I: INTRODUCTION
A lot is now spoken and written about the need for gender sensitive inclusive development in developing economies such as India (GOI, 11th plan document, GOI, 2009). The gender sensitivity was heralded to be essential in assessing social and economic development by the UNDP which computes a ‘human’ and another ‘gender (adjusted) development’ index, and presents a conceptual scheme on ‘gender empowerment measure’ (HDR 1995). In the following we present a set of variables which integrate both the ‘gender adjustment’ and ‘empowerment measures’ and compute a single ‘gender empowerment index (GEI)’. The GEI further eliminates three constraints the UNDP concepts face, firstly that the GEI aggregates multi-dimensional concepts and dimensions of empowerment; secondly the variables are socio-culturally sensitive to India; and that the new index can be estimated not only at the level of a nation but also at the level of states and lower level of geographic units within a country.
Practically all countries in the world that are identified as ‘developed’ are in unison for having provided equality of opportunity and access to women in all spheres of economy, society and polity. Such inclusiveness was possible not only through formal legal provisions but also as a matter of democratization of political system. Further, the process of inclusiveness of women in development was concurrent to increase in real incomes of households which was controlled and managed by women themselves; often such income was individually earned by them. In the context of developing societies such as the democratic India, where patriarchal social values are still in vogue, understanding women’s empowerment is somewhat complicated. Given a large canvas of social, economic, political and household level dimensions, empirically measuring women’s contributions across India and many States is not easy. This paper identifies the core concepts that are socio-culturally relevant and uses the empirical measures to compute a Gender Empowerment Index (GEI) for the mid-period of first decade in 21st century. The variables identified are those which capture the essence of the six main dimensions which together define gender empowerment efficiently, namely; (i) women’s level of human capital formation, (ii) women work participation, (iii) women’s capacity for household decision making, (iv) women’s control over resource and self assertion, (v) women’s control over reproduction, and (vi) woman’s political participation.
What follows in section 2 is a description of the generic concepts relating to empowerment found in literature; the gender relevance in the Indian context or a conceptual framework within which gender empowerment is articulated in section 3. Section 4 introduces the dimensions which encompass gender empowerment and the variables which help measure them; and estimates of the index values and state ranks as well as ranks according to social and economic characteristics are discussed in section 5. Section 6 concludes and discusses policy implications.
II: GENERIC CONCEPTS AND EMPOWERMENT
International literature on gender often highlights an important facet of societal decision making namely agency which is a desire and ability of the society and households to delegate responsibility to woman so that they take decisions independent of men and traditional- institutional support. The role of women's agency in the expansion of social opportunities for both women and men is considered to eliminate gender inequality (Dreze and Sen, 1999, 2000). Empirical research has found out that household decision attributed to women especially when interacted with education yield better human capital formation through investments in children’s education and health and also reduce gender bias (Schultz 1995, Shariff 1995. Another evidence has been feminization of agriculture, in the Indian context the skeptics use this as an evidence of distress but one can look at this phenomenon as empowerment of women instead (see Duvvury 1998, Shariff 2009). A related issue is of control - over resources (http://www.un.org/womenwatch/); for example, women normally use number of resources but they do not own or have control over them. For example, research highlights as to how little control women have over resources; none at all in case of land and only limited control over food crops for example in Uganda (FAO, 2008). The situation in India is not be any better in this regard since the rules of asset ownership is governed by complicated patriarchic system of inheritance and also because women move over husband’s place of co-residence after marriage . In its first ever gender gap study covering 58 nations, the World Economic Forum (http://www.weforum.org/) ranked India a lowly 53. Titled 'The Women's Empowerment: Measuring the Global Gender Gap', the report measures the gap between women and men in five critical areas namely economic participation, economic opportunity, political empowerment, access to education and access to reproductive health care.
Since the gender dimensions are far too many and condition of women varies according to different social, economic and political settings, it is not ordinarily possible to standardize the number and type of variables, measurements and framework of analysis to be used. The UNDP methodology of international comparisons chose variables that are easy to collect and but at high levels of aggregation such as a country. Although many countries are adopting the UNDP method to create disaggregated measures at lower geographic units, it is argued in this paper that these efforts do not adequately capture the socio-cultural context of the gender empowerment within a nation. Any adaptation therefore should take the conceptual relevance and application inherent in choice of variables and its national level appropriateness in to account.
The framework of analysis and choice of variables in this paper are guided by the evolving ideas on gender deprivation over time (more below) as well as availability of dependable data to empirically estimate gender empowerment at the level of the states. The six gender dimensions identified broadly conform to the generalized gender empowerment framework for India enunciated below. The choice of variables and measures are compatible for similar estimation even at lower levels of geographic/ administrative units such as the districts within a state in India. In this regard it is important to state that since the UNDP considers elected representatives in the parliamentary and assembly levels as the proxy for gender empowerment, these indicators are not suitable benchmarks if one is considering disaggregated level analysis. In the Indian case, appropriate indicator is intensity of participation of women in local level institutions such as the panchayats and nagrpalikas; and since over 17 years of democratic decentralization through the 73rd and 74th Indian Constitutional amendments, such data are available to academic use. Since August 2009 it is mandatory to compulsorily elect women for fifty per cent of the panchayat membership posts in India. Unlike all other variables in this paper which are extracted from unit level records, information on political participation is accessed from relevant departments of the government of India.
Alternative Analytical Frameworks
A number of analytical frameworks are in vogue for undertaking a gender enriched analysis; the prominent are identified below . The frameworks are not mutually exclusive and there is ample scope for academics to formulate new analytical models so as to contextualize the country specificity and / or incorporate socio-culturally relevant new data. The following listing is arranged in a broad chronological order although the refinements in the concepts and frameworks are a continuous process.
UNDP’s Gender Empowerment Measure: Assessments and measures to evaluate bias based on sex of individual was in vogue in research amongst the applied economists, sociologists and demographers since long, yet what made the gender discrimination prominent knowledge was the UNDP’s human development index which brought sex-differentials to fore in parameters such as literacy and health outcomes through the Human Development Reports, the first of its kind published in 1991. Subsequently in 1995 the UNDP formalized the gender dimension by computing a separate ‘gender adjusted index’ and expanded the scope not only to understand gender bias in common parameters but also to assess ‘gender empowerment’ using the political, economic and societal factors of highest order. But the UNDP’s choice of variables capture empowerment at a high level of geographic aggregation and less conducive for disaggregated measures at states, districts and other social and economic criteria.
Gender Roles Framework: An analytical framework developed by the Harvard Institute of Development, is a grid for collecting data at the micro-level, mapping the productive and reproductive work of men and women in a community, and highlighting the differences between them. This approach utilizes a number of tools such as, an activity profile, an access and control profile of resources and benefits, and lists influencing factors. This framework :-
• argues for an economic case for allocating resources to women as well as men, what is known as the efficiency approach to gender and development;
• resources, not power relations, are central to this approach;
• adapts well to an analysis of agriculture or other rural production systems; and
• relies on micro-level analysis and data collection at the household/individual level.
Gender Planning Framework: Developed by Moser (1994) this framework links the examination of women’s roles to the larger development process and questions the assumption that planning is a purely technical task. It employs three main concepts; women’s triple role of productive, reproductive, and community work; and practical and strategic gender needs. This approach:-
• disaggregates control of resources and decision-making within the household;
• uses concept of triple role and analyzes linkages between them; and
• conceptually focus on emancipation of women from their subordination.
Social Relations Approach: Developed by Kabeer (1994), this approach uses concepts instead of tools to concentrate on the relationships between people, their relationship to resources and activities, and how these are re-worked through the institutions of state, market, community, and family. More recently the institutional linkages for gender empowerment are well argues in global context for example in Roy et. al., (2008). one finds The framework helps to examine social institutional parameters that explain how gender inequality is formed and reproduced at the individual level leading to inequalities. This approach utilizes qualitative and contextual information which is often difficult to quantify.
• The framework concentrates on institutions and challenges the ideological neutrality and independence of institutions;
• links institutional analysis at all levels;
• views development as a process for increasing human well-being; and
• employs a holistic analysis of poverty, recognizing the cross-cutting inequalities of class, race, ethnicity and so on.
Gender Analysis Matrix: Developed by Parker (1998), this method attempts to determine the differential impact development interventions have on women and men, by providing a community-based technique for identifying and analyzing gender differences. It supports -
• participatory approach/fosters bottom-up analysis and qualitative in nature;
• use community for self-identification of problems and solutions;
• excludes macro-and institutional analysis; and
• capture change over time but through repetition of the analysis.
Since the UNDP’s efforts to sensitize the gender issues has been commendable and also the one with very high reach and visibility, it is quite normal to benchmark any further work on it. However, this present paper is aligned more with the other frameworks enunciated above, since it focus on empirical measurements within in social and economic contexts, and suitability of variables for disaggregated assessment.
The UNDP spearheaded the concept of human development and undertook gender oriented empirical adjustments to create a parallel index known as Gender-related Development Index (GDI) (HDR 1991). Further, in 1995 it also gave a methodology to compute a ‘gender empowerment measure’ (GEM). The GEM uses a set of variables namely, (1) seats in parliament held by women (% of total), (2) female legislators, senior officials and managers (% of total), (3) female professional and technical workers (% of total), (4) estimated earned income of women, and (5) women’s share of population (Human Development Report, 2004). Thus GEM attempts to capture women’s participation in higher political office (political empowerment), employment in high offices (economic empowerment), and macro-economic participation. Both the GDI and GEM indices, therefore, fail to capture socially and culturally sensitive factors which are relevant to assess gender empowerment amongst the masses in India. In fact the UN is unable to compute the GEM even for the all India level let alone for its many states due to want of appropriate data (HDR,????). The adaptation and recasting of the India GEM methodology undertaken by the ‘ministry of woman and child development’, Government of India could not eliminate these deficiencies in spite of efforts to rationalize the variables and data inputs in computation of GEM (GOI, 2009).
There are other critiques of the UNDP’s GEM as well. For example, Beteta (2006) argues that the UNDP concept do not account non-economic dimensions of decision-making and appear to measure empowerment only of the better-offs. Another critique argues that while normally the GDI & GEM are being used to highlight gender discrimination, but these measures do not reflect discrimination per se (Schuler, 2006), rather the GDI measures only the objective gender inequality when compared with the HDI. The GDI is not an independent and stand alone measure as it has to be interpreted always in conjunction of the HDI. There are also methodological issues relating to the estimations as found in Bhardan and Klasen (2000).
At the India level the report of the ministry of woman and child welfare, (GOI, 2009) do not isolate the socio-culturally sensitive factors that ideally measure woman’s empowerment amongst the Indian population. Rather it carries forwarded the UNDP suggested variables which are rather topical in nature and only captures very high and idealistic level of empowerment. Further the measures do not reflect the status linked to a specified state, for example, in India the national level services such as the IAS, IPS, the Judges and so on do not generally belong to the state of birth as matter of policy. Similarly, due to skewed prevalence of educational infrastructure, the professional women need not necessary belong to the state of their birth for practicing their services, rather they move over to places of higher demand and to megacities.
III: GENDER RELAVANCE IN THE INDIAN GROWTH CONTEXT
Establishing interlinks between economic growth, reduction of poverty and profiling livelihood opportunities is topical given the progressive context of ongoing economic reforms and global integration of economies. Drawing a gender perspective is essential as women stand at the cross road of economic growth and human development burdened with multiple activities in both reproductive and remunerative roles. Gender poverty is far bigger a challenge that confronts developing societies as much as the issues of equity. It is essential to recognize that although women and men are born equal, the changing social and agrarian structure, development policies and growth trajectories impact them differently. The socio economic dynamics reveal that while impact of growth processes have not been completely gender neutral, that of poverty and its deepening has had its worst impact upon women. It is well documented and acknowledged that women suffer most in conditions of deepening poverty and unless existing inequalities in opportunities, capabilities and differential rights are eliminated, the agenda of poverty reduction cannot be achieved. Female disadvantage reflected in unequal access to household resources, economic opportunities, household decision-making power and lack of control over reproduction or child care have large perpetuating intergenerational implications.
It is, therefore, essential to discuss gender disadvantage in a holistic framework, tracing the various facets of inequality and how poverty renders women doubly disadvantaged and vulnerable to economic shocks and adjustments. Refer to a diagrammatic presentation (Figure 1) of a ‘generalized framework’ explaining the factors which render women poor and the manifestation of it. These linkages may have substantial variation depending upon which state or region one lives in. It is well understood that inequalities originate from the household at very early stages of lifecycle continues to reflect in several social and economic spheres. The discussion therefore should revolve around the multiple dimensions of inequality and how poverty worsens the situation from a gender disaggregated perspective.
FIGURE 1 ABOUT HERE
Normally, since men being the sole breadwinners of the household had to go out and earn their living; they also have control over all resources and assets and the right to better nutrition, healthcare and education. Men, therefore, both at the household and community at large emerged as the decision makers and exhibit strong bargaining powers, favoring their own interests. Gradually this logical following of things matured and because of males’ supreme command over assets, particularly land and other economic resources resulted in increasing gender inequality. Women all along derived their identity through their kinship and household relationships. There is a vicious circle where things originated and went wrong because of the influence of socio cultural stereotypes and poverty has had a compounding impact.
With the passage of time, when women increasingly took to education and economic activities, such participation stood in conflict with the dominant socio cultural practices. Subsequently, all growth and adjustment processes have neglected the issue of gender or rather touched upon marginally and failed to recognize women as potential partners. Whereby, in conditions of inequality and deepening poverty, women have had to bear the brunt of it, balancing both reproductive and remunerative activities. Gradually what was considered a way of living took different forms and some of these inequalities; unequal access to food, nutrition, healthcare, market seclusion and voicelessness of women has become resilient to change.
Household and Market Gender Relationships: In examining the gender relationships at the household level, it is observed that nutrition biases are in favor of men and boys in the family. This pattern is aggravated in conditions of scarcity arising out of cyclical seasonal effects and differential entitlements wherein women and girls eat less and last as a coping devise. Although women are responsible for ensuring food security of the family, they themselves are the most food insecure. This results in under nourishment of women in their reproductive age and young girls. For women, poor nutrition, severe anemia levels and poor quality or nonexistent reproductive health services contribute to high maternal mortality and low child survival.
Such biases are observed in healthcare systems as well. Women have lesser access to healthcare services. They rarely seek health services during sickness or ill health compared to men. This is yet another expenditure saving mechanism. Health seeking behavior of females is also guided by their educational levels whereby they are informed and understand the necessity to be healthy. Women in rural areas are more vulnerable to respiratory disease owing to their prolonged exposure to harmful and toxic fuels and gases. Women are at greater risk of disease and morbidity living in unhygienic conditions, which lack sanitation and access to pure drinking water, as observed in growing urban slums.
There has been a lot of advocacy in ensuring female education and employment is considered critical means of liberation. Although reducing female illiteracy has been part of every development agenda, there exist strong biases against female education and more so continuation in school. It is also true that although girls are sent to school at an early age, their continuation rates are poor compared to boys. Often it is the poor penetration of schools in rural areas that deter parents from sending their daughters to schools at far off distance. Again given the restricted opportunities in the labor market, the alternative is better to save upon the resources spent in educating a girl for marriage. When poverty strikes, girls are withdrawn from school such that their male siblings can continue. Also in families where the mother is engaged is some wage work to eke out a living, young girls are kept at home to take care and nurse their younger sibling or else join their mothers to contribute to the family pot.
Division of labor is highly skewed to the disadvantage of female and more so poor women are caught in a double whammy; balancing both reproductive and productive activities. Although globalization had broadened employment opportunities in most of the developing countries, it has set in trends of informalisation and women have been increasingly a part of it. Although women form a large part of the labor force, most of them are tied to the lower rungs. There is an increasing trend of feminisation of informalisation of the labor force. The informal sector is characterized by low wages, no contract and no fixed workplace. Women who are not educated enough and lack skills form part of this informal workforce. This has added to their workload, the returns from which are not at all remunerative. Often it is the economic distress that compels them to join the labor force and does not help them in enhancing their well being. As found in rural agrarian communities, women work either as unpaid family laborers or agricultural laborers as opposed to men who enjoy ownership rights. Despite the fact that the agrarian structure is undergoing enormous diversification and the role of women in dairying, fishing, horticulture can be improved; the efforts lack the appropriate gender sensitiveness. Although empirical evidences suggest that women through self help groups and community management approaches can lead in some of these spheres, the progress is too slow.
It is common practice that women have less access to ownership of land, credit and other productive resources. The law of inheritance in a south Asia study found men’s supreme command over land rights. Women derive their land rights by virtue of their relationship with men and have barely any role in using it as a resource. In agricultural communities, men are the landlords and own the assets as well as revenue accruing from land based activities. Women mostly work as wage or family labor and do not enjoy entrepreneurial rights. Differential access to credit has its roots in land ownership, wherein land is used as a mortgage for loans and it is only men who have the benefit of using it to access credit facilities. Hence women have very little access to credit which impedes their participation in any kind of technological innovation critical for agricultural growth. The self-help group approach to micro credit has mixed results in India unlike its roaring success in Bangladesh. Unequal access to resources has resulted in limited and restricted participation of women in both farm and non-farm activities.
Gender gaps in education, health care and employment opportunities have resulted in the voiceless of women in decision making and bargaining for a better livelihood. This has rendered women poorer and more vulnerable to shocks and adjustment processes. Inequality and poverty are two reinforcing elements and is seen as aggravating one another. In other words, unequal access to resources and opportunities is the major obstacle to women’s economic liberation and opportunity to break free from the poverty trap. Similarly, poverty aggravates inequality wherein female in early stages of their life cycle adopt expenditure saving mechanisms such as eat less, drop out of schools and live unhealthily life and as women take to income earning measures by taking up any low paid insecure odd jobs.
Modern economic reforms and associated dynamics with respect to work and income earning mechanisms are promoting empowerment of women even in rural areas of India. Besides remittances promote participation of women in agriculture which in turn improves agriculture productivity and household income. The new evidence suggests considerable increase in rural income from remittances (Shariff, 2009) due to an increase in rural-rural and rural-rural migration within India (WDR, 2009). Gender empowerment has received strong empirical support across the globe since it further enhances investments in education, health and nutrition that build stock of physical capital formation, thereby yielding durable poverty alleviating effects. Therefore, it is important to bring to fore the fact, that even in India the formative abilities of women are being enhanced due to higher education, participation in workforce, democratic participation and learning from programs such as micro-credit and national rural employment guarantee scheme. It is imperative, therefore, that women demand a rightful place in household and societal level decision making. Figure 2 below provides a pictorial depiction of gender empowered economy in India.
IV: GENDER EMPOWERING CHARACTERISTICS AND MEASURES
After an understanding of the multi-dimensional general framework within which one need to understand gender issues and a number of approaches that are in vogue enunciated above; in the following we identify selected measurable characteristics which all together will form a comprehensive and wholesome ‘gender empowerment measure’. Since these entire variable set are empirically measurable, an index derived out of them is described as ‘gender empowerment index’, which will be a useful policy instrument to governments and civil society alike. Note that this index is a mix of the gender adjustment which UNDP’s GDI performs as well the gender empowerment measure; and conceptually measures empowerment of masses as opposed to a measure of higher order which is inherent in UNDP’s gender empowerment measure.
