VB GRAM G vs MNREGA: Which burdens States more?

This is Infocus. The Hindus, Current Affairs, Podcast. The Viksit Bharat, Guarantee for Rosegarh and Ajivika Mission, Grameen or VBG Ramji, has replaced the 21-year-old Mahatma Gandhi National Rural Employment Guarantee Act or Mandraiga. The VBG Ramji Act provides a statutory guarantee of 125 days of wage employment per financial year to rural households whose adult members volunteer for unskilled manual work up from 100 days under Mandraiga. However, under the new system, the state's contribution to the scheme will increase by 300%. Rajinthan Narayan, Associate Professor at Azim Premji University Bengaluru. His work focuses on bridging the gap between data and social justice, is here to discuss how this change reflects on Indian welfare policy and more. Hi sir. Hi. Thank you for inviting me. So the data show that under this new VBG Ramji financial model, the state's contributions to rural employment will increase by 300%. So how does this shift from the 1910 funding ratio between the center and the state to the 60-40 ratio impact fiscaly constraint states? See, yeah, it's a very important shift. Now, there are many reasons for this, but this is not the first of the kind of shifts that we have seen. We have seen this kind of a shift in the center state financing pattern over the last decade. And this is crucial because here you had a right through the right to work through the National Rural Employment Gallery at. And primary funder for such a right to be honored and valued in the states was by the union government. Now, by shifting from a 1910 to 60-40, what has happened is there is excess burden on the states to generate employment. Now, the states are already operating within a constrained fiscal space. So by that, what we mean is the states are already funding a lot on education, they're funding on health. And there are many other state specific schemes that they have to fund. Now, on top of that, this certain shift which was done again without any consultation with the state governments is going to put extra burden on the state. So, for example, consider a state which has let's say 100 rupees to spend on different kinds of social welfare policies. Now, in that 100 rupees itself, they were spending on let's say, Angan Vadees, they were spending on PHCs, etc. Now, suddenly you have this additional thing on generating rural employment that the states have to fund. So, obviously, the pie that is there for other aspects of social sector are going to be reduced. Now, I'll give you in terms of what the implications are, I'll give you some examples. Let's say, you take the example of Kanataka. Now, in Kanataka, in the financial year 2425, the state and let's, let's, this is being extremely conservative. I'm going to give you very conservative number. In the financial year 2425, in Kanataka, the total number of registered households in Narega were about 89 lakh. Now, of which only about 29 lakh revealed the rural employment program in Narega, I mean. Now, the average days of employment that was generated in Kanataka was 45. Now, for that, for to generate an average, an average of 45 days of employment per year, for about 29 lakh households in the state, the Kanataka government under Narega, under the 10% funding, they spent about 570 crores or something. Now, just to maintain that amount, just to maintain an average of 45 days, for only 29 lakh and not 89 lakh registered households, the Kanataka government has to now spend about 2600 crore or something. So, that's a massive, you're talking. Now, what will happen to the other schemes that they are functioning, that they are implementing. So, it's a huge, it's a sudden huge burden, I would say, for the states. And because, again, the, if you see the tax devolution is favoring the center. So, when the taxes are going to the center largely, it's going to be a, it's going to be a mammoth problem for the states now. I actually did want to ask about tax devolution. So, India's tax GDP ratio is comparable now to other middle income countries. But the nation still lags behind on social, social security as a share of its GDP. So, why has the center's contribution to this sector remain so stagnant, while the tax revenue is continued to favor the center? Yeah, so that's a question of political willingness. Now, the thing is, it's as simple as that. It's a question of what kind of policies would the center want, would the union government want to implement? Clearly, the interest or inclination to finance rights has been declining over time. And that's also a steady trend. So, this is a very, the Narega to VB boundaries is a very good example, where a right based law was transformed to some kind of a scheme. Now, this is a centrally sponsored scheme and which is not backed by many kinds of, many kinds of legislations, so to say. It is backed by legislation, but it's not a right based law. It's not a demand driven law in the way Narega was conceptualized. This shift from a demand driven nature of an employment program to something which is a supply driven program is actually at the heart of this transition of how we envision social security framework in a country. Now, in the first decade of 2000s, you saw a lot of right based laws come into picture. Now, these right based laws meant that in order, these are rights. So, you have to have adequate financial capacity to honor them. Now, if you are not able to honor financially, then you are causing a violation of right. So, in theory, a person who's right has been violated can go to the courts. But now, when you have the switch from a right to a scheme, then the ability of a person who's right has been violated to go to the courts gets diluted. They can't go to the courts. They say that even the government is not liable or accountable for not honoring because they'll say that, "Oh, it's not a right." So, what can we do? So, I think this pattern, it's actually, I would say it's a question of political willingness and also think about it that many of these are very closely connected to electoral outcomes. I wanted to ask if you could elaborate on this shift from the context of the Constitution. How is it impacting these newer iterations of schemes? And what was the involvement of the Constitution in previous iterations? Right. See, in the Constitution, one thing civil and political rights are there as fundamental rights in the Constitution. Social economic