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MGNREGA to employ at least 52 million Indians in the next 20 years

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New Delhi: There is a 14-percent rise in the programme run under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) in the 2016-17 Budget, the world’s largest state-run jobs plan, after a decade of operation continues to be India’s top poverty mitigation programme.

MGNREGA, which guarantees 100 days of work to unskilled people in villages of India, will employ at least 52 million people and provide livelihoods to their families. That means about 260 million (considering an average family of five) will depend on it over the next 20 years, according to an analysis.

In three years MGNREGA funding has raised up to 18%. Unlike last year, though, when the programme exhausted its money by December, it is unclear what might happen this year when — which is more likely than if — the money runs out.

In 2015-16, there was a cushion of Rs5,000 crore in case the ministry over its money, but New Delhi released only Rs.2,000 crore of that money, according to Aruna Nikhil Roy of the People’s Action for Employment Guarantee, a Delhi-based NGO.

More Indians are still poor than the population of Indonesia. The unqualified number of poor as well as the proportion of poor below the poverty line (according to the Tendulkar poverty line) has been declining over two decades, as we reported.

But about 270 million are still below the poverty line, more than the population of Indonesia (255 million), the world’s fifth-most populated country. The poverty line is the ability to spend Rs.47 per day per person in urban areas and Rs 32 in rural areas.

MGNREGA is being lauded for its achievements in the past decade. Around 277.9 million people are registered under the scheme, and 98.3 million of them are active workers. The programme covers all adults from rural households who seek employment.

The “work” under MGNREGA covers “unskilled manual labour”, providing an opportunity to every person who needs employment. Without skills, young Indians in rural areas will need MGNREGA.

To know exactly how many Indians will need employment in the coming years, the illiterate rural population was scrutinised, according to the 2011 census. There are 51.7 million illiterate people aged 16 to 30.

Since they will not benefit from the Right to Education, which guarantees free and compulsory elementary education till age 14, this population will not be a part of India’s skilled labour force.

According to this International Labour Organisation definition, skills require at least five years of schooling. So, for at least 20 years, MGNREGA will likely need to support this group of Indians.

A word of caution: This 52 million (rounded-off) population includes only illiterates from the Census 2011 data. There are many among the literate population who have basic reading and writing skills but are not skilled enough to work in industry.

MGNREGA critics contend that the scheme does not help pare poverty because of corruption and poor implementation. “From a policy point of view, we should be interested in the efficiency of transferring incomes to the poor,” economist Surjit Bhalla wrote in a column recently.

With no cost-benefit valuation of MGNREGA work and no technical support, the programme struggles to create assets or infrastructure in rural areas, which it should, Indian Institute of Technology (Delhi) economics professor Reetika Khera, wrote in a recent column.

MGNREGA is short of funds- 17 percent of its budget went into paying wages and material from the previous financial year, according to a letter from Ministry of Rural Development to the Ministry of Finance.

The actual allocation for MGNREGA this year is around Rs.29,000 crore ($4.6 billion).

This fund squeeze for MGNREGA is not new and has been evident under both the United Progressive Alliance II and the National Democratic Alliance regimes. Ending the year with pending obligations, which effectively means workers’ wages are unpaid, has been a consistent trend.

As much as 95 percent of the budgetary allocation for the current financial year (2015-16) was exhausted by December 30, 2015. Further, as per the Ministry of Rural Development and Ministry of Finance calculations, state governments require at least an additional Rs.6,300 crore to pay wages and other expenses.

The drought-affected states of Odisha, Madhya Pradesh, Karnataka, Andhra Pradesh, Telangana and Uttar Pradesh will provide 150 days of employment against the normal 100-but there is no extra money evident, from Delhi or in their budgets.

Finance Minister Arun Jaitley’s budget for MGNREGA may not be enough. Under the devolution recommendations of the 14th Finance Commission, India’s states have been given more money, and hence more powers, to decide how they want to finance social welfare.

The one-time Planning Commission had 66 centrally sponsored schemes, reduced to 30 under the NITI Aayog, the body that has replaced the Planning Commission. MGNREGA is one of these 30.

Even though the central government has transferred social welfare to the states through “devolution” (transfer of powers-fiscal or administrative-from higher level of government to lower level of government), it will pay for important programmes, such as NREGA and rural roads.