Conceptually the selected indicators measure empowerment within the contemporary Indian socio-economic outlook and compatible with the debate on mechanisms to reduce gender bias in society and political decision making. Note that the dimensions and factors used in this paper are very different from those identified by the Government of India (2009) which is aligned with the UNDP concept but weak data support of suspicious quality.
An empowered Indian woman is the one who is literate, works (often outside home) and contributes measurable household income, independently decides for example, as to what kind of food needs to prepared and ingredients to be purchased; do not wait for husband to seek paid care for a sick child, owns some property by herself and also manages a bank account. Above all she decides as to how many children she can bear as well as ensure full immunization of all her children. She executes her right to vote and also participates in local panchayats and committees.
Compare this with a concept in which she is an IAS/IPS officer or a judge in a High Court, or can also be doctor or an engineer, or someone who can borrow at least Rs. 2 lakhs from a bank, or an MP, MLA or a Panchayat president, have immovable property and so on. In such a measure the focus is on individual instead of societal achievements and therefore can be aggregated only at national level. On the other hand the multi-dimensional attributes can be created at lower geographic levels and they reflect empowerment of all women in specified locales.
There are also serious data problems in case of the UNDP linked GOI approach; for example, in India the top level services including judiciary have national relevance. At the level of the state, a women born and education elsewhere will normally be posted in a specified state, thus her empowerment do not reflect empowerment of women of that state. Similarly, a large number of professional for example get education in states where educational infrastructure is better and often begin to reside and work in that state. Under such circumstance the gender measures will over estimate the true level of empowerment and may go inimical to women in that state/district. Another measurement issue is that all the measures are to be accessed from secondary sources often of poor and questionable quality. On the other hand the alternative variables proposed are extracted from unit level records of large household surveys which are known to be dependable data for measurements of societal dynamics at least in India. Further the proposed concepts and method can estimate a ‘gender empowerment value/index’ at any level of disaggregation even upto a village level and also estimated can be separately provided for the rural and urban areas separately. The data occurrence and coverage of the universe is almost all women in a defined areas in case of the alternative set of variables; where as in case of the GOI recasted method only a miniscule proportion of women may be covered, for example, even at the state level women in top level services, judiciary and polity can be only a handful countable in single digits and s on.
Statement 1
Measuring Gender Employment in a Socio-Cultural Framework:
Multi-Dimensions and Variable Measures
Choice of Dimensions and Variable measurements
Dimensions Measures Source and Quality of Variables
Human Capital Adult (7+) literacy Estimated from a nationally representative survey of 41,554 households namely the Human Development (HDPI) 2004-05, undertaken by NCAER New Delhi.
Gender gap in literacy
Work Participation Work Participation Rate (15‐64 Year) Estimated from a nationally representative survey of 1,24,680 households namely the National Sample Survey (NSSO) of Employment and Unemployment, 2004-05.
Gender gap in WPR
Household Decision Making Capacity to decide matters alone relating to daily household purchases Estimated from a nationally representative survey of 1,09,041 households namely National Family health Survey (NFHS)–3 of 2005-06.
Capacity to independently undertake the decision for own health care NFHS- 3 (2005-06)
Eco. Resources /Assets Individual/shared ownership of immovable assets HDPI (2004-05)
Manage independent bank accounts NFHS-3 (2005-06)
Earned Cash wages as a regular salaried/wage employee NSS (2004-05)
Gender gap in wages as a regular salaried/wage employee
Earned Cash wages as a casual wage labor NSS (2004-05)
Gender gap in wages as a casual wage labor
Reproduction and Child Care Use of modern contraceptives NFHS-3 (2005-06)
Women having fully immunized children in ages 12-23 months NFHS-3 (2005-06)
Political Participation Cast their vote in the last general election Statistical Report on General Elections, 2004 (14th Lok Sabha) – Vol. I, Election Commission of India.
Gender Gap in the vote casting
Panchayat members Ministry of Panchayati Raj, Government of India: Number of women elected representatives in the three tiers of panchayats as on 31.03.2008 are available in the Annexure 1(A).
Thus, in the Indian context a comprehensive measure of gender advantage needs to incorporate indicators that capture culture-specific dimensions of agency and control over resources, through measures having relevance at the level of individual, household and society. Since aspects of gender empowerment are complex and multidimensional the variables and data needs are diverse and needs to be debated as to their appropriateness. Ideally the variables that measure a social situation and dimension should have the following qualities – (a) robust outcome indicators are the best; but since such indicators are difficult to gather and also as they change slowly, indicators highlighting the process and proximate to the concept of the index measure, in this case ‘gender empowerment’ can be used; (b) that the indicators are easy to collect and that they are collected from independent survey data rather than from service statistics which often lack quality; (c) easy to update frequently such as annually or at the most once in two years, for example, the NSSO undertake annual surveys and required data can therefore be collected, and (d) as much possible relevant to whole or majority of population.
We have identified six dimensions of which five dimensions extracts data directly from large sample surveys using the primary unit level records at the level of individual and households. A gender empowering dimension namely ‘political participation’ uses data from the government records since sample surveys so far have not collected information on these issues. All dimensions are aggregates of multiple measures and wherever appropriate incorporates gender gaps as well. The national sample surveys (NSS), national family health surveys (NFHS) and human development Surveys of the national council of applied economic research (NCAER) are well known data source in India.
(i) Human Capital (Education): Most commonly used human capital indicator, along with its gender gap captures human capital formation, namely, literacy. Absolute measures of female literacy amongst the population ages 7 years and above in percentage and the gender gap ratio are used to capture this dimension. Data from the human development survey of NCAER for reference year 2004-5 supplies data to measure literacy.
(ii) Female work participation: Female work participation rate and associated gender gap for adults 15-64 year was assessed using the ‘usual principal activity status’ (UPS) over a reference period of one year. Further the gender gap in work participation is also incorporated into the computation. A woman is classified as a participant in labor force, if she had been either working or looking for work during a longer part of 365 days preceding the survey. The UPS measure excludes from the labor force all those female who are unemployed and employed for a period of less than six months. The data are drawn from the 61st round employment and unemployment survey of the NSSO for the reference year 2004-05.
(iii) Household Decision Making: This is an aggregation of two variables namely, (a) women’s capacity of ‘making purchases for daily household needs’ and (b) women's participation in decision making for own health care, both extracted from NFHS-3 survey 2005-06 (www.measuredhs.com). The variables together measure women’s participation in decision making; those who usually make specified decisions on their own or independently. Those reporting joint decision making along with men or husbands are excluded from these measures. These variables selected to reflect woman’s capacity for independent decision making in the domain of household are well recognized even in studies undertaken in other developing economies around the world.
(iv) Economic Resources and Assets: Aggregates of two variables namely, women’s ownership of (a) immovable assets and (b) bank account are used to reflect her control over resources. The first variable is measured as the proportion of women who have their name on immovable properties owned or rented. Normally such names are incorporated on to the contract or registered property documents. For the first time such data have become available for all India and many states from the NCAER’s Human Development Survey -2004-5. Women having a bank / savings account are drawn from the NFHS-3 data set. Give that these data have longer-term relevance and are important aspects of households, both individually owned and jointly owned (along with husbands/other household members) are considered appropriate to reflect control of respective resources.
It is useful to state both these variables have become prominent in the Indian context in reflecting the independent nature of women and their empowerment. Besides a number of states in India have passed laws which favor joint (registration) ownership of land or properties which are rented. Often properties jointly owned are given tax concessions by law. So far as the ownership of bank accounts we bring the attention of the readers to the fact that the microfinance programs in India are over two decades old and upto 25 million households are enrolled into such program through the self-help group formations; and they are in a way enrolled in to a informal banking scheme. Further since about a year millions of bank accounts are opened in the names of women across India through a wage employment program known as ‘national employment guarantee scheme’. Thus there is a revolution of sorts which is enabling women even in rural areas to open and operate their own bank account. However the data used to assess these variable have the reference year 2004-5, and conditions during recent years are expected to more women friendly. Given this background these variables are India specific and they capture a dominant part of women’s empowerment.
(v) Reproduction and Care: This dimension is an aggregation of two variables, (a) one reflecting women’s capacity to choose and use a modern contraceptive method which is a reflection of control over reproduction; and (b) her capacity to ensure that her own children are completed with all essential dozes of immunizations. This second variable is constructed linking all children aged 12-36 months with the respondent women and identifying the completeness of all immunizations.
(vi) Political Participation: Participation of women in political sphere is indeed a dominant evidence of empowerment. For example, Indian historically has been in the forefront in this benchmark as it has had considerable world recognition when Mrs. Indira Gandhi was the Prime Minister of India. Contemporary situation has enabled Smt. Pratibha Patel to be the President of India, and another high position of the ‘Speaker’ of the Loksabha (lower house of parliament) is occupied by a woman. The list of world’s powerful women contains many more entries from India. In spite of such feat one finds the condition of women in India is deplorable, mostly due to strong patriarchy and men favoring social and public policies. Therefore, we believe what is relevant to capture the political empowerment of women in India is their participation in Indian democratic system. We capture these traits by using two variables whose data are available from government sources. Percentage of women exercising franchise during the last general election is one variable used and dependable data are available from the Election Commission of India. Another positive woman favoring policy in India has been the democratic decentralization of governance to a third tier identified as the Panchayats in rural areas and nagar palikas (municipalities) in urban areas. Percentage of women members in the panchayat councils is used to represent political participation in this indexing exercise.
V: GENDER EMPOWERMENT INDEX: Values and Rankings
This is an exercise to cumulate the multi-dimensionality of gender empowerment inherent in the six identified dimensions enunciated in the previous section and create an index at the level of the Indian states, economic standing and social identities, and place of residence. All six dimensions are considered equally important; for example literacy and work are two equally important attributes expressing pedagogy and economic independence. Similarly, control over physical assets, using banking services, independently taking routine household decisions as well as control over her own reproduction and take decision about child care are all equally important in expressing the power a women exercise so as to change her immediate environment to benefit her own welfare, and the derived welfare of the household. So is the ability of women to participate in political system especially in the modern context of decentralized democratization process especially in India. Therefore, we believe assigning equal weights to each of the six dimensions should be noncontroversial, also because one expects systematic improvements occurring concurrently across all these dimensions over a period of time. The variables chosen to reflect the above aspects of empowerment are carefully selected from across the multiple sources of data, and wherever necessary gender differentials are also factored in the computations. Normally the index values and rankings are created for over the time comparisons; it should not matter much as to what the definitions, measurements and weights (implied) are so far as they remain constant over time. Even assign equal weights, however, care must be taken by making all variables and dimensions scale free so that the level difference between selected variables do no influence the values and subsequent rankings. A comprehensive discussion about the scaling, normalization, weighing and indexing in the Indian context can be found in Kundu et. al (2007).
Gender Empowerment Index for Major Indian States:
The gender empowerment values/index and associated ranks for all six identified components/dimensions according to major sates of India can be found in Table 1 and the last column assigns a GEI ranking.. The upper and lower benchmarks for comparisons are taken from within the state distributions and therefore the absolute values are not comparable with other international benchmarks. Measuring empowerment requires country specific qualitative variables as described above and therefore no effort is made to undertake international comparisons although such indices can be crafter should a situation demands.
The GEI index values reflect the levels of achievement to the maximum possible of 1 and the least value being 0. Thus if a state takes the maximum value of 1 in six dimensions then the aggregated index value will be 1 which is the perfectly women empowered situation and if it is 0 then it is the worst scenario. At the All India level the overall GEI value has worked out to be 0.424 which is less than even the half of the level mark, and in the inter-state comparisons show the bottom most value is 0.238 recorded in Uttar Pradesh and the top most value is 0.646 for Kerala. We have categorized states in four segments taking the mean of all states as the first dividing line and further the mean of each segment as the other dividing line to distribute states in all four segments. This method of ordering states in segments provides useful analytical advantage. One can find that states with relatively better or ‘high GEI’ besides Kerala are Tamil Nadu, Maharashtra and Karnataka in that order, followed by Gujarat, Punjab, Andhra Pradesh, Haryana and West Bengal which can be considered as states with ‘moderate GEI’. States which have ‘low’ index are Orissa, Chhattisgarh and Madhya Pradesh; followed by the ‘very low GEI’ states namely, Jharkhand, Assam, Rajasthan, Bihar and Uttar Pradesh (refer Table 1). Refer also to a composite map (Map 1) and six other maps one each of the specified dimensions of empowerment identified in this empirical exercise (Maps 2- 7).
TABLE 1, 2 AND MAPS ABOUT HERE
In case of Gujarat while it ranks as low as 8th in human capital formation, it is on the top on ‘control over assets, and second on ‘capacity for household decision making’; but it ranks too low at 16th of the 17 states in political participation. On the other hand Kerala which is on top on human capital formation, but as low as 8th in household decision making as well as woman’s work participation and 6th in political participation.
Gender Empowerment Index according to Socio-Economic Categories:
The type of the data used allows estimating the GEI using the first five dimensions, since disaggregated data for woman’s political participation is not available, according to place of residence (rural or urban residence), socio-religious categories and economic groups based on per capita income quintiles (Table 2). It is surprising to note lack of GEI differential according to place of residence, namely the rural and urban areas; although we are aware that there are noteworthy gender differentials if only an absolute level of a particular variable is evaluated. Thus while there may be huge level differentials in the measurement of variables in absolute terms, when one takes the relative gender differentials it does not matter whether one resides in rural or urban areas, the gender bias seems as strong. This is a very important empirical finding.
Further the values and rankings are evaluated for economic classification and socio-religious groups and one notices some perfect association. The GEI index has a perfect match with the per capita income quintiles in such a way that relative economic prosperity indeed promotes gender empowerment. The only dimension which has inverse relationship from within the six considered is women’s work participation suggesting that poorer women work relatively more so as to supplement household income; yet overall economic prosperity promotes ‘gender empowerment’.
The data bases used, namely the national sample surveys, the NCAER’s human development survey and the national family health surveys contain variables that are amenable to create exclusive socio-religious categories which are generally so identified in day-to-day discourses in India. One finds considerable variations in the GEI according to the socio-religious categories as well. For example, it is residual others (minority religions other than Muslims but less than 5 % of population) category which has the highest value of 0.763 followed by the high caste Hindus with 0.675 and these two communities are class apart and reflect large inequity in society. The subsequent values are far too low at 0.410 for OBCs, 0.366 for SCs, 0.281 for the STs and least for Muslims at 0.276. There is a notion that the tribal communities offer fairly egalitarian social system which, but such common understanding and does not stand the empirical test, thus making ST women extremely vulnerable as well along with the SCs and the Muslims. The socio-religious exercise provides excellent leads for public policy formulation in the area of effecting group-equity in India.
VI: CONCLUSIONS AND POLICY IMPLICATIONS
It is common knowledge that the UNDP promoted the concept of human development index which is now widely used all over India. One finds that many states in India have brought out human development reports highlighting district level variations as well. We consider it useful to compare the state HDI ranks with the GEI estimated by us (see Table 3). There are a few unexpected relationships between the two in a few states. For example Assam and Uttar Pradesh have recorded relatively better HDI ranking compared with the GEI which are far too low. Other states with higher ranking differentials and having lower GEIs are Bihar, Haryana and Punjab. On the other hand state which have improved over their HDI rankings considerably are Maharashtra, Karnataka, Orissa, Jharkhand and Chhattisgarh. However, it will be instructive to know as to what factors have pulled the state of Assam and Uttar Pradesh considerably low in the GEI measures.
TABLE 3 ABOUT HERE
The correlation between the GHI and HDI rankings has worked out to be only 0.58 suggesting that HDI do not reflect the true gender vulnerability and therefore it is essential to create a separate series of data that reflect women’s empowerment. As mentioned earlier, we have used six dimensions and associated measures for which dependable data are available from sample surveys and government records. Although we believe that dimensions and variables chosen for this exercise are excettent and effecnint in capturing empowerment of women in India, one can add other concepts provided quality data are available so as to contextualize indexing to local situation and needs. Tt is most appropriate to create the gender indices as the level of districts, and according to socio-religions communities within the state for a better understanding of the problem of gender discrimination.
A number of policy implications will emerge from this research and a few of them are listed below:
• Enable policy makers to understand the process that facilitate empowerment of women.
• This research will enable recognition of the significant role gender empowerment play in improving incomes especially in rural areas and thereby poverty alleviation.
• Help formulate policy support to sustain empowerment of women, for example, through strategies to establish and sustain ownership rights, enhance participation in local governance and undertake market based activities.
• Promote fiscal and financial products which suits formation of household capital, assets and insurance against risks in rural areas of India.
• Effective policies can be designed to so that economic resources transferred through micro-credit programs can promote micro-enterprises and local markets.
• Promotes regionally balanced economic growth through wage and labor market effects especially factoring increased female participation in labor force.
We believe that this paper raises a major issue of appropriateness of the factors and measures that reflect gender empowerment and hope that the methodology presented will help generate an informed debate on the topic in India and other developing societies.
References:
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Saturday, September 19, 2009
Saturday, September 5, 2009
What can we learn from India’s Mass Employment Scheme?
I. Introduction
Countries with large rural populations that include high shares of landless laborers typically require formal safety nets to reduce vulnerability and sustain people’s livelihoods. India already has several large, universal safety net programs, including the Public Distribution System (PDS) for food and the Integrated Child Development Services (ICDS) scheme, and in 2006, it launched another. The National Rural Employment Guarantee Scheme (NREGS) emanated from India’s commitment to a legal right to work. Adopted in the wake of persistent public demand, the NREGS is a mass ‘public works program’ (PWP) based on the country’s experience in reducing human distress in recent decades in rural Maharashtra state. It promises to sustain the incomes of rural people while creating physical infrastructure that will benefit the country in the long run. Although the program is relatively new and thus has not been subject to a comprehensive assessment, early indicators point to areas of success and failure, highlighting where improvements can be made and lessons learned in a public employment program of this size.
II. The National Rural Employment Guarantee Act/Scheme (NREGA/S)
The ‘right to work’ is a ‘directive principle’ in Indian Constitution which was formalized through the enactment of NREGA (2005) . It is seen as a mechanism of income transfer, infrastructure development and promoting rural production and consumption markets - a multifarious strategy indeed. NREGA has found priority policy attention in India’s 11th five year plan (2007-12) under a broader objective of ‘Bharat Nirman’ aiming for resurgence in rural areas. Some consider nrega a natural response to non-inclusive growth that occurred during reforms process of last about two decades. The format of nrega and its nationwide implementation was a result of persistence by civil society and activists which is a common mechanism to influence policy in India. NREGS is unique, being large in size , intended to cover long periods, disburse huge funds and be dynamically responsive to climatic and rainfall conditions and above all open to any adult intending to work for wages often lower than local causal wages. Since self-targeting is inherent to scheme, besides chronic poverty manifest for example in food inadequacy, it also intends to mitigate idiosyncratic risks and shocks faced by households due to being differently-abled or death of earning member. NREGS can attract the unemployed or underemployed rural youth; because of immediate cash availability and 100 days of assured work which functions as a short-term relief objective. Indian policy appears confident that nregs can be important normally, even in the absence of price or income shocks and that it can smoothen seasonal fluctuations in labor demand and, therefore, wage rates in rural areas where rainfall patterns and insufficient irrigation preclude year-round crop cultivation (see also Barrett, et. al, 2004). Other objectives include, generation of productive assets, empowering rural women, reducing rural-urban migration, fostering social equity and environmental protection. Box 1 summarized the multiple nrega goals which can be categorized as protective, preventive and promotive in nature.
