a pointer in this direction. Indeed, if the domestic demand story does not lead to a happy ending, the consequences for India will be severe. Not only will the domestic industry suffer, even FDI will become scarce. We should not be surprised if this festive season the consumer is forced to hold back purchases. And if this happens, it would be a body blow and recovery would not be easy.

If India considers itself to be in a state of transition to becoming a world economic superpower, it has to realise that such transition can not surely be a function of economic factors which are internal to India. India has to integrate and be deeply involved with the global economy. The high-speed development required by India to become a word economic superpower will have to be dominated by foreign capital and reliant on international markets. India must attract foreign capital which is constantly looking for low cost production zones – from Mexico to China to Vietnam…

The above steps need to be taken up as a project by India. And it has to be borne in mind that such a project is not an economic project alone, it requires and puts a premium on social and political stability in the society and economy and if not handled with care, this project will produce extreme and acute economic distortions and vast regional and social inequalities.

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