rights are not as part of the fundamental rights. Social economic rights were part of the directive principles of state policy. Now, directive principles of state policy was conceptualized and the idea behind directive principles were that in a democracy, electors would need to elect government where the government's elected governments would try to promote socio-economic rights. So, in fact, Dr. B. R. Ammaker envisioned socio-economic rights to be on the same footing as civil and political rights. But of course, the Constitution assembly was not just one person, there were many other kinds of people. So, for various reasons that became part of the directive principles, but with an explicit mandate that elected governments should formulate policies that legislate many of these socio-economic rights. So, that's the Constitution framing of it. And what the first decade of 2000s did when the whole slew of rights-based legislations happened was that they took upon these, they took these directive principles and they translated many of them into rights. So, for example, the right to education is something that happened in 2000 later, but the idea of right to education is there in directive principles. It was made into a kind of law only after the rights-based law. Similarly, right to work was there as part of the directive principles. It was made in a very limited form. Of course, when you say through the National Root and Employment Guarantee Act, it's just 100 days per household per year. So, it's actually not right to work because if it's right to work, then it has to be individual. It has to be throughout the year. So, in a very limited form, it was still realized. Similarly, food security. The Constitution, the directive principles also says that concentration of wealth should, states should ensure that concentration of wealth should not happen. No. we are we are very far away from realising that kind of constitutional vision in our economy. So I think there's a big, so what we saw was that there was a realisation for constitutional imagination of welfare in the 2000s and in the last decade or so what we are saying is that the realisation, the notion of rights is slowly getting diluted and rights being converted to schemes. This switch is also there is also another interesting aspect to it is that it also I think it needs to be seen together with the rise of digital technology is in the ability of governments to directly transfer money to people's accounts. So that the rise of internet technology is the rights of different, sorry the rise of different kinds of digital technologies. For example, in 2014-15 economic survey there's a very clear mention of the jam trinity, the Jandhan Adhar mobile, which says that now the Jandhan Adhar mobile was seen as a big important flashpoint in the way rights would be delivered. So what you see is that when let's say I am a minister, the chief minister whatever kind of minister I am and I transfer money to you directly with my face on it, then you build a direct connection with me saying that oh so also chief minister is transferring money to my account. So what it does is it establishes a direct connection between a political leader and a person. So now you can directly ascribe this relationship. Now in a rights based framework, you are talking about building human capacities, you are talking about building education systems health etc. The prospect of it having an impact on you is a little medium term and long term, but electoral cycles are short. So this tension is also an important factor. So how this tension plays out, aided by digital technologies aided by this kind of center state relationship is playing a very central role in the way we are seeing dilution of rights from how it was imagined in the constitution. I when we looked into the split of the wages, administration and operational costs, we noticed I think 100% of wages used to be covered by the center and now that has also been reduced to 60%. So from a social justice perspective, what does it mean for the union to opt for lesser expenditure on the poorest segment of the workforce and have you noticed this sort of change in other schemes or legislation? See it's a big step. So now one is that the through in this VB Gram G, the union government will notify which it says what it says is there will be object, there will be what normative allocation based on objective parameters to states. Now that normative allocation does not it does not in any way abide by minimum wage laws. So for example, let's say you are again, let's say you are Kanataka or Chathisgarh, whichever state and I am suppose the union government and I will decide that okay, Kanataka will get this much money, Chathisgarh will get this much money. Now how the individual states are going to use the pool of money is up to them. Now there is in this I, if I actually do a demand based calculation, right, if I say that okay, as I said in Kanataka there are 89 lack registered households. Now if in the spirit of a demand based law, if I have to allocate budget saying that okay, assuming that these 89 lack households demand for 100 days at the scheduled notified minimum wage of 532 rupees per day which is the Kanataka's for agriculture and allied activities, then the amount of money that needs to be allocated for Kanataka would be much higher. But it will be something like I think for just for 100 days would be something like 27,000 crore. Now if on the other hand, I decide as the union government that Kanataka government, Kanataka will get only 5,000 crore. So obviously as the state government you are going to not be able to pay minimum wages. So you will actually be in some sense in violation of the minimum wages act, you will be forced to pay not give employment to all the people who want employment, you will have to do some kind of rationing. And typically what you'll do is you'll either give few days of work to many households or many days of work to few households. That's the kind of rationing you'll do. Now what it directly does is the labor wages are going to go down. So if the labor wages are going to go down because you're not being able to supplement. So in a way you are artificially in injecting a system where you're saying that these are the this is I'm going to pay you only this much very low wages. So naturally you will what are the options as a rural worker for you if you have the option to migrate you