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College- Vinod Gupta School of Management, IIT Kharagpur

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Team mate-Manchi Vamsi Krishna (http://insideiim.com/vamsimanchi/)

Article Refuted: Why India Needs its Poor (http://insideiim.com/why-india-needs-its-poor/)

 

 

Growing inequality is one of the biggest social, economic and political challenges of our time. But it is not inevitable – Economist

 

Last week on my way back to Delhi, I observed an eight year old kid selling tea whereas his father was busy enjoying a ciggarette.The kid was the one dealing with customers and serving them tea. Saddened by the picture, I approached the father and  confronted him, “Dada, he is too young to do all these things and why don’t you send him to a school instead?”. The father had the typical complacent look on his face and he instantly replied back, “This is how things work. We are poor and need to serve the people to survive”. He didn’t want to change the status quo and according to him some things in life are meant to be the way they are.

Poor should always remain poor and serve the rich for the sustainable growth of economy.

Nothing could be further from truth, a country which has 32.7% of people below the international poverty line , one should not expect the country to progress with the ‘exclusive growth model’.

 

The author of  article “Why India needs poor”, believes that the Employment Guarantee Scheme (EGS) of Indian government has resulted in increased labour-wages in cities and a lot of domino effects , not good for the Indian economy. He candidly attaches the term “pseudo” to his intellectual thoughts but on the other side tries to justify his position with the ill effects of EGS for the poor.

 

To start with, MNREGA scheme was introduced with a primary objective of alleviating rural poverty and support the rural labours in the lean period of the seasonal Indian agriculture. The scheme in no way was introduced to compete with labour hiring decisions. India is a country with surplus labours and in most of the cases these resources are exploited by the contractors, who pay them wages that are way below the market standards. Schemes like MNREGA have helped set a certain threshold for the rural wages and have conferred some bargaining power to rural workers.

Now, let us consider a hypothetical case where no such EGS exists. In such a scenario the surplus labours in rural markets remain unemployed due to lack of market opportunities. This has a direct effect on the government spending in form of increased PDS , subsidies and other schemes that involve a lot of moolah $$$.

The question which arises now is, ‘will the augmented wages help in increasing the production and contribute to economy as a whole?’.

NREGA as an EGS aims to fulfil only a certain target income of the rural poor that should be enough to fulfil the nutritional need of his family. Consider a certain percentage of the labour group, who are already beneficiaries of this scheme and  strive to get more work to fulfil other non-basic needs, such as providing a better education and healthcare to their children, with this increased income. This group will be directly contributing to the skill set and prosperity bucket of India. However, some people will refute this logic by saying this small group would be a drop in an ocean. Well, then we should never forget that ‘every drop makes an ocean’.

Without a doubt, the NREGA scheme has not been able to deliver what was expected and this can be largely attributed to the administrative inefficiencies & lack of proper monitoring. One possible solution to these problems could be a total revamp of the scheme’s structure with proper controls incorporated in the entire process.

 

India has one of the highest Below Poverty Line population in the world and it does not do any good to the government to leave such a huge population poor. It is through such mass employment schemes and poverty alleviation programs that the government can work towards improving the economic condition of the poor.

It is only when a tea seller’s son can dream of leading a nation can we truly expect our nation to be on the path of inclusive growth.

 

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