Multiple Goals of NREGS
Protective : assistance ensuring consumption smoothening and immediate welfare
Preventive : insurance facilitating risk taking such as investment in agriculture
Promotive : economic stimulus, through cash accumulation, local production and enhancing markets
- harmonize labor market, promote rural nonfarm employment (RNFE) and equalize wage rates;
- create durable physical assets impacting local eco-system and climate change;
- facilitate human capital formation through skill development; and
- alleviate poverty, effect equity, reduce distress migration and empower women.
The listed issues, however, are yet to be thoroughly investigated in the context of nrega.
How was the NREGS formulated: The format of nrega/s draws upon positive experiences of reducing human distress by Maharashtra ‘employment guarantee scheme’ (MEGS). The MEGS was first of its kind effort in India, to address high levels of rural distress caused by a severe drought in 1973-74. The MEGS created 3,597 million person days of work on minor irrigation, soil and water conservation, reforestation and local roads since inception until 2004. In its peak year in 1980 about one fifth of capital spending of Maharashtra was spent on EGS. MEGS thus became a model of sorts in which all aspects of governance, political commitment, bureaucratic efficiency, equity objective and concerns to sustain local environment and so on came into play, although at the heart of the issues was clearly the push and pulls of electoral politics. This scheme had central focus on drought proofing activities that led to measurable tangible results. Land holders were direct beneficiaries and the scheme also established a participatory process in the local governance (Moore and Jadhav 2006).
While the MEGS was a prototype and used as a benchmark, before the launch of nrega a plethora of PWPs were tried out all over India. National rural employment program (NREP) was initiated in 1980 followed by rural landless employment guarantee program (RLEGP), and in 1989 they were merged to form Jawahar rozgar youjana (JRY) with a focus on unemployed and creating rural assets. Employment assurance scheme (EAS) introduced in 1993 became universal by 1997-98. Jawahar gram samridhi yojana (JGSY) introduced in 1999 restructured the JRY and made it a central scheme. Sampoorna grameen rozgar yojana (SGRY) was launched in 2001 and in 2002 EAS and JGSY were also merged, aiming at providing rural wage employment as a mechanism to ensure food security, along with the creation of durable community, social and economic assets. The ‘national rural employment guarantee act (NREGA)’ thus is the most resent version of PWP, which for the first time has a legal sanctity inbuilt into the scheme.
Coverage of the program: The national level rural development ministry and associated departments are responsible for implementing nrega across the whole country. They also appropriate financial allocations from national budgetary mechanism and facilitate states to draw respective shares to execute work projects. The nrega coverage during first year of implementation (2006-7) was only to 200 poorest districts, followed by an additional 130 district during 2007-8; and by 2008-9 all the 610 districts across India were brought under nrega. A review of data published biannually through official website suggests that in the year 2007-8 , overall 33.7 million households were provided with 1.43 billion man days of nrega employment and distributed close to Rs. 86 billion. These absolute numbers which account for about 45% of all rural households, suggest a vibrant and highly efficient program implementation and matches with the stated policy and the targets.
Budgetary allocations: Before formalizing the Act, government agencies estimated that full coverage of nregs will cost Rs. 400 billion (about US$ 9-10 billion) which was about 1% of GDP. Some empirical assessments suggest that nrega could help reduce rural poverty to 23 per cent during lean season, at annual cost of 1.7 per cent of GDP (Murgai and Ravallion 2005). Others based on simple average minimum wage aggregates of all states estimated the national annual cost to be 1.3% of GDP; and a case was made that nrega will be sensitive to prevailing minimum wages in respective states (Shariff, 2004).
The allocation and expenditure on nregs during first two years of implementation were low due to staggered implementation; yet even after covering all 610 districts in 2008-9, only Rs. 160 billion (0.37% GDP) were allocated. The allocation for the year 2009-10 is Rs. 780 billion or 0.66 % of GDP, but the actual expenditure is expected to much less. NREGA expenditure for 2007-8 although 0.23 % of GDP compares well with other national programs namely targeted ‘public distribution system (PDS)’ of food products (0.13% GDP) and ICDS (0.10% GDP) respectively. However, a cost-benefit estimate for erstwhile MEGS compared with PDS suggested a ratio of 21.6 % for the former and meager 11.2% for the latter (Parikh et. al. 2007). Although there are substantial improvements lately, the relative efficiency differentials are likely to prevail. The Indian safety net programs appear huge in terms of allocations and coverage but reach a small proportion of poor and only nominal benefits are received by them.
Given both low allocation and under-utilization of funds, further financial expansion of nrega are not expected to impact national level fiscal deficits adversely even if no additional tax or levy is imposed; nor does one expect that nregs proceeds would cause inflation in the local economy. An increased cash flow amongst wage workers will pushup local demand and prices, but a simultaneous accelerating effect on local product market associated with broad based income growth will dampen the inflationary impact. However, nregs appear good in reducing risks and vulnerability, but not sufficient to eliminate poverty in India.
III. Strong Performance in Some States
Given a vast expanse one expects interstate differentials in nrega performance, some due to staggered and lagged universalization others because of administrative bottlenecks unique to each state (CAG, 2007). Corruption, leakage and dominance of private agents are other notable hurdles which are insurmountable where panchayats are nonexistent. Some appreciate self-targeting strategy inherent in nrega, but cautions social welfare losses caused by miss-targeting (Banerjee, 2008). Overall all, Rajasthan, Madhya Pradesh and Chhattisgarh stand out as better performing states. The relative coverage of households is better and average wage accruals are reasonable due to better provisioning of employment days. Given relatively higher poverty it is reasonable to assume that relatively vulnerable households do benefit in these states.
In case of Rajasthan, there are satisfactory assessments as to who benefits from nregs. Wage accruals have helped smoothening of household income (Scandizzo, et al., 2007) and there are large favorable gender impacts (Chandrasekhar and Ghosh, 2009). A silver lining thus has emerged from state of Rajasthan (Shivakumar 2006, Dreze, et al. 2007) which indeed provide much needed confidence to strive for improvement and continuity of nregs. Although vibrant panchayat raj administration is essential, but it is not a sufficient condition for better nrega; for example, Kerala with well developed panchayats is suffering from high leakage of funds. The success story of Rajasthan is due to a fair balance between functioning of panchayats and other enabling factors such as open and transparent monitoring and public audit mechanisms.
IV. Poor Performance in Most States
States which host large number of the poor but doing poorly in nrega are Bihar and Uttar Pradesh. Other states utilizing meager expenditures are Haryana, Gujarat, Karnataka, Kerala, Maharashtra and West Bengal. Another backward state, Jharkhand suffers from absence of panchayat institutions (Bhatia and Dreze 2006). Orissa’s problem is attributed to systemic bureaucratic failure to put in place transparent implementation of nregs. Large scale leakages and corruption are rampant due to absence of documentation system amenable for crosschecks for accuracy of record keeping (Dreze, et al. 2007), and the situation in Bihar is not encouraging either (Pankaj or Sharma 2006).
While nregs suffers from large exclusion errors due to poor coverage, one finds some hope due to greater access that it gives to women, the Scheduled Castes and the Scheduled Tribes (Chandrasekhar and Ghosh, 2009). A recent field study of vulnerable rural households in seven north Indian states (Shariff, 2008) suggests that community participation; information sharing and formulation of an opinion of program stand out as dominating factors that enhance maximization of receipts from nrega. Such attributes are normally prevalent amongst ‘rural middle class’ and therefore poorest of the poor within a micro locality are most likely to face entry barrier to nregs. Mechanisms to overcome such anomalies are available, for example, beneficiary participation and partnerships with local civil society and NGOs are known to have helped in ensuring transparency, equity, timeliness, financial prudence and quality assurance in delivery of public services. Such partnership also strengthens institutional capacity at the grassroots. The future reforms or nregs-course correction must address such anomalies, lest the program is held ransom to middle class values.
V. What determines access to NREGA and maximization of employment days?
A perceptions survey of 3200 poor households about government’s safety net programs in sixteen selected most deprived districts in northern parts of India provides some rare data that are amenable for econometric analysis in identifying factors supporting access and use of the nregs. These data evaluates both nregs accessibility/enrollment and number of days of employment received per household form such employment. Qualitative information on participation of households in village level institutions (of local governance), frequency and transparency of panchayat meetings are also available. The data were subjected to the ‘correction for the selectivity bias econometric model’; which assessed in its first stage, determinants of enrolment and factored a computed lambda value in the second stage to find out characteristics supporting maximization of the number of days of employment from amongst those enrolled. The survey was conducted across seven states in north India, the results do present a close to accurate status of the nregs of this region and the main findings are highlighted below .
Accessing NREGS: The econometric analysis suggests that social variables have influence nrega enrollment in expected direction, for example the casual labor and illiterate households have easy enrollment into the scheme. However, the scheme is accessible to households belonging to all caste and religious communities suggesting the fact that the scheme is adequately broad-based although one expects the Scheduled Castes and Scheduled Tribes to show greater access. Important is that fact that governance variables such as participation in panchayat meetings and having an opinion about transparency in nrega meeting have favorable impact on choice of nrega work. View on ‘transparency’ was categorized as yes, no and no opinion. Both divergent views - that nrega meetings were ‘transparent’ and that they were ‘not-transparent’- show a large and significant positive effect on nregs as opposed to those households who did not have a opinion at all or the fact that they were truly not interested in having a view on local panchayat meetings. Given this strong and important relationship additional tests were performed using interactive terms with transparency but did not find significant additional advantage. This analysis suggests that program information and having-a-view on institutions that promote participation are important to determine enrolments. This finding provides a strong signal to program managers that to enhance reach and efficacy of nregs and similar other programs people’s participation is essential irrespective of whether such participants approve or disapprove of a program. There are a few studies which have discovered the importance of participation for example, Krishna (2006, 2001); Weinberger (2000); and Cohen and Norman (1980) in promoting access to program in developing economies and in rural areas.
To understand whether the scheme is accessible to the poor a comprehensive index (using a combination of productive assets such as animals, implements and durables) which captured economic standing was used in the model. It was puzzling to find that relatively better-offs have high accessibility to the scheme; and the evidence challenge the program expectation that nregs is designed to benefit the poorest of the poor through self targeting mechanism. Since nregs-wage in a number of states is higher than local wage rates the beneficiaries are the regular wage workers, and not necessary those abject poor whose reservation wages can be low. Although, by law all those who approach for work must be provided with jobs, there are many constrains that limits creation of all the desired / demanded / needed employment days. Such limits emerge from limited supply of funds, seasonal factors, non-availability of useful projects and local level idiosyncratic factors as well. Given such limitations, many nregs jobs will be appropriated by those who have a better bargaining capacity (can also be the better off within the group), thus inhibiting the poorest of the poor benefiting from the program.
Maximizing Days of Employment: The selection bias correction model used evacuated the mean number of days of employment conditional upon a household getting enrolled. Information on ownership and size of land was used as distinguishing variable which also reflect relative economic condition of the household. Limited numbers of variables show significant effects; for example, even after controlling for land asset variable with no impact, the ownership of pukka (good quality) house shows independent positive impact at less than 5% level. That is labor force living in pukka homes maximize netting nregs employment days. Another dominant effect emerge from a community level factor namely, institutional participation of woman in the village; followed by significant (less than 5%) and unexpected effect from those reporting fair food adequacy. Finally, households having a migrant family member show high degree of incapacity to maximize nregs employment days, although as we found above they were successful in enrolling into the program, however.
It appears that the inner story of who gets to work more number of employment days depends upon one crucial fact that shows little influence on whether one gets to work or not; but once one gets enrolled in to the scheme derives maximum benefit. This crucial fact is women’s formal participation (from within households or own community) in local self governance such as the panchayat, school committees, mahila mandlas and so on which has shown the most dominant impact suggesting the fact that household gets its employment days maximized when a woman from the household or even from own community participates in the panchayati raj linked village level institutions. Strategies to improve program efficiency must be undertaken jointly and concurrently by strengthening local self governance with clear distinctions made between political, administrative and fiscal decentralization (von Braun and Grote, 2002). Best results can accrue if political and administrative decentralization precede the financial but it appears that in case of nregs this step wise transition has not taken a clear shape yet. This finding is highly significant both to the national goal of democratic decentralization on the one hand and favorable implementation of nregs on the other.
An unexpected finding is that even households reporting fair food adequacy have recorded a large positive effect that gives credence to the fact, that even those households who do not feel the pinch of food inadequacy make efforts to hang on to nregs employment for maximum number of days and this effect is prominent even after controlling for other social and economic factors makes it puzzling . Given a vast array of mechanisms through which leakages and discrimination works, it appears that those who manage to show endurance can hang on to more employment through various partnerships that may develop with the managers of muster rolls and payments in this program. In case of the migrant households, what appeared to be a reflection of distress while seeking work turns out to be worse as they are not able to maximize upon wage receipts through higher number of days of employment. In fact such people seem to get penalized and factors that lead to such a situation are not yet clearly documented.
VI. Policy Implications
India’s experience so far suggests lessons for its own implementation of the NREGS as well as for other countries that implement large-scale employment schemes and a few are summarized below:
Lesson 1. Be sure that local institutions exist that are capable of implementing large PWPs. This Indian model depends entirely on the 3rd tier of government identified as the local panchayats which are in principal locally elected bodies reflecting not only people’s participation but also people’s interaction with such institutions on a daily basis. However, panchayat system is essential but not sufficient condition for the success of nregs.
Lesson 2. Make implementation transparent to all stakeholders. Transparency is a trait which is not well factored in program implementation in India. Number of welfare programs therefore suffers from lack of scope for monitoring and mid-course correction if necessary. In built monitoring through a transparent documentation and audit mechanism enables reductions in leakages, better targeting and cost efficient delivery. NREGA has responded well when there is transparency in implementation.
Lesson 3. Monitoring through social audits can help ensure accountability. A social audit is a process in which the people work with the government to monitor and evaluate the planning and implementation of a scheme or indeed of a policy. NREGA social audit can examine local records such as the muster roles, work requisitions and monetary transactions, by nregs-workers and civil society. Such social audits will benefit from use of modern information technology (IT) and banking networks. NREGA has immensely benefitted both by the IT, and the banking and post office networks across India resulting in reduction in corruption, leakage and improvements in timely payments to the enrolled participants.
Lesson 4. Reducing ‘exclusion’ and ‘inclusion’ errors; the former being highly anti-poor and the latter reflecting program inefficiency are essential to register success for such a large scheme. It is ideal, therefore, that political and administrative decentralization precedes the financial one so as to enhance coverage and make nregs inclusive. Sustaining nregs-wages below the minimum wage seems essential so as to eliminate the crowing-out effect adversely impacting self-targeting, thereby causing exclusion.
Lesson 5. A larger policy issue relates to nregs promoting labor market distortions and impacting upon the natural process of migration (see also World Bank 2009). NREGS can inhibit rural to urban and rural to rural migration affecting employment and wages in both place of origin and place of destination across the country. Such a possibility arises when the nregs wage is arbitrarily fixed higher than the reservation wage of the poorest amongst the rural communities. Higher wages will deepen the exclusionary and wrong inclusionary process thus defeating the very purpose of large PWPs. Besides, if nregs create basic public service infrastructure in rural areas it may in fact inhibit migration of the poor in search of such services.
In conclusions it is useful to emphasize, that future of nregs, which is a legal entitlement for the deprived living in rural areas, is securely tied with functioning of the panchayati raj institutions in India. To some this scheme is a consolidation of democratic process and appears revolutionary. But test of the success of such a large scheme is in its ability to carry vulnerable and the poor on board and keep them there for extended period of time. Further mechanism for an exit from nregs is a useful policy to think about. Due to deepening effects on farming and increase in land productivity the household incomes can rise above poverty line or at a level when reservation-wage will be more than nregs-wage, in which case many marginal and small farmers, may not further nregs work. This aspect is not recognized and no policy guide lines exist as ‘exit strategy’. It is useful to document the processes which provide leads to nregs’s relevance for poverty alleviation through improvement in agriculture.
In spite of powerful demands from the monitoring agencies, academics and activists, one finds lack of coordinated government level initiative, innovation and interventions to improve the program. In the end it must be stated that nregs has potential to provide social security to the masses only if its implementation is efficient and synergies are exploited. India should not miss another opportunity to demonstrate that world’s largest democracy also cares for its people especially the deprived and vulnerable, and that it truly is marching ahead to become a welfare state.
Countries with large rural populations that include high shares of landless laborers typically require formal safety nets to reduce vulnerability and sustain people’s livelihoods. India already has several large, universal safety net programs, including the Public Distribution System (PDS) for food and the Integrated Child Development Services (ICDS) scheme, and in 2006, it launched another. The National Rural Employment Guarantee Scheme (NREGS) emanated from India’s commitment to a legal right to work. Adopted in the wake of persistent public demand, the NREGS is a mass ‘public works program’ (PWP) based on the country’s experience in reducing human distress in recent decades in rural Maharashtra state. It promises to sustain the incomes of rural people while creating physical infrastructure that will benefit the country in the long run. Although the program is relatively new and thus has not been subject to a comprehensive assessment, early indicators point to areas of success and failure, highlighting where improvements can be made and lessons learned in a public employment program of this size.
II. The National Rural Employment Guarantee Act/Scheme (NREGA/S)
The ‘right to work’ is a ‘directive principle’ in Indian Constitution which was formalized through the enactment of NREGA (2005) . It is seen as a mechanism of income transfer, infrastructure development and promoting rural production and consumption markets - a multifarious strategy indeed. NREGA has found priority policy attention in India’s 11th five year plan (2007-12) under a broader objective of ‘Bharat Nirman’ aiming for resurgence in rural areas. Some consider nrega a natural response to non-inclusive growth that occurred during reforms process of last about two decades. The format of nrega and its nationwide implementation was a result of persistence by civil society and activists which is a common mechanism to influence policy in India. NREGS is unique, being large in size , intended to cover long periods, disburse huge funds and be dynamically responsive to climatic and rainfall conditions and above all open to any adult intending to work for wages often lower than local causal wages. Since self-targeting is inherent to scheme, besides chronic poverty manifest for example in food inadequacy, it also intends to mitigate idiosyncratic risks and shocks faced by households due to being differently-abled or death of earning member. NREGS can attract the unemployed or underemployed rural youth; because of immediate cash availability and 100 days of assured work which functions as a short-term relief objective. Indian policy appears confident that nregs can be important normally, even in the absence of price or income shocks and that it can smoothen seasonal fluctuations in labor demand and, therefore, wage rates in rural areas where rainfall patterns and insufficient irrigation preclude year-round crop cultivation (see also Barrett, et. al, 2004). Other objectives include, generation of productive assets, empowering rural women, reducing rural-urban migration, fostering social equity and environmental protection. Box 1 summarized the multiple nrega goals which can be categorized as protective, preventive and promotive in nature.