Jaitley said in his budget speech: “In spite of the consequential reduced fiscal space for the Centre, the government has decided to continue supporting important national priorities such as agriculture, education, health, MGNREGA, and rural infrastructure including roads.” (IANS)

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Budget 2019-20: Domestic Market Waiting for Signals from New Government

India is likely to benefit from the bilateral trade tensions between US-China by exporting more to both the countries

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"Sales might turn positive in August as the liquidity situation is expected to improve." Pixabay

Ever since the new government assumed office at the Centre, the market is looking for directions and hopefully the Union Budget slated to be presented on July 5 as a norm will provide one.

On broader terms, the market is looking for the much needed support from the government both in terms of fiscal and monetary steps. To a greater extent, the rate setting committee of the Reserve Bank of India (RBI) has set the monetary policy ball rolling by not only cutting the policy rates third time in a row but also changing its stance from “calibrated tightening” to accommodative.

By doing so, the central bank has also become the most dovish among its peers. With no more rate hike on the table, it is safe for the market to consider that the interest rate cycle has peaked thus signalling flow of fresh liquidity into the market.

Further, the RBI has used its open market operation (OMO) tool to infuse approximately Rs 1.5 lakh crore into the system during the year and the purchase of additional securities is well underway. This is in sync with the global trend of most of the central banks including the US Federal Reserve changing their stances to neutral while dropping enough hints to turn accommodative in the near-term.

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India is likely to benefit from the bilateral trade tensions between US-China by exporting more to both the countries. Pixabay

The European Union (EU) is looking for new ways to push liquidity through a fresh wave of quantitative easing (QE) by cutting interest rates in spite of the policy rates touching the lower band. (The current 10-year yield of euro area bonds stands at -0.2 per cent). The EU is also looking at fresh round of bond purchases to boost liquidity.

In terms of fiscal support, the domestic market is waiting for signals from the new government. During the past few weeks, the equity market has been roiled after a raft of gloomy domestic and international macroeconomic data… It is true that the pre-election rally was positive with key indices like Nifty50 and Nifty Small caps returning 10 per cent returns in three months.

However, the rally lost its legs due to lack of clarity about policy measures. The sentiments are further dampened by rainfall data which forecast deficit monsoon showers during the current cropping season. Market may have to wait till the full budget is presented.

Globally, the ever-worsening US-China trade tensions are hitting the market sentiments. Equity performance of important economies like China, South Africa, Mexico, South Korea and Europe are bad with an average negative return of -11 per cent in a year, while the US market has been flat and showing increased volatility.

But Indian markets remained relatively resilient by returning an average 10 per cent year-on-year (Nifty50 index). It is said that the market always had a hope that economy would benefit from previous reforms and the new government would build on the positives of past policy steps in a bid to accelerate growth and private investment. This explains premium valuation of Indian market.

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However, economic factors like fiscal constraints and commitments to continue the social expenditures as well as cut in direct tax announced in the interim budget will limit the ability of the government. Pixabay

Also, according to latest research by the Ministry of Commerce and Industry, India is likely to benefit from the bilateral trade tensions between US-China by exporting more to both the countries.

The Sino-US trade standoff may also open opportunities for India to boost exports of over 350 products. Around 151 domestic products including diesel, X-ray tubes and certain chemicals have an outright advantage to replace the US exports to China. Similarly, 203 Indian goods like rubber and graphite electrodes have the advantage to replace Chinese exports to the US. Increasing exports would help India narrow the widening trade deficit with China, which stood at $50.12 billion during April-February 2018-19, the study noted.

ALSO READ: FICCI Recommends Government to Grant Priority Status to Healthcare Sector in Upcoming Budget

It looks like the market has a very high expectation on the first budget of the new government due to a bigger mandate. However, economic factors like fiscal constraints and commitments to continue the social expenditures as well as cut in direct tax announced in the interim budget will limit the ability of the government.

At the same time market also hopes that fiscal deficit is maintained in the long-term while in the short-term support is provided with minor dilution in FY20 and non-budgetary resources like RBI reserves, divestment and Public Sector Units. Therefore, rather than near-term measures, we can expect a budget with long-term vision and ideas. Broadly speaking, we think the overall mid and small caps are likely to outperform the market while select bottom up stories and sectors like finance, infrastructure, chemicals, cement and industrials may do better. (IANS)