will because ultimately you want to have better wages. So I think in many ways this is going to create two three very important negative ramifications let's say one is it's going to be it's going to deeply affect the landless and women. And that's a big segment of our country by the way. That's it's going to affect the landless and women. It's going to potentially increase distress migration. And it's going to it's going to also have an impact on your bargaining power with private contractors and private players in the rural labor market. There is a boom in construction there is a boom in there is a rise in construction I would say boom but there's a rise in construction sector etc which are largely governed by private players. So in a way this is subsidizing private capital. This depression of wages I would say is a way to subsidize private capital and promote privatization. So I think that's the way I see as a larger picture of what it will have the impact it will have on the rural economy. So one question that was constantly brought up in in the context of this change to from Mandraika is that the center still was approximately 6900 crore rupees in material and administrative costs along with of course the wage areas in states such as Maharashtra and Bihar. So how has the center been able to launch this new scheme before clearing these massive existing liabilities to rural workers and do you think there are signs of a plan in place to clear them? I think this is a pattern that's been existing from the forest when. So what you're seeing is not a new thing even within a rights based framework of the National Rural Employment and Guarantee Act. What we saw was every year roughly 20% of the annual budget allocation was used to clear pending areas. Material payments are notoriously late even wage payments have been very very late but material payments are even notoriously late. So this is not a new thing. What we see I think there are three phases to think about Narayga's when. It was envisioned as a demand driven program where you had a right to get wages within 15 days of completion of work whether right was routinely violated. So because of constraints in the supply of funds. So what we saw within the framework of Narayga was demand driven being reduced and diluted to supply driven and what we see now is that supply driven mechanism becoming it's legitimizing that supply driven mechanism. So now when you legitimize a supply driven mechanism you are not bound by necessary accountable laws. So these material areas, payments of areas of wages, material and any other administrative expenses it's going to a group and it's as I said it was existing you will see the same thing play out possibly same thing play out in a way that had a much larger scale. So I think this is this is not a new phenomena it's just legitimizing what was legitimizing the violation that was happening in the earlier framework. Within the current framework of VB Gram G is there anything that addresses this shift in burden in a way that might reduce it in specific cases or any exceptions. There's nothing in fact this is a really what we I think it's a it's a very aggressive step because now what you've done is see in many ways right earlier in why do we say that rights based laws are in. useful because along with a law of an individual entitlement, what it does is it creates an ecosystem where other institutional architectures can be strengthened. For example, whether it is the look, whether it is a gram sub-hap process, whether it is the ability, whether it is the vigilance committees, monitoring, social audits, all those mechanisms, institutional architectures which were set up through a rights-based law, were envisioned to be strengthened through this individual entitlement. So that's a positive spillover effect where other delivery mechanisms, whether it is decentralized systems, sorry, whether it is institutions of decentralization or institutions of accountability, both of them were envisioned to be strengthened. Now through this we do not have any framework necessarily to strengthen those aspects of decentralization, aspects of accountability. So what we are going to see is in fact an overall dilution of the architecture of citizenship itself because earlier citizen, when you have a demand-driven law, what it does is it creates patchy, I am not saying it was perfect, it was definitely imperfect and it would work well in only those places where there is a good federation or sangatan that was operating. Yet even within that limited scope, it had the power and the promise. But right now you have actually regressed so much that you have gone back to a system where an individual entitlement is now dependent on the benevolence of the officials. And the benevolence of the officials is again, it's a trickle-down effect because it depends on the benevolence of the union government. If the union government likes a particular state, it will give money. If it does not, it might not. Primarily because of this idea of normative allocation. So I think we have taken a huge step back in that sense. And it connects to the earlier point that you made about tax and how much the union government is willing to spend. If you look at the tax to GDP ratio of OECD countries, you will see it's about 40% India is much lower than that. So the pool that is available for expenditure in the social sector is diminishing. And I think it's another just to tie up another important point that I missed saying earlier on the states is that, see there is also this fiscal responsibility budget management act from 2003, I think, FRBM Act. Now FRBM Act puts a cap on how much states can borrow. It says that you can borrow only about 3% of your growth state domestic product. And even within that, there is a hierarchy. Borrowing can be done for capital expenditures and not for revenue expenditures. So all these, whether when we are talking about building a framework for social security, we are talking about revenue expenditures. So there is already a constraint imposed on the states through the FRBM Act, which prevents the states from borrowing for revenue expenditures. So within that constraint system, this additional burden on the states is going to have a huge negative impact. And it goes against the grain of federalism. It goes against the grain of decentralization. It goes against the grain of building human capacity and human development. [MUSIC]