Multiple Goals of NREGS
Protective : assistance ensuring consumption smoothening and immediate welfare
Preventive : insurance facilitating risk taking such as investment in agriculture
Promotive : economic stimulus, through cash accumulation, local production and enhancing markets
- harmonize labor market, promote rural nonfarm employment (RNFE) and equalize wage rates;
- create durable physical assets impacting local eco-system and climate change;
- facilitate human capital formation through skill development; and
- alleviate poverty, effect equity, reduce distress migration and empower women.
The listed issues, however, are yet to be thoroughly investigated in the context of nrega.
How was the NREGS formulated: The format of nrega/s draws upon positive experiences of reducing human distress by Maharashtra ‘employment guarantee scheme’ (MEGS). The MEGS was first of its kind effort in India, to address high levels of rural distress caused by a severe drought in 1973-74. The MEGS created 3,597 million person days of work on minor irrigation, soil and water conservation, reforestation and local roads since inception until 2004. In its peak year in 1980 about one fifth of capital spending of Maharashtra was spent on EGS. MEGS thus became a model of sorts in which all aspects of governance, political commitment, bureaucratic efficiency, equity objective and concerns to sustain local environment and so on came into play, although at the heart of the issues was clearly the push and pulls of electoral politics. This scheme had central focus on drought proofing activities that led to measurable tangible results. Land holders were direct beneficiaries and the scheme also established a participatory process in the local governance (Moore and Jadhav 2006).
While the MEGS was a prototype and used as a benchmark, before the launch of nrega a plethora of PWPs were tried out all over India. National rural employment program (NREP) was initiated in 1980 followed by rural landless employment guarantee program (RLEGP), and in 1989 they were merged to form Jawahar rozgar youjana (JRY) with a focus on unemployed and creating rural assets. Employment assurance scheme (EAS) introduced in 1993 became universal by 1997-98. Jawahar gram samridhi yojana (JGSY) introduced in 1999 restructured the JRY and made it a central scheme. Sampoorna grameen rozgar yojana (SGRY) was launched in 2001 and in 2002 EAS and JGSY were also merged, aiming at providing rural wage employment as a mechanism to ensure food security, along with the creation of durable community, social and economic assets. The ‘national rural employment guarantee act (NREGA)’ thus is the most resent version of PWP, which for the first time has a legal sanctity inbuilt into the scheme.
Coverage of the program: The national level rural development ministry and associated departments are responsible for implementing nrega across the whole country. They also appropriate financial allocations from national budgetary mechanism and facilitate states to draw respective shares to execute work projects. The nrega coverage during first year of implementation (2006-7) was only to 200 poorest districts, followed by an additional 130 district during 2007-8; and by 2008-9 all the 610 districts across India were brought under nrega. A review of data published biannually through official website suggests that in the year 2007-8 , overall 33.7 million households were provided with 1.43 billion man days of nrega employment and distributed close to Rs. 86 billion. These absolute numbers which account for about 45% of all rural households, suggest a vibrant and highly efficient program implementation and matches with the stated policy and the targets.
Budgetary allocations: Before formalizing the Act, government agencies estimated that full coverage of nregs will cost Rs. 400 billion (about US$ 9-10 billion) which was about 1% of GDP. Some empirical assessments suggest that nrega could help reduce rural poverty to 23 per cent during lean season, at annual cost of 1.7 per cent of GDP (Murgai and Ravallion 2005). Others based on simple average minimum wage aggregates of all states estimated the national annual cost to be 1.3% of GDP; and a case was made that nrega will be sensitive to prevailing minimum wages in respective states (Shariff, 2004).
The allocation and expenditure on nregs during first two years of implementation were low due to staggered implementation; yet even after covering all 610 districts in 2008-9, only Rs. 160 billion (0.37% GDP) were allocated. The allocation for the year 2009-10 is Rs. 780 billion or 0.66 % of GDP, but the actual expenditure is expected to much less. NREGA expenditure for 2007-8 although 0.23 % of GDP compares well with other national programs namely targeted ‘public distribution system (PDS)’ of food products (0.13% GDP) and ICDS (0.10% GDP) respectively. However, a cost-benefit estimate for erstwhile MEGS compared with PDS suggested a ratio of 21.6 % for the former and meager 11.2% for the latter (Parikh et. al. 2007). Although there are substantial improvements lately, the relative efficiency differentials are likely to prevail. The Indian safety net programs appear huge in terms of allocations and coverage but reach a small proportion of poor and only nominal benefits are received by them.
Given both low allocation and under-utilization of funds, further financial expansion of nrega are not expected to impact national level fiscal deficits adversely even if no additional tax or levy is imposed; nor does one expect that nregs proceeds would cause inflation in the local economy. An increased cash flow amongst wage workers will pushup local demand and prices, but a simultaneous accelerating effect on local product market associated with broad based income growth will dampen the inflationary impact. However, nregs appear good in reducing risks and vulnerability, but not sufficient to eliminate poverty in India.
III. Strong Performance in Some States
Given a vast expanse one expects interstate differentials in nrega performance, some due to staggered and lagged universalization others because of administrative bottlenecks unique to each state (CAG, 2007). Corruption, leakage and dominance of private agents are other notable hurdles which are insurmountable where panchayats are nonexistent. Some appreciate self-targeting strategy inherent in nrega, but cautions social welfare losses caused by miss-targeting (Banerjee, 2008). Overall all, Rajasthan, Madhya Pradesh and Chhattisgarh stand out as better performing states. The relative coverage of households is better and average wage accruals are reasonable due to better provisioning of employment days. Given relatively higher poverty it is reasonable to assume that relatively vulnerable households do benefit in these states.
In case of Rajasthan, there are satisfactory assessments as to who benefits from nregs. Wage accruals have helped smoothening of household income (Scandizzo, et al., 2007) and there are large favorable gender impacts (Chandrasekhar and Ghosh, 2009). A silver lining thus has emerged from state of Rajasthan (Shivakumar 2006, Dreze, et al. 2007) which indeed provide much needed confidence to strive for improvement and continuity of nregs. Although vibrant panchayat raj administration is essential, but it is not a sufficient condition for better nrega; for example, Kerala with well developed panchayats is suffering from high leakage of funds. The success story of Rajasthan is due to a fair balance between functioning of panchayats and other enabling factors such as open and transparent monitoring and public audit mechanisms.
IV. Poor Performance in Most States
States which host large number of the poor but doing poorly in nrega are Bihar and Uttar Pradesh. Other states utilizing meager expenditures are Haryana, Gujarat, Karnataka, Kerala, Maharashtra and West Bengal. Another backward state, Jharkhand suffers from absence of panchayat institutions (Bhatia and Dreze 2006). Orissa’s problem is attributed to systemic bureaucratic failure to put in place transparent implementation of nregs. Large scale leakages and corruption are rampant due to absence of documentation system amenable for crosschecks for accuracy of record keeping (Dreze, et al. 2007), and the situation in Bihar is not encouraging either (Pankaj or Sharma 2006).
While nregs suffers from large exclusion errors due to poor coverage, one finds some hope due to greater access that it gives to women, the Scheduled Castes and the Scheduled Tribes (Chandrasekhar and Ghosh, 2009). A recent field study of vulnerable rural households in seven north Indian states (Shariff, 2008) suggests that community participation; information sharing and formulation of an opinion of program stand out as dominating factors that enhance maximization of receipts from nrega. Such attributes are normally prevalent amongst ‘rural middle class’ and therefore poorest of the poor within a micro locality are most likely to face entry barrier to nregs. Mechanisms to overcome such anomalies are available, for example, beneficiary participation and partnerships with local civil society and NGOs are known to have helped in ensuring transparency, equity, timeliness, financial prudence and quality assurance in delivery of public services. Such partnership also strengthens institutional capacity at the grassroots. The future reforms or nregs-course correction must address such anomalies, lest the program is held ransom to middle class values.
V. What determines access to NREGA and maximization of employment days?
A perceptions survey of 3200 poor households about government’s safety net programs in sixteen selected most deprived districts in northern parts of India provides some rare data that are amenable for econometric analysis in identifying factors supporting access and use of the nregs. These data evaluates both nregs accessibility/enrollment and number of days of employment received per household form such employment. Qualitative information on participation of households in village level institutions (of local governance), frequency and transparency of panchayat meetings are also available. The data were subjected to the ‘correction for the selectivity bias econometric model’; which assessed in its first stage, determinants of enrolment and factored a computed lambda value in the second stage to find out characteristics supporting maximization of the number of days of employment from amongst those enrolled. The survey was conducted across seven states in north India, the results do present a close to accurate status of the nregs of this region and the main findings are highlighted below .
Accessing NREGS: The econometric analysis suggests that social variables have influence nrega enrollment in expected direction, for example the casual labor and illiterate households have easy enrollment into the scheme. However, the scheme is accessible to households belonging to all caste and religious communities suggesting the fact that the scheme is adequately broad-based although one expects the Scheduled Castes and Scheduled Tribes to show greater access. Important is that fact that governance variables such as participation in panchayat meetings and having an opinion about transparency in nrega meeting have favorable impact on choice of nrega work. View on ‘transparency’ was categorized as yes, no and no opinion. Both divergent views - that nrega meetings were ‘transparent’ and that they were ‘not-transparent’- show a large and significant positive effect on nregs as opposed to those households who did not have a opinion at all or the fact that they were truly not interested in having a view on local panchayat meetings. Given this strong and important relationship additional tests were performed using interactive terms with transparency but did not find significant additional advantage. This analysis suggests that program information and having-a-view on institutions that promote participation are important to determine enrolments. This finding provides a strong signal to program managers that to enhance reach and efficacy of nregs and similar other programs people’s participation is essential irrespective of whether such participants approve or disapprove of a program. There are a few studies which have discovered the importance of participation for example, Krishna (2006, 2001); Weinberger (2000); and Cohen and Norman (1980) in promoting access to program in developing economies and in rural areas.
To understand whether the scheme is accessible to the poor a comprehensive index (using a combination of productive assets such as animals, implements and durables) which captured economic standing was used in the model. It was puzzling to find that relatively better-offs have high accessibility to the scheme; and the evidence challenge the program expectation that nregs is designed to benefit the poorest of the poor through self targeting mechanism. Since nregs-wage in a number of states is higher than local wage rates the beneficiaries are the regular wage workers, and not necessary those abject poor whose reservation wages can be low. Although, by law all those who approach for work must be provided with jobs, there are many constrains that limits creation of all the desired / demanded / needed employment days. Such limits emerge from limited supply of funds, seasonal factors, non-availability of useful projects and local level idiosyncratic factors as well. Given such limitations, many nregs jobs will be appropriated by those who have a better bargaining capacity (can also be the better off within the group), thus inhibiting the poorest of the poor benefiting from the program.
Maximizing Days of Employment: The selection bias correction model used evacuated the mean number of days of employment conditional upon a household getting enrolled. Information on ownership and size of land was used as distinguishing variable which also reflect relative economic condition of the household. Limited numbers of variables show significant effects; for example, even after controlling for land asset variable with no impact, the ownership of pukka (good quality) house shows independent positive impact at less than 5% level. That is labor force living in pukka homes maximize netting nregs employment days. Another dominant effect emerge from a community level factor namely, institutional participation of woman in the village; followed by significant (less than 5%) and unexpected effect from those reporting fair food adequacy. Finally, households having a migrant family member show high degree of incapacity to maximize nregs employment days, although as we found above they were successful in enrolling into the program, however.
It appears that the inner story of who gets to work more number of employment days depends upon one crucial fact that shows little influence on whether one gets to work or not; but once one gets enrolled in to the scheme derives maximum benefit. This crucial fact is women’s formal participation (from within households or own community) in local self governance such as the panchayat, school committees, mahila mandlas and so on which has shown the most dominant impact suggesting the fact that household gets its employment days maximized when a woman from the household or even from own community participates in the panchayati raj linked village level institutions. Strategies to improve program efficiency must be undertaken jointly and concurrently by strengthening local self governance with clear distinctions made between political, administrative and fiscal decentralization (von Braun and Grote, 2002). Best results can accrue if political and administrative decentralization precede the financial but it appears that in case of nregs this step wise transition has not taken a clear shape yet. This finding is highly significant both to the national goal of democratic decentralization on the one hand and favorable implementation of nregs on the other.
An unexpected finding is that even households reporting fair food adequacy have recorded a large positive effect that gives credence to the fact, that even those households who do not feel the pinch of food inadequacy make efforts to hang on to nregs employment for maximum number of days and this effect is prominent even after controlling for other social and economic factors makes it puzzling . Given a vast array of mechanisms through which leakages and discrimination works, it appears that those who manage to show endurance can hang on to more employment through various partnerships that may develop with the managers of muster rolls and payments in this program. In case of the migrant households, what appeared to be a reflection of distress while seeking work turns out to be worse as they are not able to maximize upon wage receipts through higher number of days of employment. In fact such people seem to get penalized and factors that lead to such a situation are not yet clearly documented.
VI. Policy Implications
India’s experience so far suggests lessons for its own implementation of the NREGS as well as for other countries that implement large-scale employment schemes and a few are summarized below:
Lesson 1. Be sure that local institutions exist that are capable of implementing large PWPs. This Indian model depends entirely on the 3rd tier of government identified as the local panchayats which are in principal locally elected bodies reflecting not only people’s participation but also people’s interaction with such institutions on a daily basis. However, panchayat system is essential but not sufficient condition for the success of nregs.
Lesson 2. Make implementation transparent to all stakeholders. Transparency is a trait which is not well factored in program implementation in India. Number of welfare programs therefore suffers from lack of scope for monitoring and mid-course correction if necessary. In built monitoring through a transparent documentation and audit mechanism enables reductions in leakages, better targeting and cost efficient delivery. NREGA has responded well when there is transparency in implementation.
Lesson 3. Monitoring through social audits can help ensure accountability. A social audit is a process in which the people work with the government to monitor and evaluate the planning and implementation of a scheme or indeed of a policy. NREGA social audit can examine local records such as the muster roles, work requisitions and monetary transactions, by nregs-workers and civil society. Such social audits will benefit from use of modern information technology (IT) and banking networks. NREGA has immensely benefitted both by the IT, and the banking and post office networks across India resulting in reduction in corruption, leakage and improvements in timely payments to the enrolled participants.
Lesson 4. Reducing ‘exclusion’ and ‘inclusion’ errors; the former being highly anti-poor and the latter reflecting program inefficiency are essential to register success for such a large scheme. It is ideal, therefore, that political and administrative decentralization precedes the financial one so as to enhance coverage and make nregs inclusive. Sustaining nregs-wages below the minimum wage seems essential so as to eliminate the crowing-out effect adversely impacting self-targeting, thereby causing exclusion.
Lesson 5. A larger policy issue relates to nregs promoting labor market distortions and impacting upon the natural process of migration (see also World Bank 2009). NREGS can inhibit rural to urban and rural to rural migration affecting employment and wages in both place of origin and place of destination across the country. Such a possibility arises when the nregs wage is arbitrarily fixed higher than the reservation wage of the poorest amongst the rural communities. Higher wages will deepen the exclusionary and wrong inclusionary process thus defeating the very purpose of large PWPs. Besides, if nregs create basic public service infrastructure in rural areas it may in fact inhibit migration of the poor in search of such services.
In conclusions it is useful to emphasize, that future of nregs, which is a legal entitlement for the deprived living in rural areas, is securely tied with functioning of the panchayati raj institutions in India. To some this scheme is a consolidation of democratic process and appears revolutionary. But test of the success of such a large scheme is in its ability to carry vulnerable and the poor on board and keep them there for extended period of time. Further mechanism for an exit from nregs is a useful policy to think about. Due to deepening effects on farming and increase in land productivity the household incomes can rise above poverty line or at a level when reservation-wage will be more than nregs-wage, in which case many marginal and small farmers, may not further nregs work. This aspect is not recognized and no policy guide lines exist as ‘exit strategy’. It is useful to document the processes which provide leads to nregs’s relevance for poverty alleviation through improvement in agriculture.
In spite of powerful demands from the monitoring agencies, academics and activists, one finds lack of coordinated government level initiative, innovation and interventions to improve the program. In the end it must be stated that nregs has potential to provide social security to the masses only if its implementation is efficient and synergies are exploited. India should not miss another opportunity to demonstrate that world’s largest democracy also cares for its people especially the deprived and vulnerable, and that it truly is marching ahead to become a welfare state.
Monday, July 6, 2009
Budget 2009-10 : Will Bharat Smile while India waits for non-budgetary incentives
Annual Budget is an exercise of stock taking therefore highly contextual; yet the balancing act it has to perform is not only in terms of revenue and expenditure, but need to address a number of dualisms that confronts Indian economy - for example, short and long term goals, rural and urban economy, agriculture and industrial (service) sectors, dualism of labor markets where 90% of labor force is in informal or unorganized sector, government versus private sector initiatives and not the least - Social Sector - so called people’s sector versus other formal sectors of the economy. Thus it is not a simple balancing line crossing, rather a number of such lines which are not parallel and the multiple crisscrossing in the web called National budget is not easy to confront with.
The contextual reality is that India is facing the heat of global economic downturn; and it would be futile to take solace in still positive growth of 6.3% in 2008-9 compared to near zero or a marginal global growth. What is important is not the level of GDP growth, but what incremental growth is achieved during the previous year; and a growth deceleration of about 3.0 % or so, does translates in to innumerable formal and informal shocks the corporate as well as general public is facing. One sure consequence is a broad based increase in unemployment but more specifically retrenchment of skill labor employed in selected export led industrial/services sectors where migrant and women labor has suffered.
The Budget 2009-10 presented this morning in many ways is a carried forward of the interim budget, but not much is added in terms of the ‘big bang’ second generation reforms nor strategy to plug a very high fiscal deficit of 6.8% which alone is 40 % of the total budgetary allocation and note that this amount is not on hand yet that spending will take effect immediately. Often upto one-third of allocations is never actually appropriated and spent thus the effecting need of fiscal deficit will be much smaller. Although the tax to GDP ratio is declared at 11.5%, the proceeds are far too inadequate to ease the interest payment worth 4% of GDP and the inevitable expenditure on defense worth another 2.5% of GDP.
This is budget with high fiscal deficit with no indication of from where this money will be brought in, limited direct tax incentives, no indication that domestic demand will be fired through fiscal and monitory incentives and there is no roadmap of disinvestment targets. However, while more details are awaited, what can be stated from the presentation of the finance minister is a focus on Bharat – meaning a focus on the common man beginning from a resolve to make agricultural sector rebound to a 4% growth; and there is also an emphasis on a number of infrastructural investments which can push both employment generation and augment rural markets. A 45% increase in allocation to projects under Bharat Nirman are noteworthy; further Rs. 325,000 cr or 5.45% of GDP worth funds are promised to be made available mostly from banking channels for agricultural credit at about 7% rate of interest. The farmers loan waver scheme is also extend further.
