John Samuel Raja D: Wages up but no gains

Has the National Rural Employment Guarantee Scheme (NREGS), which has cost the exchequer more than Rs 40,000 crore in the past three years, really benefitted rural households? A joint study by the National Council for Applied Economic Research and Public Interest Foundation (PIF) thinks not. Analysing how wage rates behaved in the two years (2004-06) prior to the scheme and two year after it was implemented (2006-08), the study finds that the increase in wages could be ‘largely attributed’ to the introduction of this scheme but this was only in nominal terms.

During 2006-08, wage rates increased by more than twice (6.7-7.4 per cent) compared to just 2.7-3 per cent growth in the previous two years. This gain was more than offset by the rise in the Consumer Price Index (CPI) which went up by 2.3-2.4 times after the scheme was launched. In real terms, rural wages, except for female farm workers, declined after NREGS was introduced. It’s not clear how much of this sharp rise in rural inflation was on account of the higher money flow through NREGS or for other reasons like higher support price for crops.
 

Is this the flip side? Average annual change in wages during 2004-05 and 2005-06
	Farm		Non-Farm
	Male	Female	Male	Female
Nominal	2.9	3.0	2.7	3.0
Real	-0.3	-0.3	-0.5	-0.2
Average annual change in wages during 2006-07 and 2007-08
	Farm		Non-Farm
	Male	Female	Male	Female
Nominal	6.7	7.7	6.9	7.4
Real	-0.9	0.1	-0.4	0.1
(in per cent) Source:NCAER and PIF report on NREGS