NREGS and inflation

While there can't be much debate on good intent of NREGS, one certainly is forced to think about it's implementation at a time when a few states have shown signs of failure. To start with lets just look at one aspect of how it fuels inflation.

The scheme guarantees the rural populace a fixed minimum amount of labour work within its area at a better daily wage. The problem here is that the dependence is completely on infrasturcture projects, be it state or centre sponsored. Now this can work well in a state where infrastructure projects are being undertaken thick and fast. And also where infrasturcture development does not just mean building of roads. But come to states where the infrastructure projects are far and few and those which are running show no signs of ending. This is where the imbalance starts. The labourers get their wages for miniscule amount of work. And landowners find labour at much higher cost since the minimum rates have been pegged. This means while the cost of foodgrains increases, the supply decreases due to lack of labour and lower productivity. The same time, the demand for the grains increases because you have more people with money to buy. This entire cycle pushes the start cost of foodgrains higher but still both the players in agri economy are left dissatisfied. The landowner is not satisfied because of higher wages, lack of labour and less productivity. And the labourer now finds the rising prices of foodgrains a burden and also has to live with Damocles sword on his head of losing the wages if no new infrasturcture projects are undertaken in the area. This is a dangerous cycle and has far greater impact than just inflation.

So if NREGS has to work well, a balance has to be found between labour for infrasturcture and labour for agriculture. The implementation has to be different. Infrastructure project need to be undertaken at a faster speed so that more work can be taken in an amount of time and this ensures the labourers have enough work for long. More spheres like agricultural labour, rural enterpreneurship, private corporate involvement etc have to be covered else NREGS will remain just a free sop>