There is an emphasis on infrastructural development beginning from power development to development of rural roads and housing in both rural and urban areas especially through the Indira Ahwas yojana and JNNURM linked projects. The biggest gainer in this budget is the NREGA which has an allocation of Rs. 39,100 crores yet measures up to only 0.66% of GDP. This amount if fully spent will comfort millions of households especially by promoting employment of women. But since the NREGA wages are increased to Rs. 100/- nationally, a number of wage labor households may in fact net lower than expected annual income through wages since they may not migrate to urban or high wage rate areas due to availability of NREGA work. Thus the NREGA is a double edge apparatus, while on the one side it feels cool and nice on the other it can harm innovation and risk taking behavior.
Allocation to education programs including SSA and mid-day meals appear on the expected direction, but what is important is to ensure improving the quality of public education especially at the primary and elementary level which is not forthcoming in the budgetary allocations. The age old PDS is at its first year of getting redundant through a new program of providing 25 kg cereals at Rs.3 per kg for the BPL families. This program can only succeed if the BPL families are intelligently and correctly identified, and there is nothing which suggests that such a situation is achievable given over four decades of unsuccessful implementation of PDS. Whether ‘universal ID’ scheme can be put in place is yet to be seen and I am not yet hopeful on this innovation.
On the whole, agricultural and social sectors soaps are subject to implementation efficiencies and partnerships of the states; both are in the danger zone, therefore not much can be built upon these announcements yet. Besides, roads, markets and communications are drivers of the Indian economy but what has to be remembered is all this investment will be of no use if there are no users, for example what will you do by building mega infrastructural structures if there are no users and cost recovery. Having said that, the Indian growth story is going ‘ga-ga’ about the role of domestic demand; and given the global recession, it is indeed that capacity of the Indian citizen both in rural and urban areas to ‘fire the market’ so to speak that is the key for growth for the year 2009-10, but there is a week indication of this happening in the current budget.
-------------------------------------------------------------------------------------
Crores of Rs. % GDP
Total Plan Exp 325,000 5.45
Fiscal Deficit 6.80
Revenue Deficit 4.80
Tax-GDP ratio 11.50
Interest payment 236,000 4.0
Defense expenditure 141,702 2.38
Selected social sector allocations 105,079 1.76
Total Budgetary allocation 1.020,838 17.1
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The contextual reality is that India is facing the heat of global economic downturn; and it would be futile to take solace in still positive growth of 6.3% in 2008-9 compared to near zero or a marginal global growth. What is important is not the level of GDP growth, but what incremental growth is achieved during the previous year; and a growth deceleration of about 3.0 % or so, does translates in to innumerable formal and informal shocks the corporate as well as general public is facing. One sure consequence is a broad based increase in unemployment but more specifically retrenchment of skill labor employed in selected export led industrial/services sectors where migrant and women labor has suffered.
The Budget 2009-10 presented this morning in many ways is a carried forward of the interim budget, but not much is added in terms of the ‘big bang’ second generation reforms nor strategy to plug a very high fiscal deficit of 6.8% which alone is 40 % of the total budgetary allocation and note that this amount is not on hand yet that spending will take effect immediately. Often upto one-third of allocations is never actually appropriated and spent thus the effecting need of fiscal deficit will be much smaller. Although the tax to GDP ratio is declared at 11.5%, the proceeds are far too inadequate to ease the interest payment worth 4% of GDP and the inevitable expenditure on defense worth another 2.5% of GDP.
This is budget with high fiscal deficit with no indication of from where this money will be brought in, limited direct tax incentives, no indication that domestic demand will be fired through fiscal and monitory incentives and there is no roadmap of disinvestment targets. However, while more details are awaited, what can be stated from the presentation of the finance minister is a focus on Bharat – meaning a focus on the common man beginning from a resolve to make agricultural sector rebound to a 4% growth; and there is also an emphasis on a number of infrastructural investments which can push both employment generation and augment rural markets. A 45% increase in allocation to projects under Bharat Nirman are noteworthy; further Rs. 325,000 cr or 5.45% of GDP worth funds are promised to be made available mostly from banking channels for agricultural credit at about 7% rate of interest. The farmers loan waver scheme is also extend further.
There is an emphasis on infrastructural development beginning from power development to development of rural roads and housing in both rural and urban areas especially through the Indira Ahwas yojana and JNNURM linked projects. The biggest gainer in this budget is the NREGA which has an allocation of Rs. 39,100 crores yet measures up to only 0.66% of GDP. This amount if fully spent will comfort millions of households especially by promoting employment of women. But since the NREGA wages are increased to Rs. 100/- nationally, a number of wage labor households may in fact net lower than expected annual income through wages since they may not migrate to urban or high wage rate areas due to availability of NREGA work. Thus the NREGA is a double edge apparatus, while on the one side it feels cool and nice on the other it can harm innovation and risk taking behavior.
Allocation to education programs including SSA and mid-day meals appear on the expected direction, but what is important is to ensure improving the quality of public education especially at the primary and elementary level which is not forthcoming in the budgetary allocations. The age old PDS is at its first year of getting redundant through a new program of providing 25 kg cereals at Rs.3 per kg for the BPL families. This program can only succeed if the BPL families are intelligently and correctly identified, and there is nothing which suggests that such a situation is achievable given over four decades of unsuccessful implementation of PDS. Whether ‘universal ID’ scheme can be put in place is yet to be seen and I am not yet hopeful on this innovation.
On the whole, agricultural and social sectors soaps are subject to implementation efficiencies and partnerships of the states; both are in the danger zone, therefore not much can be built upon these announcements yet. Besides, roads, markets and communications are drivers of the Indian economy but what has to be remembered is all this investment will be of no use if there are no users, for example what will you do by building mega infrastructural structures if there are no users and cost recovery. Having said that, the Indian growth story is going ‘ga-ga’ about the role of domestic demand; and given the global recession, it is indeed that capacity of the Indian citizen both in rural and urban areas to ‘fire the market’ so to speak that is the key for growth for the year 2009-10, but there is a week indication of this happening in the current budget.
-------------------------------------------------------------------------------------
Crores of Rs. % GDP
Total Plan Exp 325,000 5.45
Fiscal Deficit 6.80
Revenue Deficit 4.80
Tax-GDP ratio 11.50
Interest payment 236,000 4.0
Defense expenditure 141,702 2.38
Selected social sector allocations 105,079 1.76
Total Budgetary allocation 1.020,838 17.1
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Wednesday, June 17, 2009
Labor Market Response in South Asia to the Global Recession
Key characteristics of the economic downturn / recession
Economic downturn/recession being experience during 2008-9 and still continuing has a global spread and most developed and many developing countries affected; in fact it all began from the USA, UK and Europe. Recession affected ability to sustain domestic demand mostly due to failure to sustain mortgages which triggered a banking crisis affecting investments, stalling large businesses especially those dependent upon global, multilateral and bilateral cross country production and distribution anchored on international trade. The global production slumped by 20% in the fourth quarter of 2008 (The World Bank, 2009). The average citizens across the developed economies especially, the USA which accounts for over a quarter of global business followed by many nations in Europe (eastern), experienced a decline in real income, postponed and/or squeezed household expenditures. This affected investments, production and trade in countries far and wide who supplied consumer goods and services to the developed world. Asia, especially countries which were dependent upon external trade for growth suffered most such as Japan, China, Korea, and India and so on.
By the time this contagion was taking place there were multiple channels through which the depression affected the households and labor markets. Noteworthy are sudden retrenchments and possibly wage cuts. However, almost the same time (and it is not co-incidental) that during the early period of the downturn oil prices touched the new high crossing USD 100/- and proceed further topping $140/-, unusually large increase in food price without major shortages in food stocks, increase in real rate of interest mostly in developing economies and tightening of credit and commodity markets. Economic slowdown can also be associated with falling prices known as deflation due to lack of demand of products. Again, it could be the result of inflation or a combination of increasing prices and stagnant economic growth in the west.
Although none of the countries in South Asia have recorded negative rates of growth yet, they indeed have experienced a steep decline in rate of growth. For example, India recorded a GDP growth of 6.7% in 2008-9 (CSO, quarterly estimates) lower than 8.7% growth of 2007-8 (Economic Survey, 2007-8)and a considerably low growth compared with the projected growth of 9-10%. The following occurrences in South Asia seem to be due to the impact of global reaction in South Asia:
1. Financial conditions deteriorated in developing countries, also reduced liquidity in the respective economies (India - some banking crunch, a few corporate postponed primary issues and joint ventures). Sharp decline in stock market and frozen real estate market
2. Sharp decline aggregate domestic demand and weak international demand for goods and services; reduction in industrial output
3. Reduced job opportunities, retrenchments and wage cuts (all countries in South Asia). India alone was estimated to have shed more that 500 thousand organized sectors employment during 2008, which is miniscule in terms of its share in the total labor market. Small and medium enterprise sector to suffer most. Increase in poverty and loss of gains in MDG goals likely.
4. In spite of declining commodity prices globally, country level inflationary tendencies, and food price increase (food price especially high in Pakistan and Bangladesh).
5. Drastic fall in global trade, Indonesia, Philippines, Turkey experience a decline of over 20%, India experience a 15 % decline in exports last year after a phenomenal 35% growth achieved previous years (World Bank, 2009). China and other Southeast Asia affected by a drastic fall in exports although not reached the negative side yet.
6. Overall decline in GDP (India recorded a lower 5.8% growth during last quarter of FY 2008-9 and the expected growth for the following quarters is also low).
7. Reports have begun to appear about steep increase in number of people affected by food vulnerability and hunger (UNICEF, 2009).
8. The internal and international economic migrations streams to stall and even reversed especially the rural-urban migration. It is likely that the laid-off nonfarm workforce returns to their respective rural areas and try to work on original occupations especially in agriculture causing serious labor market distortions and reduction in agricultural wages.
South Asian economies are experiencing a differentiated impact of the downturn; and the extent of impact depends upon the structure of the economy such as the extent of dependence on exports, whether it is a single or multiple commodity exporting country and the extent to which the country is dependent on imported capital inputs (FDI & FII) to manufacture exportable goods and intensity of labor used in manufacturing and so on. Consider, India whose export to the United States (which is under serious downturn) account for just over 3% of GDP and India has a healthy trade surplus with the United States. Yet India being a multi-commodity exporter, a number of sectors got adversely affected such as a total collapse of diamond and ornaments industry; steep reduction in textiles, garments and leather products which were exported in large quantities and many others. There has been a decline in overall export proceeds due to a 15% decline of exports in October 2008 and 19 % in February, 2009 (UNDP, 2009?). Industries have to build up now only on the strength of domestic demand and with steep reductions in market prices, which is not easy. The net result is high degree of unemployment of the labor engaged in manufacturing, and especially the migrant labor, mostly from rural areas but also from other urban locations working in a number of urban manufacturing growth centers. Yet only a fraction of Indian labor force is employed in the organized manufacturing sector (NCEUS, 2009; see also Table 1), since overwhelming proportion and size of labor is self employed and occupied in unorganized vocations both in rural and urban areas which are not integrated with the markets especially the global ones. This sector also gets affected albeit indirectly. The case of Pakistan is much more alarming as its economy is most vulnerable due to high fiscal and current account deficits, runaway inflation, dwindling foreign exchange reserves, a very weak currency and above all considerable internal security issues.
Linkage between Recession and Labor Markets
Long term effects on unemployment: In the absence of dependable data on employment and unemployment in south Asia, one is forced to review studies on the impact of recession on unemployment in developed economy such as the USA. Historically recessions have left traces of drastic fall in employment, a considerable size of addition to the unemployed during the medium term - upto 5 years. Schmitt and Baker (2008) estimate such impacts for the USA during the previous three recessions (of 1980-82, 1990-1991 and 2001) and also project impacts subsequent to 2008-9/10 recession under different scenarios. Accordingly, the rate of unemployment for example after the 1980-82 recession in the USA increased to 7.1%, 7.6, 9.7, 9.6 and 7.5 % during the five successive years from the peak year just before the recession when the rate was only 5.8. Similarly, the 2001 (March to November) recession pushed unemployment from only 4% to 4.7, 5.8, 6.0, 5.5 and 5.1 % respectively during the flowing five years. Further they provide the structure of unemployment according to gender, age and race to identify most vulnerable groups that suffer during the recessions, for example the teen and black-teen experienced higher unemployment rates of over 8% during the 2001 recession. Their projections for the 2008-9/10 recession in unemployment rates are as high as around 20% for the teen, 35-40% for black-teen, and 7-8% for Hispanics, even under the mild to moderate recession impact.
What is instructive from the above is the long term effect of recession on unemployment which lingers on for many years after the recession is over, and such impacts can be severe and longer in less developed economics such as those in South Asia. There are fewer studies assessing the impact of economic downturn or recession in the South Asian region.
The World Bank (2009) states, that the current economic crisis has increased poverty by 46 million by the end of 2008 itself (P.9). The UNCEF (2009) estimates just about 100 million more number of people in south Asia have become hungry and food vulnerable (P.2). The effect is transmitted to the poor through unemployment and wage effects. But vulnerability can further get accentuated through a number of indirect mechanisms operating though markets and contraction of consumer demand. Besides, in South Asia, the problem of vulnerability, food insecurity and poverty has exacerbated by country specific violent happenings of extreme order such as in Western parts of Pakistan, Northern Sri Lanka and in Nepal; and natural calamity in Bangladesh and parts (Bihar) of India. Period of recession is now setting in which is not yet well recognized in South Asia. Sectors having local markets are not suffering and in spite of a ‘sense of optimism’ and hope both amongst the poor and others, yet poor are getting affected. Some sectors that have suffered and also affect the poor are, the diamond industry (fully collapsed), recycling business has reduced to half (rag pickers deeply affected), and employment in construction industry has stood still. More micro occupations can be listed from all over south Asia.
Dualism in South Asian (labor) markets complicates the issues further: Broadly, South Asian economies are characteristic of dualism in growth and structure and in labor markets. For example the economy is split in to rural and urban areas with a heavy bias towards the latter. Similarly, large agricultural sector is entirely managed by individual farmers compared to industrial and modern services which are entirely organized and constantly infused with capital and technological inputs promoting unprecedented productivity growth. Similarly, the labor market is structured with informal and unorganized compared with formal and organized sectors. Even the so called organized sector in India employs almost one half of its workforce on casual informal basis (refer Table 1below) thus exposing them to the vagaries of recession. Such casual labor even while working in factory sector does not get coverage of the social security schemes meant for industrial workers.
In an effort to catch up with the west, so to speak, the south Asian economies especially, India and Pakistan have pursued heavy industrialization and modern services development which favor the urban and organized sectors, and mostly at the expense of rural and agricultural sectors. Even public investments are extremely low in rural agricultural sectors where the largest share and number of people are occupied. As a proportion or share, the poor concentrate in rural, agricultural and unorganized sectors where the policy focus is little if at all present.
The entire attention of the public policy, private finance and regulatory mechanism during the downturn has reprogrammed to address problems of the organized manufacturing and service sectors and mostly relevant for urban areas which already have high concentration of both physical and social infrastructure. The recession which has caused job losses in India too (World Bank, 2009) especially in the organized sector which was populated by the migrant labor, on their return to place of origin cause catastrophe in the local labor and wage market. In the absence of any social security for the displaced workers they are under extreme stress and suffering. This in turn has disturbed the labor wage market on the one side while demand for products produced in the rural, agricultural and unorganized sectors have declined due to the direct impact of recession in the first place. Thus the rural economy is now subjected to a kind of double whammy.
Table 1:
Relationship between Sector of Economy and Type of Employment
All Workers 1999-2000 and 2004-05
Formal/Informal Sector Total Employment (in percentage)
Informal/ Unorganized Worker Formal/ Organized Worker Total
2004-05
Informal/ Unorganized sector 99.6 0.4 86.3 (393.2)
Formal/Organized Sector 46.2 53.8 13.7 (62.6)
Total 92.3 7.7 100.0 (455.7)
1999-2000
Informal/ Unorganized sector 99.5 0.5 86.2 (341.5)
Formal/Organized Sector 42.1 57.9 13.8 (54.9)
Total 91.5 8.5 100.0 (396.4)
Note: Estimates based on the usual principle and subsidiary status of workers developed by the National Sample Survey Organization. Figures in parenthesis are in millions of workers.
Source: National Commission for Enterprises in the Unorganized Sector (NCEUS) (2009). The Challenge of Employment in India: An Informal Economy Perspective, Table 2.3, page no. 13. New Delhi. (Calculated by NCEUS using NSSO 55th and 61st Round Employment and Unemployment Survey).
Characteristics of labor markets in South Asia
People in populous economies typically depend for a living upon the rural and agricultural occupations. No other region compared to South Asia characterizes this scenario especially during the second half of the last century. Since about decade and half the south Asia especially India is identified as an emerging economy, where the role of rural occupations and farming is fast declining; while contributions from off-farm sectors such as manufacturing, trade and services has increase manifolds. What is less known is, the absence of concomitant shifts in labor force from the rural-traditional and less efficient occupations to urban oriented off-farm and apparently more productive occupations. Further the south Asian economies have a high growth of workforce which is more than 2% per annum. As mentioned earlier, most of the workforce is informal and they are also either illiterate or barely educated, and under skilled. There is also a general tendency to deny work opportunities to women seeking work.
India is characteristic of dualism in it labor market. But low growth of employment is not because of rigidities in labor market (NCEUS, 2009). Lately there has been a decline in overall employment, decline in wages and low growth of formal employment. Disconnect, between growth and employment appear a long lasting problem. There is also no expectation of growth of employment in formal sector employment even when the GDP growth remain high, in fact the Indian planning model did not put foundation of growth on formal sector, instead on small scale industries and micro-enterprises. New employment is capital intensive and not labor intensive in formal sector. There may be growing inequality which can be termed as the ‘latin americanization’ of India. Therefore, policy approach should favor massive investments in informal sectors - may be a shift in investment from formal sector necessary. Public and private sector issues are relevant in this context.
One also notice a slow movement of labor from agriculture to RNFE, yet the nonfarm sector is not able to provide high productivity employment in India, although relative to agriculture these sectors have registered high productivity growth (see Table 2). There is also feminization of agricultural and manual labor (NCEUS, 2008 –Report No2, Shariff, 2009), while the policy emphasis on non existing micro-enterprises (survey of enterprises). Lack of education amongst young labor force is alarming which threaten the very foundation for future GDP growth in the region.
Table 2
Shares of income and labor, and productivity ratios in Rural India
Share of
Income Share of
Labor Income/Labor ratios
%ge Change in
ratios
(1994) (2005) (1994) (2005) (1994) (2005)
Self employed 12 12.9 12.7 8.8 0.95 1.5 58.0
Salaried 16.5 20.4 10.4 9 1.6 2.3 44.0
Manual worker 6.3 12.8 9.8 15.8 0.64 0.81 27.0
Cultivator 55 33.1 43.7 42.3 1.26 0.78 -38.0
Ag Labor 7.9 12 23.5 24.1 0.34 0.5 47.0
Other residual* 2.4 8.8 --- --- --- --- ---
*Other residual is a source of income category but not an occupation
Source: Shariff (2009)
How does the crisis affect the informal economy?
