The Manmohan Singh government wants to offer 100 days of guaranteed manual labour to any poor able-bodied person. This is a good idea. Such employment guarantee schemes (EGS) are widely seen as the best anti-poverty mechanism, as the work of development economists like Amartya Sen has highlighted. They are self-targeted: only the poor will step forward and do manual labour. They are self liquidating: when a district gets out of poverty, the programme will quietly die, without needing the political effort to close it down. New money does not need to be spent on the UPA government’s proposal. EGS should replace the other existing anti-poverty programmes of the Government of India.Maharashtra’s pioneering work on EGS should be used to draw lessons on how to do an EGS. Digging up holes and filling them up can achieve employment, but it does not create assets — as graphically illustrated by a recent Express report from Maharashtra. Kuccha roads are being made under the scheme, but they do not benefit local communities for any length of time because they tend to get washed away, creating the need to rebuild them the next year around, using the EGS. Employment schemes are not designed to create assets and the idea is to be satisfied with the mere fact that the money has actually reached the targeted groups. However, for the economy, this design is incompetent. This incompetence comes about because the EGS only plans for money for labour. Under such circumstances, one can build kuccha roads, but it is not possible to build pucca roads. That would require budgetary allocation for raw materials, equipment, and so on. Such allocations are made under a different set of schemes such as the rural roads schemes.How can an EGS create durable assets? One format is to give districts the flexibility to combine the money available under different schemes to achieve the best outcome. For instance, lessons can be learnt from the initiatives in some places in Maharashtra that have combined the Gram Sadak Yojana with the EGS. Such creative use of fiscal transfers from the Centre would work best if they were planned at the district level, since those located in villages and cities have a better knowledge of local conditions than state governments. Manmohan Singh’s recent speech to the Conference of Chief Ministers on Tuesday emphasised precisely that. The government should put money into an employment guarantee scheme only when it can guarantee that the money will be spent — not just honestly, but also competently.
