Rajasthan government set to launch job guarantee scheme for urban poor

The government of Rajasthan will inaugurate the Indira Gandhi Urban Job Guarantee Scheme later today in all urban bodies in the state. It is so far the largest scheme among all the states with annual budget expenditure of Rs 800 crore.

So far, more than 225,000 families have registered under the scheme, which guarantees 100 days of employment a year to needy families in urban areas, according to the state government. It is inspired by the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

Other states such as Odisha, Himachal Pradesh, Kerala, Jharkhand and Tamil Nadu have also implemented or are in the process of implementing similar programs.

Read also | Urban Jobs Program: How 6 States Are Doing It, What’s Needed to Make It Work

These are very small programs and any successful program of this type would need to be launched at the national level.

In fact, a report, “The State of Inequality in India”, commissioned by the Economic Advisory Council to the Prime Minister (EAC-PM) and prepared by the Institute for Competitiveness, recommended in May that such a system on the basis of his assessment that the gap between the labor force participation rate (LFPR) in rural and urban areas is widening.

The LFPR is the percentage of active people (working or looking for work) in the population.

The LFPR was slightly lower in urban areas at 36.8%, compared to 37% in rural areas in 2017-2018, according to the Annual Periodic Labor Force Survey (PLFS). However, this gap widened in subsequent years. The LFPR was 36.9% in urban areas and 37.7% in rural areas the following year. It rose to 38.6% in urban areas in 2019-20, but the rise was higher in rural areas, at 40.8%. The following year, 2020-2021, when the first wave of Covid-19 hit and nationwide lockdowns were announced for months, the LFPR rose to 42.7% in rural areas and in 38.9% in urban areas.

The Rajasthan government has said that Covid-19 is affecting the livelihood of the common man, in addition to the economy. While MGNREGA provided support to people living in rural areas to emerge from the livelihood crisis, there was no such program in urban areas.

However, its launch at the national level will come up against the crucial question of the financial burden that the Center alone or with the help of the States could have to bear.

The financial burden depends on the design of the system.

There were around 471 million workers in India in 2021, according to World Bank data. Extrapolating from an earlier NSS report which indicates that 20% of the workforce is in the unorganized sector in urban India, around 94.2 million people were in the unorganized sector in 2021.

However, the urban MNREGA may not fully target the unorganized sector.

Earlier, Azim Premji University released a report on an employment guarantee scheme for urban India, in 2019. The report had proposed Rs 500 per day as wages for casual workers and Rs 13,000 per month as allowance for people with a certain education.

It proposed to offer 100 days of guaranteed work to casual workers and 150 consecutive days of training and apprenticeship to educated young people in these urban centres.

Some 4,000 urban local bodies, representing about 50% of the population (2011 census data), could be covered by the scheme through legislation, he suggested.

According to this report, the total budgetary requirements will consist of three elements: labour, materials and administrative costs. It proposed a ratio of 60:40, meaning that 60% of the total budget allocation would be labor costs and 40% would be a combination of material and administrative costs. Salary costs should be split between the Center and the states in an 80:20 ratio, while non-salary costs would be shared between the Centre, the states and the urban local authorities (ULB), the report suggests.

The report offered two options for the program: Option 1 would give 100 days of work per year to one person in a household, and Option 2 was to provide it to every adult.

The first option would cost, under certain assumptions, a total of 2.8 trillion rupees or 1.7% of Gross Domestic Product (GDP) at that time. The second option would cost 4.5 trillion rupees, or 2.7% of GDP.

The question, however, is where these funds would come from, given that the Center and the states are grappling with growing expenses and scarce resources, although the Goods and Services Tax (GST) provides them with a some buffer.

Various existing schemes will have to be merged or the daily wage of Rs 500 for casual workers, proposed in the report, reduced to a workable amount to even think of such a scheme.

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