It is estimated that during 2004-05, 420 million or 92 percent of labor force was engaged in informal economy; and only about 8 percent were occupied in the formal sectors in India. The informal workers are the self-employed including the cultivating farmers, casual wage laborers, street vendors to those who operate micro enterprises with less than ten workers, and those regular workers in the formal sector who are without any employment or social security and so on. Eighty-four percent of cultivators are marginal and small farmers operating not more than 2 hectares of land. Agricultural laborers, the bottom layer of the occupational structure, include a majority of workers from Scheduled Castes and Scheduled Tribes, and constitute around 89 million in the total labor force. This is also the poorest segment in the Indian economy from an occupational point of view.
It needs to be recognized that the impact of the crisis is not restricted to the larger, organized segments of industry and is indeed of a much more serious nature among those engaged in the informal economy. Consumption estimates, during the period of growth (1993-94 / 2004-05), suggest a rapid expansion roughly in the top two deciles, fuelling the growth, but the benefits of this growth principally bypassed the vast majority of the population (about 77%) who remained vulnerable with an average per capita daily consumption below Rs. 20. However, during the current slowdown, it is precisely these people, the poor and vulnerable, engaged in informal sector enterprises or informally employed by the formal sector, who will be affected the most adversely:
- the informal workers in the organized sector losing employment – in manufacturing, construction and tradetinal services sectors.
- Small producers who contribute more than 30% of exports and traders have suffered in sectors such as in handlooms, textiles, apparel, leather products, gems and jewellery, metal products, carpets, and various types of agricultural products such as spices, and marine fishery.
- Unorganized sector manufactures with investment below Rs. 5 lakh in ‘plant and machinery’ gets less than 2 percent of net bank credit, yet they are getting liquidated due to the economic downturn.
- Casual workers, the urban self-employed, and rural producers in the unorganized sector, including marginal farmers who are net buyers of food grains, have been affected in the recent months by the sharp upturn in the prices of food grains and the rate of inflation, depressing their real income.
The combined impact on the informal economy would be an increase in livelihood insecurity, decline in income and intensification in the conditions of poverty and vulnerability.
Pakistan has seen unusually large increase in food and every day commodities' prices coupled with the high fuel prices. Stock markets have suffered banks sans deposits and Pakistan rupee has seen a large downward trend. Pakistan gets most of its FDI from the west which has dried down. Pakistani exports are steeply reduced due to slowdown in the west. But so far Pakistan has escaped the recent economic turmoil emerging from the US and engulfing the developed European economies. But as the financial analysts go, it has created a situation loaded with immense possibilities for Pakistan. Top bankers are expecting a lot of eastward investment in the near future as options are drying out swiftly in the developed countries' markets. So far as the rural and informal economy is concerned the impact in Pakistan has been on the similar lines described for India.
Bangladesh has also seen considerable increase in food prices and it is only in April-May 2009 that India lifted the ban on rice export which will help reduce food price inflation in Bangladesh which imports rice from India. Bangladesh which was building up its economy through the value added export projects such as garments has got adversely affected due to downturn.
Nepal is one of the countries which have seen migration as an opportunity since long; the labor market is characteristic of long distance and often international (mostly to India) migration. A neighborly county good gesture of India is that labor migration from Nepal can happen without any restrictions generally imposed by rules of international travel such as restriction due to visa and permit requirements. But an adverse impact of recession in India is being felt in Nepal as many migrant workers will be returning back to Nepal. This will put unprecedented pressure in Nepal as well. Nepal which is experiencing political instability exacerbates the problem of dwindling economic fortunes.
Research Gaps in the area of Labor markets
Understanding the Push and the Pull Factors are important: The prevailing spatial market and non-market characteristics exert pull and push forces to both the capital and labor shifting from the inefficient to efficient sectors of the economy. In this regard the role of rural to urban migration is important. Besides the current trend of development of growth centers either in the form of ‘development corridors’, ‘urban peripheries’ or even the growth of medium and small towns which are promoting nonfarm employment and higher incomes are important to be explored. There could also be reverse association in the form of commutation, backward and forward market linkages in goods and services; and income from remittances from the urban to rural areas that will add richness to this analysis. Reverse migration may have taken a clear shape due to the impact of economic downturn which need to be studied.
Increasing role of remittances: Remittances are now a major source of household income both in rural and urban areas. Data on remittances has for the first time become available from the NSSO 64th round and also from NCAER-IHDS surveys, which can be analyzed.
Restructuring the production sectors due to declining role of land as productive asset: Another area worth exploring relates to the asset ownership profile of farmers, agricultural laborers, artisans and tradesmen in the agriculturally progressive versus marginal areas in India, Bangladesh and Pakistan. Given a long history of feudalism in the region, it would be appropriate to document changes in land ownership pattern after the Independence, subsequently after the green revolution period and in the contemporary context of consolidation of land both due to cultural factors and modern markets based on contract farming. While cultivable land appear to be the dominant asset, both productive as well as contractual in nature; many human capital enhancing assets such as formal education, skills and access to working capital would be denting the importance of land assets. Besides the breakdown of the jajmani system in the region seems to have released a large number of wage workers and artisan from the bondage; but could well have pushed them in penury due to the breakdown of traditional support systems; which then get linked with institutions supporting evolution of safety net mechanisms.
Productivity versus Safety Nets: Why growth in employment is low, what is it which is holding back employment generation, which formal sector not growing needs a study? Beside it is useful to focus on policies which aim for productivity growth versus and provisioning of safety nets. The institutional mechanisms, emanating either from public programs and/or market orientation cushion favorable changes in movement of labor, generate higher income or sustain welfare effects at the household level. One of the challenges in Asia is to accurately trace labor market mobility and associated income changes during fast pace of economic growth . Given that a good proportion of work force is employed in rural-agricultural vocations, it is imperative to understand the dynamics of rural life and survival strategies that people resort to. Further, labor market reforms in developing societies should be aimed to ensure fair distribution of income from out of expanding domestic product. This demands mechanisms that not only enhance household income but also enables food and nutrition adequacy and improves basic human capital such as levels of literacy; disease free enhancement of life expectancy and socio-culturally peaceful living.
Migration, Labor flexibility and Poverty in South Asia
Physical movement of labor, manifest in migration mostly from rural to urban; but also the other three identifiable streams including international has not been studied in-depth. Recent evidence suggests closer to 10% of Nepal’s population out migrated, mostly to (India) international destinations, contributing (Rs. 102.1billion 2006-7) over 14% to the GDP , and enabling 11% decline in poverty between 1994 and 2004 . Similarly, remittance from aboard is the largest foreign exchange earner which constitute over 8% of GDP in Bangladesh, and reduced poverty by 6 per cent . India, during 2006-7 received a net of US$ 27.8 billion in remittances which is over 10% of India’s foreign exchange reserve. The remittance for the year 2005-6 was 25.2 billion dollars and for two earlier years it averaged about US$ 22 billion in India. This suggests a substantial role that migration can play in building national economies as well as household welfare. On the similar lines, if one identifies the economic role of internal migration it becomes clear as to how important migration is in the growth process of economics in south Asia. Besides the economic benefits, concurrently there are a number of household level positive changes in attitudes, perceptions and livelihood strategies that take place due to migration. The subject matter of this study is to document the role of migration mostly (internal) in sustaining and improving rural livelihoods and reducing poverty.
Migration, an opportunity or distress: Migration a source to sustain income and consumption but can be at the cost of a decline in a number of human capital formation outcomes such as reduced schooling and literacy, increase vulnerability to sickness, family splits leading to emotional discard and increase in vulnerability. Yet migration has been seen as an opportunity especially by the land less labors, and surprisingly both the educated and illiterate from the rural areas. Concentration of economic activities in urban and semi-urban areas and higher casual wage rates in urban sectors of the economy probably provide the necessary motivating pull, but the push factors in the rural parts which can be due to both natural cause such as declining land productivity, increase pressure of population growth; and also policy neglect and low investment in agriculture.
Migration a bridge between Rural and Urban Economies: Rural and urban livelihoods are interconnected economically, financially, and socially. From a rural perspective, most farmers depend on urban markets to secure their livelihoods such as sale of agricultural produce often on a daily basis such as supply of milk, fruits, vegetables, poultry and so on. Rural households generally depend on cities and towns to access various institutional services such as from hospitals, schools and colleges, banks, and government offices) and for the provision of various private and public goods. The rural households also benefits from remittances sent by family members who migrated to urban areas on employment.
Urban areas are similarly linked to the rural sector, for example, various large businesses and enterprises depend on rural demand for their goods and services (bicycles, ratdios, TVs, FMGC products, seeds and fertilizer, IT enabled communications and so on). Urban areas also rely on rural areas for the supply of raw materials. Urban consumers, on the other hand, benefit from sustained food supply from rural areas. Many poor urban households partly depend on rural activities (e.g., farming) for their livelihoods. The rural sector can also act as a buffer from the impact of macroeconomic shocks on the urban economy. Links between the rural and urban sectors also include flows of information, such as markets and employment opportunities, as well as flows of people moving between rural and urban centers on a temporary or permanent basis
Policies that strengthen or weaken migration
• Inhibiting trade been districts, states, and rural and urban areas by using taxation policies or outright ban.
• Agricultural policies protect urban households, e.g., from high food prices, can indirectly stymie agricultural investment. Low commodity prices discourage farmers from continuing and expanding production, not only affecting the desirability to allocate capital into agriculture, but also potentially creating food shortages
• State policies can discourage people from moving freely between regions, historically there are barriers to labor mobility. Differences emerging from cultural and linguistic differences and variations in life style factors such as food habits and so on can inhibit migration. Besides local politics seeking favors especially jobs, permits and so on only for local population, often referred to as ‘sons of the soil’ policies discourage interstate as well as rural to urban migration.
• Limiting provisions such as housing, water, electricity, roads to living localities populated by migrants
• Limiting social services such as education, health and nutrition/ food access to migrant families. Rural out-migrants usually are unable to claim state benefits in urban areas of India and China (Deshingkar, 2006).
Refined Understanding of Links between Migration and Poverty
The dynamics of migration differs considerably by its type. The characterization of migration streams is not very well documented in economic literature, especially in south Asia, due mostly to want of data and definitional issues. Distinctions, for example, between rural-to-urban and rural-to-rural, just to name two of the four major streams is important. Similarly, distinction between internal and international migration is another useful characterization. Another way is to identify life time versus circular migration which carry very different dynamics; and the intermediating ‘step-wise’ migration in which a migrant cautiously moves over to the final destination after taking a number of shorter and smaller migration moves over time. A recent research , for example, has found that the impact of household welfare especially on gender specific child schooling and health differed substantially depending upon whether the economic migration was within ‘district’, ‘within state but out of district’ and ‘out of state’ migration.
The available data from surveys do not capture many of the variations in migration enunciated above especially the short term and circular migration. Migration is an intermediating process which generally breaks a household, often leaving women, children, the old and infirm vulnerable. Yet this same vulnerability may turn out to be a factor leading to empowerment of women in the rural areas. One such evidence has been feminization of Indian agriculture, the skeptics use this as an evidence of distress but one can look at this phenomenon as empowerment of women instead. Women’s control over resources generally leads to better human capital output indicator such as better education and health conditions of children.
Migration in the south Asian context is considered a sign of distress. A historical assessment of migration since the partition provides credence to such a hypothesis. Often the migrants originating from rural areas belong to asset less households such as the landless, small / marginal farmers (for example, migrant agricultural labour to Indian Punjab from Bihar and Eastern Uttar Pradesh), low castes such as the dalits, tribal groups (for example, migration from high lands and mountains to tarai regions in Nepal) and minorities (for example, Muslims in India and Hindus in Bangladesh). Such high propensity migration often leads to permanent or life time migration as well. This dynamics of migration has immense relevance to the future of social cohesion and peaceful living within a country or region. Further migrating adult male members leave behind dependents who can get into distress and penury. The proposed study intends to document and empirically measure various aspects of class and caste hierarchies, power structures, gender relations, social cohesion and historical factors that have a bearing on migration of people / households and relative impact on livelihoods.
Firstly there is a need to assess migration streams using data from large scale sample survey of households in Bangladesh, India, Nepal and Pakistan Longitudinal datasets are useful in understanding change over time in critical variables at the household level such as occupations, assets, poverty/wealth status. A number of qualitative studies needs to be launched so as to get complementary information to substantiate the quantitative data analysis. Qualitative study and in depth interviews will highlight village level processes and individual life trajectories in response to wider changes (environmental, market and policy).
Hypotheses - Migration, labor mobility and poverty:
• What are the patterns of labor migration in each of the countries? Is there evidence of large-scale movement of labor from low-productivity regions to high-productivity regions?
• To what extent has the shift from farm to nonfarm income sources occurred via migration? In other words, has income diversification taken place through migration of some family members to urban areas?
• Remittances now form a large share of household income both in rural and urban areas of South Asia. Even in India, its importance has increased. New data available from NSSO 63rd round data and data from NCAER’s IHDS can be analyzed to find out the poverty reducing impact of migration linked remittances.
• What types of occupations (using the three-digit International Standard Classification of Occupations) have seen growth, and which occupations have seen a decline, over the last two decades in each of the seven countries?
The frame of analysis of ‘migration and its impact’ must begin with analyzing the economic structure and labor market imperfections followed by the process and mechanisms that in turn determine impact and outcomes. The outcomes in this research are to be identified at the levels of household and community. The set of questions which will be used in both quantitative as well as qualitative approaches are listed below:
a) Economic structure, migration and market imperfections
• Economic structure and income/GDP profiling by source with a focus on rural urban differentials.
• What type of labor market imperfections are promoting migration flows. Is it linked with rural - urban or interregional wage differences?
• What kind of strategy is adopted by migrants to enhance income and savings leading to remittances?
• Role of migration in sustaining household income and impact of remittances on poverty.
• Identify uninsured risks that need to be addressed by public policy?
b) Societal factors and household level social process
• What are the social drivers of migration at the intra-household level and at the village level (e.g. historical connections with certain destinations) and how these vary by social groups?
• The relationship between income and occupation, education, skills; which social groups are excluded from well paid jobs and for what reasons?
• Migration as a response to differential needs – (short versus long term).
• The impact of migration on assets, durables, education, social standing, creditworthiness and how this differs by caste and gender.
c) Gender response and outcomes
Gendered response will be investigated in four different perspectives: (a) implications for the individual woman, (b) implications for the household, (c) implications for the society, and (d) implications for agriculture. The expectation is that while woman assumes a greater role in household decision making as a consequence of migration of a male household member; and over a period of time it generate a number of women empowering effects which will operate through her own self, human capital formation of children, through a number of public and social goods and even improvements in agricultural productivity.
Bibliography and References:
Mujahid, G. B. S (2007). Rural-urban migration, urban underemployment and earnings differentials in Pakistan, Review of World Economics, 111(3):585-598.
Schmitt, J and Dean Baker 2008. ‘What we’re in for: Projected Economic Impact of the next recession’, a paper of the Center for Economic and Policy Research, Washington DC. (www.cepr.nt).
Admes H Richard Jr and Jane J. He (1995) Source of income inequality and poverty in rural Pakistan, Report No. 102, Washington DC: International Food Policy Research Institute.
Muller, Valerie and A. Shariff, 2008. ‘Can Migration Improve Living Standards in Developing Countries? Internal Migration and Welfare in India’, International Food Policy Research Institute, Washington DC, (December).
World Bank 2009. ‘Swimming against the tide: How developing countries are coping with the global crisis’. Background paper prepared by the World Bank Staff for the G20 Finance Ministers and Central Bank Governors meeting, Horsham, the UK, March 13-14.
Behrman, Jere, R (1988). ‘The impact of economic adjustment programs’ in Bell, David E and Michael R. Reich (eds.) Health, Nutrition, and Economic Crisis: Approaches to Policy in the third World, Dover, Massachusetts: Auburn House Publishing Co.
UNICEF (2009). A Matter of Magnitude: The Impact of the economic crisis on women and children in south Asia. Katmandu: Unicef Regional Office.
Key characteristics of the economic downturn / recession
Economic downturn/recession being experience during 2008-9 and still continuing has a global spread and most developed and many developing countries affected; in fact it all began from the USA, UK and Europe. Recession affected ability to sustain domestic demand mostly due to failure to sustain mortgages which triggered a banking crisis affecting investments, stalling large businesses especially those dependent upon global, multilateral and bilateral cross country production and distribution anchored on international trade. The global production slumped by 20% in the fourth quarter of 2008 (The World Bank, 2009). The average citizens across the developed economies especially, the USA which accounts for over a quarter of global business followed by many nations in Europe (eastern), experienced a decline in real income, postponed and/or squeezed household expenditures. This affected investments, production and trade in countries far and wide who supplied consumer goods and services to the developed world. Asia, especially countries which were dependent upon external trade for growth suffered most such as Japan, China, Korea, and India and so on.
By the time this contagion was taking place there were multiple channels through which the depression affected the households and labor markets. Noteworthy are sudden retrenchments and possibly wage cuts. However, almost the same time (and it is not co-incidental) that during the early period of the downturn oil prices touched the new high crossing USD 100/- and proceed further topping $140/-, unusually large increase in food price without major shortages in food stocks, increase in real rate of interest mostly in developing economies and tightening of credit and commodity markets. Economic slowdown can also be associated with falling prices known as deflation due to lack of demand of products. Again, it could be the result of inflation or a combination of increasing prices and stagnant economic growth in the west.
Although none of the countries in South Asia have recorded negative rates of growth yet, they indeed have experienced a steep decline in rate of growth. For example, India recorded a GDP growth of 6.7% in 2008-9 (CSO, quarterly estimates) lower than 8.7% growth of 2007-8 (Economic Survey, 2007-8)and a considerably low growth compared with the projected growth of 9-10%. The following occurrences in South Asia seem to be due to the impact of global reaction in South Asia:
1. Financial conditions deteriorated in developing countries, also reduced liquidity in the respective economies (India - some banking crunch, a few corporate postponed primary issues and joint ventures). Sharp decline in stock market and frozen real estate market
2. Sharp decline aggregate domestic demand and weak international demand for goods and services; reduction in industrial output
3. Reduced job opportunities, retrenchments and wage cuts (all countries in South Asia). India alone was estimated to have shed more that 500 thousand organized sectors employment during 2008, which is miniscule in terms of its share in the total labor market. Small and medium enterprise sector to suffer most. Increase in poverty and loss of gains in MDG goals likely.
4. In spite of declining commodity prices globally, country level inflationary tendencies, and food price increase (food price especially high in Pakistan and Bangladesh).
5. Drastic fall in global trade, Indonesia, Philippines, Turkey experience a decline of over 20%, India experience a 15 % decline in exports last year after a phenomenal 35% growth achieved previous years (World Bank, 2009). China and other Southeast Asia affected by a drastic fall in exports although not reached the negative side yet.
6. Overall decline in GDP (India recorded a lower 5.8% growth during last quarter of FY 2008-9 and the expected growth for the following quarters is also low).
