Economists urge Modi not to squeeze NREGA for rural poor

By Nita Bhalla

NEW DELHI (Thomson Reuters Foundation) - A group of leading economists has said the future of India's biggest anti-poverty scheme, which has brought work to millions of impoverished villagers, is under threat and urged the government not to restrict or dilute the programme.

In an open letter to Prime Minister Narendra Modi, 28 prominent economists said they were alarmed to hear of moves to change the National Rural Employment Guarantee Act (NREGA), which provides jobs for 50 million households.

"For the first time, the Central Government is imposing caps on NREGA expenditure on state governments, undermining the principle of work on demand," said the letter, which was published widely on Tuesday on Indian news websites.

"Wages have been frozen in real terms, and long delays in wage payments have further reduced their real value. The Act's initial provisions for compensation in the event of delayed payments have been removed."

The signatories, among them Dilip Abreau of Princeton University, Pranab Bardhan of Berkeley and development economist Jean Dreze, said the government also appeared to be considering restricting NREGA to 200 of the country's poorest districts.

Under the programme - introduced in 2006 by the previous, Congress-led government - villagers can enroll for work building roads, digging wells or creating other rural infrastructure and receive the minimum wage for 100 days a year.

That income has helped improve nutrition levels and reduce child labour, especially at times when crops fail or prices shoot up, NREGA supporters say. It has raised rural consumption, created new markets and shored up growth when investment falters.

The majority of NREGA workers are women, and nearly half are from lower castes or tribal communities - some of the most marginalised groups in India.

NREGA is not without its flaws - critics say it is a heavy burden on taxpayers, wasteful and riddled with corruption.

A 2013 government audit said the scheme, like most other welfare programmes, was poorly implemented and there were many cases of delays or non-payment of wages.

The economists said the cost of the scheme was only 0.3 percent of India's GDP, but graft was a problem.

"No doubt, the programme could and should do even better. But the gains that have been achieved are substantial and amply justify further efforts to make it (NREGA) a success," their letter said.

"The message seems to be that the new government is not committed to the NREGA and hopes to restrict it as much as possible. We urge you to reverse this trend and ensure that the programme receives all the support it requires to survive and thrive."

(Editing by Tim Pearce)