India Uncut

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Saturday, December 11, 2004

Corruption Guarantee Scheme

“In the normal course,” writes Jaithirth Rao, “I would oppose any new government activity on the grounds that it is probably unnecessary, is likely to increase the power and the influence of an already gargantuan state and is likely to become a source of corruption and rent-seeking. And, of course, it would be a waste of taxpayer’s money.”

But, "[d]espite the likelihood of egregious, enormous waste," Rao supports the government’s Employment Guarantee Scheme (EGS). Read his full argument, in a piece titled “Forget efficiency. Let’s do it”.

Surjit Bhalla disagrees with Rao. The EGS is one of the four policy initiatives of this government that Bhalla takes on in an incisive article in Business Standard. He argues that, even leaving aside the inevitable corruption in the system, the EGS is conceptually flawed. Its “presumption is that the poor are poor because they do not have work to do.” He debunks this presumption with three interesting facts:

First, unemployment is an urban phenomenon and is less than 1.5 percent for rural agriculture households – the poorest. Second, those that are employed are working close to six days a week – the EGS thinks that such people will be available for work for a third of the week – 100 days annually! Third, the unemployed are the highly educated – possessing, in 1999-00 more than nine years of education!

Bhalla continues, “Where will the money meant for the EGS really go? Surely it won’t go to the poor, or the needy, or even the educated unemployed. It will most likely go to 'friends of the government' as fictitious assets are 'created' … These 'assets' will help keep the ruling political parties in power.”
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