7. Reports have begun to appear about steep increase in number of people affected by food vulnerability and hunger (UNICEF, 2009).
8. The internal and international economic migrations streams to stall and even reversed especially the rural-urban migration. It is likely that the laid-off nonfarm workforce returns to their respective rural areas and try to work on original occupations especially in agriculture causing serious labor market distortions and reduction in agricultural wages.
South Asian economies are experiencing a differentiated impact of the downturn; and the extent of impact depends upon the structure of the economy such as the extent of dependence on exports, whether it is a single or multiple commodity exporting country and the extent to which the country is dependent on imported capital inputs (FDI & FII) to manufacture exportable goods and intensity of labor used in manufacturing and so on. Consider, India whose export to the United States (which is under serious downturn) account for just over 3% of GDP and India has a healthy trade surplus with the United States. Yet India being a multi-commodity exporter, a number of sectors got adversely affected such as a total collapse of diamond and ornaments industry; steep reduction in textiles, garments and leather products which were exported in large quantities and many others. There has been a decline in overall export proceeds due to a 15% decline of exports in October 2008 and 19 % in February, 2009 (UNDP, 2009?). Industries have to build up now only on the strength of domestic demand and with steep reductions in market prices, which is not easy. The net result is high degree of unemployment of the labor engaged in manufacturing, and especially the migrant labor, mostly from rural areas but also from other urban locations working in a number of urban manufacturing growth centers. Yet only a fraction of Indian labor force is employed in the organized manufacturing sector (NCEUS, 2009; see also Table 1), since overwhelming proportion and size of labor is self employed and occupied in unorganized vocations both in rural and urban areas which are not integrated with the markets especially the global ones. This sector also gets affected albeit indirectly. The case of Pakistan is much more alarming as its economy is most vulnerable due to high fiscal and current account deficits, runaway inflation, dwindling foreign exchange reserves, a very weak currency and above all considerable internal security issues.
Linkage between Recession and Labor Markets
Long term effects on unemployment: In the absence of dependable data on employment and unemployment in south Asia, one is forced to review studies on the impact of recession on unemployment in developed economy such as the USA. Historically recessions have left traces of drastic fall in employment, a considerable size of addition to the unemployed during the medium term - upto 5 years. Schmitt and Baker (2008) estimate such impacts for the USA during the previous three recessions (of 1980-82, 1990-1991 and 2001) and also project impacts subsequent to 2008-9/10 recession under different scenarios. Accordingly, the rate of unemployment for example after the 1980-82 recession in the USA increased to 7.1%, 7.6, 9.7, 9.6 and 7.5 % during the five successive years from the peak year just before the recession when the rate was only 5.8. Similarly, the 2001 (March to November) recession pushed unemployment from only 4% to 4.7, 5.8, 6.0, 5.5 and 5.1 % respectively during the flowing five years. Further they provide the structure of unemployment according to gender, age and race to identify most vulnerable groups that suffer during the recessions, for example the teen and black-teen experienced higher unemployment rates of over 8% during the 2001 recession. Their projections for the 2008-9/10 recession in unemployment rates are as high as around 20% for the teen, 35-40% for black-teen, and 7-8% for Hispanics, even under the mild to moderate recession impact.
What is instructive from the above is the long term effect of recession on unemployment which lingers on for many years after the recession is over, and such impacts can be severe and longer in less developed economics such as those in South Asia. There are fewer studies assessing the impact of economic downturn or recession in the South Asian region.
The World Bank (2009) states, that the current economic crisis has increased poverty by 46 million by the end of 2008 itself (P.9). The UNCEF (2009) estimates just about 100 million more number of people in south Asia have become hungry and food vulnerable (P.2). The effect is transmitted to the poor through unemployment and wage effects. But vulnerability can further get accentuated through a number of indirect mechanisms operating though markets and contraction of consumer demand. Besides, in South Asia, the problem of vulnerability, food insecurity and poverty has exacerbated by country specific violent happenings of extreme order such as in Western parts of Pakistan, Northern Sri Lanka and in Nepal; and natural calamity in Bangladesh and parts (Bihar) of India. Period of recession is now setting in which is not yet well recognized in South Asia. Sectors having local markets are not suffering and in spite of a ‘sense of optimism’ and hope both amongst the poor and others, yet poor are getting affected. Some sectors that have suffered and also affect the poor are, the diamond industry (fully collapsed), recycling business has reduced to half (rag pickers deeply affected), and employment in construction industry has stood still. More micro occupations can be listed from all over south Asia.
Dualism in South Asian (labor) markets complicates the issues further: Broadly, South Asian economies are characteristic of dualism in growth and structure and in labor markets. For example the economy is split in to rural and urban areas with a heavy bias towards the latter. Similarly, large agricultural sector is entirely managed by individual farmers compared to industrial and modern services which are entirely organized and constantly infused with capital and technological inputs promoting unprecedented productivity growth. Similarly, the labor market is structured with informal and unorganized compared with formal and organized sectors. Even the so called organized sector in India employs almost one half of its workforce on casual informal basis (refer Table 1below) thus exposing them to the vagaries of recession. Such casual labor even while working in factory sector does not get coverage of the social security schemes meant for industrial workers.
In an effort to catch up with the west, so to speak, the south Asian economies especially, India and Pakistan have pursued heavy industrialization and modern services development which favor the urban and organized sectors, and mostly at the expense of rural and agricultural sectors. Even public investments are extremely low in rural agricultural sectors where the largest share and number of people are occupied. As a proportion or share, the poor concentrate in rural, agricultural and unorganized sectors where the policy focus is little if at all present.
The entire attention of the public policy, private finance and regulatory mechanism during the downturn has reprogrammed to address problems of the organized manufacturing and service sectors and mostly relevant for urban areas which already have high concentration of both physical and social infrastructure. The recession which has caused job losses in India too (World Bank, 2009) especially in the organized sector which was populated by the migrant labor, on their return to place of origin cause catastrophe in the local labor and wage market. In the absence of any social security for the displaced workers they are under extreme stress and suffering. This in turn has disturbed the labor wage market on the one side while demand for products produced in the rural, agricultural and unorganized sectors have declined due to the direct impact of recession in the first place. Thus the rural economy is now subjected to a kind of double whammy.
Table 1:
Relationship between Sector of Economy and Type of Employment
All Workers 1999-2000 and 2004-05
Formal/Informal Sector Total Employment (in percentage)
Informal/ Unorganized Worker Formal/ Organized Worker Total
2004-05
Informal/ Unorganized sector 99.6 0.4 86.3 (393.2)
Formal/Organized Sector 46.2 53.8 13.7 (62.6)
Total 92.3 7.7 100.0 (455.7)
1999-2000
Informal/ Unorganized sector 99.5 0.5 86.2 (341.5)
Formal/Organized Sector 42.1 57.9 13.8 (54.9)
Total 91.5 8.5 100.0 (396.4)
Note: Estimates based on the usual principle and subsidiary status of workers developed by the National Sample Survey Organization. Figures in parenthesis are in millions of workers.
Source: National Commission for Enterprises in the Unorganized Sector (NCEUS) (2009). The Challenge of Employment in India: An Informal Economy Perspective, Table 2.3, page no. 13. New Delhi. (Calculated by NCEUS using NSSO 55th and 61st Round Employment and Unemployment Survey).
Characteristics of labor markets in South Asia
People in populous economies typically depend for a living upon the rural and agricultural occupations. No other region compared to South Asia characterizes this scenario especially during the second half of the last century. Since about decade and half the south Asia especially India is identified as an emerging economy, where the role of rural occupations and farming is fast declining; while contributions from off-farm sectors such as manufacturing, trade and services has increase manifolds. What is less known is, the absence of concomitant shifts in labor force from the rural-traditional and less efficient occupations to urban oriented off-farm and apparently more productive occupations. Further the south Asian economies have a high growth of workforce which is more than 2% per annum. As mentioned earlier, most of the workforce is informal and they are also either illiterate or barely educated, and under skilled. There is also a general tendency to deny work opportunities to women seeking work.
India is characteristic of dualism in it labor market. But low growth of employment is not because of rigidities in labor market (NCEUS, 2009). Lately there has been a decline in overall employment, decline in wages and low growth of formal employment. Disconnect, between growth and employment appear a long lasting problem. There is also no expectation of growth of employment in formal sector employment even when the GDP growth remain high, in fact the Indian planning model did not put foundation of growth on formal sector, instead on small scale industries and micro-enterprises. New employment is capital intensive and not labor intensive in formal sector. There may be growing inequality which can be termed as the ‘latin americanization’ of India. Therefore, policy approach should favor massive investments in informal sectors - may be a shift in investment from formal sector necessary. Public and private sector issues are relevant in this context.
One also notice a slow movement of labor from agriculture to RNFE, yet the nonfarm sector is not able to provide high productivity employment in India, although relative to agriculture these sectors have registered high productivity growth (see Table 2). There is also feminization of agricultural and manual labor (NCEUS, 2008 –Report No2, Shariff, 2009), while the policy emphasis on non existing micro-enterprises (survey of enterprises). Lack of education amongst young labor force is alarming which threaten the very foundation for future GDP growth in the region.
Table 2
Shares of income and labor, and productivity ratios in Rural India
Share of
Income Share of
Labor Income/Labor ratios
%ge Change in
ratios
(1994) (2005) (1994) (2005) (1994) (2005)
Self employed 12 12.9 12.7 8.8 0.95 1.5 58.0
Salaried 16.5 20.4 10.4 9 1.6 2.3 44.0
Manual worker 6.3 12.8 9.8 15.8 0.64 0.81 27.0
Cultivator 55 33.1 43.7 42.3 1.26 0.78 -38.0
Ag Labor 7.9 12 23.5 24.1 0.34 0.5 47.0
Other residual* 2.4 8.8 --- --- --- --- ---
*Other residual is a source of income category but not an occupation
Source: Shariff (2009)
How does the crisis affect the informal economy?
It is estimated that during 2004-05, 420 million or 92 percent of labor force was engaged in informal economy; and only about 8 percent were occupied in the formal sectors in India. The informal workers are the self-employed including the cultivating farmers, casual wage laborers, street vendors to those who operate micro enterprises with less than ten workers, and those regular workers in the formal sector who are without any employment or social security and so on. Eighty-four percent of cultivators are marginal and small farmers operating not more than 2 hectares of land. Agricultural laborers, the bottom layer of the occupational structure, include a majority of workers from Scheduled Castes and Scheduled Tribes, and constitute around 89 million in the total labor force. This is also the poorest segment in the Indian economy from an occupational point of view.
It needs to be recognized that the impact of the crisis is not restricted to the larger, organized segments of industry and is indeed of a much more serious nature among those engaged in the informal economy. Consumption estimates, during the period of growth (1993-94 / 2004-05), suggest a rapid expansion roughly in the top two deciles, fuelling the growth, but the benefits of this growth principally bypassed the vast majority of the population (about 77%) who remained vulnerable with an average per capita daily consumption below Rs. 20. However, during the current slowdown, it is precisely these people, the poor and vulnerable, engaged in informal sector enterprises or informally employed by the formal sector, who will be affected the most adversely:
- the informal workers in the organized sector losing employment – in manufacturing, construction and tradetinal services sectors.
- Small producers who contribute more than 30% of exports and traders have suffered in sectors such as in handlooms, textiles, apparel, leather products, gems and jewellery, metal products, carpets, and various types of agricultural products such as spices, and marine fishery.
- Unorganized sector manufactures with investment below Rs. 5 lakh in ‘plant and machinery’ gets less than 2 percent of net bank credit, yet they are getting liquidated due to the economic downturn.
- Casual workers, the urban self-employed, and rural producers in the unorganized sector, including marginal farmers who are net buyers of food grains, have been affected in the recent months by the sharp upturn in the prices of food grains and the rate of inflation, depressing their real income.
The combined impact on the informal economy would be an increase in livelihood insecurity, decline in income and intensification in the conditions of poverty and vulnerability.
Pakistan has seen unusually large increase in food and every day commodities' prices coupled with the high fuel prices. Stock markets have suffered banks sans deposits and Pakistan rupee has seen a large downward trend. Pakistan gets most of its FDI from the west which has dried down. Pakistani exports are steeply reduced due to slowdown in the west. But so far Pakistan has escaped the recent economic turmoil emerging from the US and engulfing the developed European economies. But as the financial analysts go, it has created a situation loaded with immense possibilities for Pakistan. Top bankers are expecting a lot of eastward investment in the near future as options are drying out swiftly in the developed countries' markets. So far as the rural and informal economy is concerned the impact in Pakistan has been on the similar lines described for India.
Bangladesh has also seen considerable increase in food prices and it is only in April-May 2009 that India lifted the ban on rice export which will help reduce food price inflation in Bangladesh which imports rice from India. Bangladesh which was building up its economy through the value added export projects such as garments has got adversely affected due to downturn.
Nepal is one of the countries which have seen migration as an opportunity since long; the labor market is characteristic of long distance and often international (mostly to India) migration. A neighborly county good gesture of India is that labor migration from Nepal can happen without any restrictions generally imposed by rules of international travel such as restriction due to visa and permit requirements. But an adverse impact of recession in India is being felt in Nepal as many migrant workers will be returning back to Nepal. This will put unprecedented pressure in Nepal as well. Nepal which is experiencing political instability exacerbates the problem of dwindling economic fortunes.
Research Gaps in the area of Labor markets
Understanding the Push and the Pull Factors are important: The prevailing spatial market and non-market characteristics exert pull and push forces to both the capital and labor shifting from the inefficient to efficient sectors of the economy. In this regard the role of rural to urban migration is important. Besides the current trend of development of growth centers either in the form of ‘development corridors’, ‘urban peripheries’ or even the growth of medium and small towns which are promoting nonfarm employment and higher incomes are important to be explored. There could also be reverse association in the form of commutation, backward and forward market linkages in goods and services; and income from remittances from the urban to rural areas that will add richness to this analysis. Reverse migration may have taken a clear shape due to the impact of economic downturn which need to be studied.
Increasing role of remittances: Remittances are now a major source of household income both in rural and urban areas. Data on remittances has for the first time become available from the NSSO 64th round and also from NCAER-IHDS surveys, which can be analyzed.
Restructuring the production sectors due to declining role of land as productive asset: Another area worth exploring relates to the asset ownership profile of farmers, agricultural laborers, artisans and tradesmen in the agriculturally progressive versus marginal areas in India, Bangladesh and Pakistan. Given a long history of feudalism in the region, it would be appropriate to document changes in land ownership pattern after the Independence, subsequently after the green revolution period and in the contemporary context of consolidation of land both due to cultural factors and modern markets based on contract farming. While cultivable land appear to be the dominant asset, both productive as well as contractual in nature; many human capital enhancing assets such as formal education, skills and access to working capital would be denting the importance of land assets. Besides the breakdown of the jajmani system in the region seems to have released a large number of wage workers and artisan from the bondage; but could well have pushed them in penury due to the breakdown of traditional support systems; which then get linked with institutions supporting evolution of safety net mechanisms.
Productivity versus Safety Nets: Why growth in employment is low, what is it which is holding back employment generation, which formal sector not growing needs a study? Beside it is useful to focus on policies which aim for productivity growth versus and provisioning of safety nets. The institutional mechanisms, emanating either from public programs and/or market orientation cushion favorable changes in movement of labor, generate higher income or sustain welfare effects at the household level. One of the challenges in Asia is to accurately trace labor market mobility and associated income changes during fast pace of economic growth . Given that a good proportion of work force is employed in rural-agricultural vocations, it is imperative to understand the dynamics of rural life and survival strategies that people resort to. Further, labor market reforms in developing societies should be aimed to ensure fair distribution of income from out of expanding domestic product. This demands mechanisms that not only enhance household income but also enables food and nutrition adequacy and improves basic human capital such as levels of literacy; disease free enhancement of life expectancy and socio-culturally peaceful living.
Migration, Labor flexibility and Poverty in South Asia
Physical movement of labor, manifest in migration mostly from rural to urban; but also the other three identifiable streams including international has not been studied in-depth. Recent evidence suggests closer to 10% of Nepal’s population out migrated, mostly to (India) international destinations, contributing (Rs. 102.1billion 2006-7) over 14% to the GDP , and enabling 11% decline in poverty between 1994 and 2004 . Similarly, remittance from aboard is the largest foreign exchange earner which constitute over 8% of GDP in Bangladesh, and reduced poverty by 6 per cent . India, during 2006-7 received a net of US$ 27.8 billion in remittances which is over 10% of India’s foreign exchange reserve. The remittance for the year 2005-6 was 25.2 billion dollars and for two earlier years it averaged about US$ 22 billion in India. This suggests a substantial role that migration can play in building national economies as well as household welfare. On the similar lines, if one identifies the economic role of internal migration it becomes clear as to how important migration is in the growth process of economics in south Asia. Besides the economic benefits, concurrently there are a number of household level positive changes in attitudes, perceptions and livelihood strategies that take place due to migration. The subject matter of this study is to document the role of migration mostly (internal) in sustaining and improving rural livelihoods and reducing poverty.
Migration, an opportunity or distress: Migration a source to sustain income and consumption but can be at the cost of a decline in a number of human capital formation outcomes such as reduced schooling and literacy, increase vulnerability to sickness, family splits leading to emotional discard and increase in vulnerability. Yet migration has been seen as an opportunity especially by the land less labors, and surprisingly both the educated and illiterate from the rural areas. Concentration of economic activities in urban and semi-urban areas and higher casual wage rates in urban sectors of the economy probably provide the necessary motivating pull, but the push factors in the rural parts which can be due to both natural cause such as declining land productivity, increase pressure of population growth; and also policy neglect and low investment in agriculture.
Migration a bridge between Rural and Urban Economies: Rural and urban livelihoods are interconnected economically, financially, and socially. From a rural perspective, most farmers depend on urban markets to secure their livelihoods such as sale of agricultural produce often on a daily basis such as supply of milk, fruits, vegetables, poultry and so on. Rural households generally depend on cities and towns to access various institutional services such as from hospitals, schools and colleges, banks, and government offices) and for the provision of various private and public goods. The rural households also benefits from remittances sent by family members who migrated to urban areas on employment.
Urban areas are similarly linked to the rural sector, for example, various large businesses and enterprises depend on rural demand for their goods and services (bicycles, ratdios, TVs, FMGC products, seeds and fertilizer, IT enabled communications and so on). Urban areas also rely on rural areas for the supply of raw materials. Urban consumers, on the other hand, benefit from sustained food supply from rural areas. Many poor urban households partly depend on rural activities (e.g., farming) for their livelihoods. The rural sector can also act as a buffer from the impact of macroeconomic shocks on the urban economy. Links between the rural and urban sectors also include flows of information, such as markets and employment opportunities, as well as flows of people moving between rural and urban centers on a temporary or permanent basis
Policies that strengthen or weaken migration
• Inhibiting trade been districts, states, and rural and urban areas by using taxation policies or outright ban.
• Agricultural policies protect urban households, e.g., from high food prices, can indirectly stymie agricultural investment. Low commodity prices discourage farmers from continuing and expanding production, not only affecting the desirability to allocate capital into agriculture, but also potentially creating food shortages
• State policies can discourage people from moving freely between regions, historically there are barriers to labor mobility. Differences emerging from cultural and linguistic differences and variations in life style factors such as food habits and so on can inhibit migration. Besides local politics seeking favors especially jobs, permits and so on only for local population, often referred to as ‘sons of the soil’ policies discourage interstate as well as rural to urban migration.
• Limiting provisions such as housing, water, electricity, roads to living localities populated by migrants
• Limiting social services such as education, health and nutrition/ food access to migrant families. Rural out-migrants usually are unable to claim state benefits in urban areas of India and China (Deshingkar, 2006).
Refined Understanding of Links between Migration and Poverty
The dynamics of migration differs considerably by its type. The characterization of migration streams is not very well documented in economic literature, especially in south Asia, due mostly to want of data and definitional issues. Distinctions, for example, between rural-to-urban and rural-to-rural, just to name two of the four major streams is important. Similarly, distinction between internal and international migration is another useful characterization. Another way is to identify life time versus circular migration which carry very different dynamics; and the intermediating ‘step-wise’ migration in which a migrant cautiously moves over to the final destination after taking a number of shorter and smaller migration moves over time. A recent research , for example, has found that the impact of household welfare especially on gender specific child schooling and health differed substantially depending upon whether the economic migration was within ‘district’, ‘within state but out of district’ and ‘out of state’ migration.
The available data from surveys do not capture many of the variations in migration enunciated above especially the short term and circular migration. Migration is an intermediating process which generally breaks a household, often leaving women, children, the old and infirm vulnerable. Yet this same vulnerability may turn out to be a factor leading to empowerment of women in the rural areas. One such evidence has been feminization of Indian agriculture, the skeptics use this as an evidence of distress but one can look at this phenomenon as empowerment of women instead. Women’s control over resources generally leads to better human capital output indicator such as better education and health conditions of children.
Migration in the south Asian context is considered a sign of distress. A historical assessment of migration since the partition provides credence to such a hypothesis. Often the migrants originating from rural areas belong to asset less households such as the landless, small / marginal farmers (for example, migrant agricultural labour to Indian Punjab from Bihar and Eastern Uttar Pradesh), low castes such as the dalits, tribal groups (for example, migration from high lands and mountains to tarai regions in Nepal) and minorities (for example, Muslims in India and Hindus in Bangladesh). Such high propensity migration often leads to permanent or life time migration as well. This dynamics of migration has immense relevance to the future of social cohesion and peaceful living within a country or region. Further migrating adult male members leave behind dependents who can get into distress and penury. The proposed study intends to document and empirically measure various aspects of class and caste hierarchies, power structures, gender relations, social cohesion and historical factors that have a bearing on migration of people / households and relative impact on livelihoods.
Firstly there is a need to assess migration streams using data from large scale sample survey of households in Bangladesh, India, Nepal and Pakistan Longitudinal datasets are useful in understanding change over time in critical variables at the household level such as occupations, assets, poverty/wealth status. A number of qualitative studies needs to be launched so as to get complementary information to substantiate the quantitative data analysis. Qualitative study and in depth interviews will highlight village level processes and individual life trajectories in response to wider changes (environmental, market and policy).
Hypotheses - Migration, labor mobility and poverty:
• What are the patterns of labor migration in each of the countries? Is there evidence of large-scale movement of labor from low-productivity regions to high-productivity regions?
• To what extent has the shift from farm to nonfarm income sources occurred via migration? In other words, has income diversification taken place through migration of some family members to urban areas?
• Remittances now form a large share of household income both in rural and urban areas of South Asia. Even in India, its importance has increased. New data available from NSSO 63rd round data and data from NCAER’s IHDS can be analyzed to find out the poverty reducing impact of migration linked remittances.
• What types of occupations (using the three-digit International Standard Classification of Occupations) have seen growth, and which occupations have seen a decline, over the last two decades in each of the seven countries?
The frame of analysis of ‘migration and its impact’ must begin with analyzing the economic structure and labor market imperfections followed by the process and mechanisms that in turn determine impact and outcomes. The outcomes in this research are to be identified at the levels of household and community. The set of questions which will be used in both quantitative as well as qualitative approaches are listed below:
a) Economic structure, migration and market imperfections
• Economic structure and income/GDP profiling by source with a focus on rural urban differentials.
• What type of labor market imperfections are promoting migration flows. Is it linked with rural - urban or interregional wage differences?
• What kind of strategy is adopted by migrants to enhance income and savings leading to remittances?
• Role of migration in sustaining household income and impact of remittances on poverty.
• Identify uninsured risks that need to be addressed by public policy?
b) Societal factors and household level social process
• What are the social drivers of migration at the intra-household level and at the village level (e.g. historical connections with certain destinations) and how these vary by social groups?
• The relationship between income and occupation, education, skills; which social groups are excluded from well paid jobs and for what reasons?
• Migration as a response to differential needs – (short versus long term).
• The impact of migration on assets, durables, education, social standing, creditworthiness and how this differs by caste and gender.
c) Gender response and outcomes
Gendered response will be investigated in four different perspectives: (a) implications for the individual woman, (b) implications for the household, (c) implications for the society, and (d) implications for agriculture. The expectation is that while woman assumes a greater role in household decision making as a consequence of migration of a male household member; and over a period of time it generate a number of women empowering effects which will operate through her own self, human capital formation of children, through a number of public and social goods and even improvements in agricultural productivity.
Bibliography and References:
Mujahid, G. B. S (2007). Rural-urban migration, urban underemployment and earnings differentials in Pakistan, Review of World Economics, 111(3):585-598.
Schmitt, J and Dean Baker 2008. ‘What we’re in for: Projected Economic Impact of the next recession’, a paper of the Center for Economic and Policy Research, Washington DC. (www.cepr.nt).
Admes H Richard Jr and Jane J. He (1995) Source of income inequality and poverty in rural Pakistan, Report No. 102, Washington DC: International Food Policy Research Institute.
Muller, Valerie and A. Shariff, 2008. ‘Can Migration Improve Living Standards in Developing Countries? Internal Migration and Welfare in India’, International Food Policy Research Institute, Washington DC, (December).
World Bank 2009. ‘Swimming against the tide: How developing countries are coping with the global crisis’. Background paper prepared by the World Bank Staff for the G20 Finance Ministers and Central Bank Governors meeting, Horsham, the UK, March 13-14.
Behrman, Jere, R (1988). ‘The impact of economic adjustment programs’ in Bell, David E and Michael R. Reich (eds.) Health, Nutrition, and Economic Crisis: Approaches to Policy in the third World, Dover, Massachusetts: Auburn House Publishing Co.
UNICEF (2009). A Matter of Magnitude: The Impact of the economic crisis on women and children in south Asia. Katmandu: Unicef Regional Office.
Monday, April 20, 2009
Thursday, April 2, 2009
AfPak Development Strategy
A strategy that will work is outlined below: Understanding causes and mechanism to alleviate vulnerability amongst people who living rural and remote areas is the key to conflict resolution in Afghanistan. In this context it is important to study the problem of Agriculture in Afghanistan which has suffered extensively due to long period of internal disturbance and a war like environment all over the country. The reconstruction of Afghanistan can at best be based on bringing back agricultural into focus and while doing so modernize it. Given the rural nature of Afghan economy, reduction of poverty and ensuring food security for the masses needs urgent attention on its agricultural sector and linkages between its rural-urban markets. Agricultural sector growth needs support from a number of non-farm activities beginning from agricultural extension activities and provisioning of input supplies to rural outback. Given not so hospitable terrains most important is to crate/recondition rural road network, establish transportation and market linkages. Expanding Irrigation systems and enhancing water availability to promote cultivation is another important activity which requires immediate attention. All the above sets of activities require involvement of both trained and manual workforce drafted form the local areas. Afghanistan has been well known for exporting exotic high value dry fruits all over the world. A cost efficient strategy to enhance rural incomes, therefore, is to encourage cash crop (fruit) cultivation and complementing it by technology aided processing, for example, dehydrating and packaging that facilitate exports. Technology and skill formation will also be needed in the area of warehousing, milling, standardization and food processing so as to modernize agricultural markets. Market information system and establishing a rural area data and information network are other areas that need investment in training, education and extension activities.
Sunday, March 29, 2009
What Balanced Growth means to the World Bank
Abusaleh Shariff and Amitabh Kundu
Amidst the global gloom of economic meltdown rivaling only the depression of the 1930’s, the World Bank has delivered its 31st ‘world development report’ (WDR) in its own ritualistic fashion last week in New Delhi. The report is a visual treat as the complexities of world’s business is presented in three dimensions, using geographic depictions that are easy to understand. Although it argues for balanced growth between the rural and urban areas, it makes a strong case for the ‘scale economies’ that can occur through geographic concentration of economic activities, which alarmingly is taking place in and around a few large city concentrations. The case of Tokyo which accounts for closer to one half of Japan’s exports is presented as an illustration with a lot of fervor. The cases of Seoul in South Korea, Dongguan in China, specified region in Egypt have been noted to strengthen the case. The report introduces the concepts of ‘three Ds’ depicting density, distance and division all in geographic parlance and their spatial overlapping without going into the details of their distressing manifestations in many of the countries in less developed regions.
The report makes a case against policies which could hinder the so called natural process of rural to urban migration and process of urbanization. It argues for well informed and people friendly provisioning of services to urban areas so as to facilitate economic growth oriented industrial and service activities. Understandably, the large cities with greater potentials are to be preferred in designing the strategy. A compulsive argument made is that it is just not for the sake of higher wage incomes and better jobs that people migrate to cities and urban agglomerations. They do so due to concentration of economic and social infrastructure; for example, the markets, facilities for education, health, entertainment, leisure and so on. In this context there is emphasis on the fact that it is no more a dichotomy of rural and urban areas but it is a continuum, rural-villages to towns, cities and metropolises that should constitute the premise of the development strategy.
The durability and resilience of an economy during the crises is linked with its own diversity and vastness in terms of the sectors of economy, For example, economies dependent on export of single or few commodities would get affected much more from a sharp fall in global prices of these commodities, compared with economies with a diverse basket of goods and services in its markets. One can extend the argument to geographic diversity and hold that a broad spread of economic activities across all different regions in a country including rural areas and semi-urban corridors would be less vulnerable to such global shocks. Thus the key to long term efficiency and stability in growth lies in economic and geographic spread and not in its concentration. Note that such counter arguments and conflicting policy orientations between economics of specialization, agglomeration and even division of labor are as old as economic thought itself and there cannot be a single prescription for countries that face very different economic situations. There have to be a range of economic prescriptions depending upon the nature, depth and breadth of global integration and level of economic development itself.
The WDR recommendation in favour of concentration of economic activities in the name of size economies would be grossly unsuited for countries like India for several empirical reasons. The country owing to historical and socio-economic reasons has experienced low rate of migration, if you exclude mobility of women occurring largely for marriage and family linked factors. More importantly, the male population has become less mobile over the past several decades. The rhetoric of the regional leaders leading to antagonism between the local population and outsiders is partly responsible for this. The decline in the rate of immigration can be observed not only in case of Maharashtra but also other developed states like Punjab, Haryana, West Bengal, Gujarat and Tamil Nadu. Correspondingly, the rate of outmigration from the less developed states has gone down. Expenditure class wise data from the National Sample Survey suggest that the poor households are worst hit by this trend and their migration rates have declined significantly. Furthermore, the WDR does not draw lessons from the fact that it is the rural-rural migration which has created fascinating geographic economic linkages in India. This linkage is the result of technological transformation of agriculture in specified areas which had relative advantage in water resources and other inputs. In the context of the rural areas the WDR under emphasis two important processes: (a) the role of technology in agriculture, and (b) the role of agriculture in economic growth and livelihood sustenance to the teaming millions in India.
The decline in the growth in urban population during the past two decades indicates that rural urban migration has not gone up despite accentuation of rural-urban disparity. The metropolitan cities have become hostile to the migrants and consequently their poverty levels have come down sharply to about 12 per cent as compared to the figure of 24 per cent for the country as a whole. The household level data show that growing rural-urban disparity provides economic rational for greater migration. Unfortunately, the socio-political reality of the country has come in the way of its materialization. It would be imprudent to plead for a strategy resulting in grater regional imbalance without ensuring that mobility can indeed be increased given the present social environment.
The major concern of the inclusive strategy designed for the Eleventh Five Year Plan is regional imbalance and social justice. A large number of programmes have been designed, targeting the development of backward areas and regions that also have large concentration of socially vulnerable people. The Prime Minister’s flagship programmes including NREGA are trying to reach out to the people who have benefited only marginally from the growth dynamics of the earlier periods. Redressal of the problem of regional balance is taken as a key component of the strategy of inclusive development in the Plan. India is not the only country where regional and social inequalities have gone up in the past few decades, partly associated with adopting measures of globalization. The WDR for the year 2006 entitled Equity and Development had expressed serious concern on this issue and pleaded for providing access to basic factors of production and strengthening the capabilities of the people in vulnerable social groups and regions. The policy perspective emerging from the present report is bound to send erroneous signals to policy makers in developing countries and come in the way of achievement of MDG by 2015. Economic growth foundations if linked securely to the economics of agglomeration will do more harm not only to the farming communities but also to those who live in relatively less endowed geographic spaces; besides creating mega-problems faced by mega-cities. Can anyone imagine India marching ahead on a high growth path even for the next couple of decades by strengthening infrastructural facilities and high quality services in a few urban agglomerations, ignoring the five thousand small towns and six hundred thousand villages, even in the short run? Utopianism can show us the moon, but only a few can reach there. The development practitioners must think about the welfare of the millions living in un-serviced villages and urban slums rather than projecting a dream of creating a few millionaires.
Amidst the global gloom of economic meltdown rivaling only the depression of the 1930’s, the World Bank has delivered its 31st ‘world development report’ (WDR) in its own ritualistic fashion last week in New Delhi. The report is a visual treat as the complexities of world’s business is presented in three dimensions, using geographic depictions that are easy to understand. Although it argues for balanced growth between the rural and urban areas, it makes a strong case for the ‘scale economies’ that can occur through geographic concentration of economic activities, which alarmingly is taking place in and around a few large city concentrations. The case of Tokyo which accounts for closer to one half of Japan’s exports is presented as an illustration with a lot of fervor. The cases of Seoul in South Korea, Dongguan in China, specified region in Egypt have been noted to strengthen the case. The report introduces the concepts of ‘three Ds’ depicting density, distance and division all in geographic parlance and their spatial overlapping without going into the details of their distressing manifestations in many of the countries in less developed regions.
The report makes a case against policies which could hinder the so called natural process of rural to urban migration and process of urbanization. It argues for well informed and people friendly provisioning of services to urban areas so as to facilitate economic growth oriented industrial and service activities. Understandably, the large cities with greater potentials are to be preferred in designing the strategy. A compulsive argument made is that it is just not for the sake of higher wage incomes and better jobs that people migrate to cities and urban agglomerations. They do so due to concentration of economic and social infrastructure; for example, the markets, facilities for education, health, entertainment, leisure and so on. In this context there is emphasis on the fact that it is no more a dichotomy of rural and urban areas but it is a continuum, rural-villages to towns, cities and metropolises that should constitute the premise of the development strategy.
The durability and resilience of an economy during the crises is linked with its own diversity and vastness in terms of the sectors of economy, For example, economies dependent on export of single or few commodities would get affected much more from a sharp fall in global prices of these commodities, compared with economies with a diverse basket of goods and services in its markets. One can extend the argument to geographic diversity and hold that a broad spread of economic activities across all different regions in a country including rural areas and semi-urban corridors would be less vulnerable to such global shocks. Thus the key to long term efficiency and stability in growth lies in economic and geographic spread and not in its concentration. Note that such counter arguments and conflicting policy orientations between economics of specialization, agglomeration and even division of labor are as old as economic thought itself and there cannot be a single prescription for countries that face very different economic situations. There have to be a range of economic prescriptions depending upon the nature, depth and breadth of global integration and level of economic development itself.
The WDR recommendation in favour of concentration of economic activities in the name of size economies would be grossly unsuited for countries like India for several empirical reasons. The country owing to historical and socio-economic reasons has experienced low rate of migration, if you exclude mobility of women occurring largely for marriage and family linked factors. More importantly, the male population has become less mobile over the past several decades. The rhetoric of the regional leaders leading to antagonism between the local population and outsiders is partly responsible for this. The decline in the rate of immigration can be observed not only in case of Maharashtra but also other developed states like Punjab, Haryana, West Bengal, Gujarat and Tamil Nadu. Correspondingly, the rate of outmigration from the less developed states has gone down. Expenditure class wise data from the National Sample Survey suggest that the poor households are worst hit by this trend and their migration rates have declined significantly. Furthermore, the WDR does not draw lessons from the fact that it is the rural-rural migration which has created fascinating geographic economic linkages in India. This linkage is the result of technological transformation of agriculture in specified areas which had relative advantage in water resources and other inputs. In the context of the rural areas the WDR under emphasis two important processes: (a) the role of technology in agriculture, and (b) the role of agriculture in economic growth and livelihood sustenance to the teaming millions in India.
The decline in the growth in urban population during the past two decades indicates that rural urban migration has not gone up despite accentuation of rural-urban disparity. The metropolitan cities have become hostile to the migrants and consequently their poverty levels have come down sharply to about 12 per cent as compared to the figure of 24 per cent for the country as a whole. The household level data show that growing rural-urban disparity provides economic rational for greater migration. Unfortunately, the socio-political reality of the country has come in the way of its materialization. It would be imprudent to plead for a strategy resulting in grater regional imbalance without ensuring that mobility can indeed be increased given the present social environment.
The major concern of the inclusive strategy designed for the Eleventh Five Year Plan is regional imbalance and social justice. A large number of programmes have been designed, targeting the development of backward areas and regions that also have large concentration of socially vulnerable people. The Prime Minister’s flagship programmes including NREGA are trying to reach out to the people who have benefited only marginally from the growth dynamics of the earlier periods. Redressal of the problem of regional balance is taken as a key component of the strategy of inclusive development in the Plan. India is not the only country where regional and social inequalities have gone up in the past few decades, partly associated with adopting measures of globalization. The WDR for the year 2006 entitled Equity and Development had expressed serious concern on this issue and pleaded for providing access to basic factors of production and strengthening the capabilities of the people in vulnerable social groups and regions. The policy perspective emerging from the present report is bound to send erroneous signals to policy makers in developing countries and come in the way of achievement of MDG by 2015. Economic growth foundations if linked securely to the economics of agglomeration will do more harm not only to the farming communities but also to those who live in relatively less endowed geographic spaces; besides creating mega-problems faced by mega-cities. Can anyone imagine India marching ahead on a high growth path even for the next couple of decades by strengthening infrastructural facilities and high quality services in a few urban agglomerations, ignoring the five thousand small towns and six hundred thousand villages, even in the short run? Utopianism can show us the moon, but only a few can reach there. The development practitioners must think about the welfare of the millions living in un-serviced villages and urban slums rather than projecting a dream of creating a few millionaires.
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