Impact of Right to Work in India

Economic Environment watchfulness PROJECT Impact of the office to act upon weapons platformme in India SUBMITTED BY Yash Jhaveri IIM Kozhikode Batch EPGP04 Date of Submission 27th January 2013 Contents INTRODUCTION Right to Work In INDIA 3 What is NREGA / MGNREGA .. WHAT ARE THE GENERAL BENEFITS RTW / MGNREGA 4 HOW IS THE computer programmeme FINANCED? .. 4 take over pattern . 4 Release of bullion comparing RTW/MGNREGA Vs otherwise disposal base example schemes 5 Impact of respectable TO WORK / MGNREGA . 5 maturation in gross domestic product . 5 solvent on Inflation Recommendations .. 7 REFERENCES 8 2 Indian build OF c atomic number 18 KOZHIKODE INTRODUCTION Right to Work In INDIA E really man being have ripe(p)s to fundamental aspects desire right to pabulum, life and education. India is a country where approximately thirty percent of the universe is below the beggary line.In order to provide millions of humans with rights to life, right to educ ation and right to food that however have access to economic assets like labor power, providing them affair is very important. Un exercise is atomic number 53 of the major c erstrn and reason for spreading exiguity in India. The right to work according to Article 39 of the Indian Constitution urges the State to ensure that the citizens, men and women equally, have the right to an adequate to(predicate) means to livelihood, and that there is equal succumb for equal work for both men and women.RIGHT TO WORK Program is implemented in India at a lower place Mahatma Gandhi national boorish troth tackle act MGNREGA. The Mahatma Gandhi National awkward trading Guarantee Act, 2005 (MGNREGA) was notified in 2005, 7TH Septmeber. What is NREGA / MGNREGA Mahatma Gandhi National Rural Employment Guarantee Act was earlier knows as NRGEA. Main aim of this program is to enhance the livelihood and pledge of people residing in rural argonas. This act guarantees a minimum speed of light days of profits- piece of work in a financial socio-economic class to a rural household whose adult members volunteer to do uneducated manual(a) work.Important original provisions of the MGNREGA atomic number 18 as outlined below i. Every household in the rural India shall have a right to a minimum of 100 days of guaranteed employment every course of instruction for minimum one adult ( above 18 eld of age) member, for doing UNSKILLED manual labour, compensation for which is fixed at Rs 120 (one hUndred twenty only) on daily stand. ii. Only productive work shall be undertaken under this program. A list of permissible and preferred work has to be prepared by a maintain council who shall implement the program.Such preferred kit and boodle are determine basis the eudaimonias of socio-economical work, the contribution make by such socio-economical work to complaisant equity, and the ability of such work to create assets on permanent basis iii. For successful implementation and for labourers benefit the up-gradation of kills are required of unskilled workers. The program may provide such training and expenses towards these trainings iv. Taking into the consideration the black market lines of states council, Wages to such labourers to be paid in cash or in kind or both. v.To make it easy for the applicant, the program states that employment shall be provided deep down a radius of 5 kilometres of the village where the applicant resides at the time of applying. In cases where employment is provided beyond such find out of 5 kilometres , transport allowances and daily living allowances shall be paid in accordance with Programme Rules vi. Given the scenario where at least twenty women are employed at a site, a provision shall be made for one of them to be deputed to look after all / any children under the age of six who may be brought to the worksite if they accompany their parents.The mortal deputed for such task of minding the children shall be paid the statutory minimum pay vii. A small portion of the payment not exceeding 5% may be deducted as a contribution to welfare schemes organized for the benefit of labourers employed under the Programme. These welfare schemes are insurance health and accident, survivor benefits, maternity benefits and social certification schemes. 3 INDIAN wreak OF caution KOZHIKODE WHAT ARE THE GENERAL BENEFITS RTW / MGNREGA i. ii. The program provides social protection by providing employment opportunities to the people living in rural India.The program promises livelihood security for the underprivileged and poor through creation of durable assets, improved piss conditions and security, soil diversity and as a allow of soil conversion loftyer land productivity The program provides services like drought-proofing and pelter management in rural India Through the processes of a rights-based legislation, this program empowers the socially disadvantaged, specifically women, Scheduled Castes an d Schedules Tribes The program ensures strengthening decentralized and participatory prep through convergence of various initiatives like anti-poverty and livelihood The program works on grass root levels by deepening democracy by strengthening Panchayati Raj Institutions MGNREGA is a powerful tool which implements transparency and accountability in governance thereby ensuring inclusive growing in rural India.This is because of its jar on social protection, security of livelihood and democratic empowerment. iii. iv. v. vi. vii. HOW IS THE PROGRAM FINANCED? Financing pattern The center willing minute up the appended comprises. 1. For unskilled manual workers 100% cost of honorarium 2. For semi skilled and skilled workers 75% cost of return and material 3. All administrative expense as refractory and as per guidelines of central regime which essentially includes salary and allowances of program officers and their support staff and work site facilities 4. Administrative expe nses of CEGC The state will bear the appended costs 1. For semi skilled and skilled workers25% cost of wages and material 2.If in case the state government cannot provide wage employment within 15 days of application, the state government to pay unemployment allowance to the applicant. 3. Administrative expenses of SEGC Release of funds 1. Unlike in other state brave out programs where the funds are pre allocated, in this programme , the personnel casualty of funds is wholly dependent upon the proposals split upn by the state 2. The ministry of rural development will decide on the sanction of funds once it receives states formulated annual work plan and compute proposal. (AWBP) 3. The annual work plan and budget proposal is based on the demands of funds accredited from the states districts and panchayats of districts 4.AWBP besides reports the use the of introductory funds received by the state and also on depict performance indicators determine under the scheme enabling an assessment of proposals received by state government. The said assessment is of qualitative nature. This enables the ministry to decide on the finalizing the arrive for the state for the given financial year. The actual spending of funds to the state also depends upon the utilization of funds previously allocated for the same state. 4 INDIAN INSTITUTE OF MANAGEMENT KOZHIKODE 5. The district programme coordinator or the state applies to the ministry of rural development , once the 60% of funds released earlier are utilized, for next round of funding under CEGF 6. On receipt to disbursement of funds by the center, the state government will release the funds to the program within 15 days.Comparison RTW/MGNREGA Vs other government based employment schemes There are a few valid reasons why a right to work- guarantee of employment works better as compared to pilot by night program introduced by center and state guarantee of employment affixs the purchasing capacity of those who ar e demanding work This program ensures the comprehension of the poorest of the poor in employment schemes. The Program brings a sense of security in the laborers lives. Employment guarantee programme boosts the confidence of laborers with respect to high local employment prospect and hence discourage season based migration, most laborers resort to in difficult times. Right to work is A legally binding employment guarantee program is far more durable and reliable than fly by night schemes and programs ramble by state government which have proven on more than one occasions to be extremely short-lived. Impact of RIGHT TO WORK / MGNREGA Increase in GDP Planned expenditure of government is increasing as government is spending (budgeted 33,000 crore for 2012-13) on welfare or construction projects to give work to the unemployed people. A substantial part of this spending goes as the wages to the direct labour. As marginal zest to consume (MPC) of this labourers is very close to 1, th e force of this government expenditure to the improver of GDP will be very high , which in turn leads to high growth in GDP. As per Keynesian model , increase in the government expenditure will make the GDP grow which in turn amounts for higher railroad siding.MGNREGA as Accelerator High proportion of clownish population actually owns land. After spending on normal consumption for livelihood, the amount saved is mostly spent on their own farms. So the issue from their land also increases leading to further increase in GDP. alteration in Interest Rates As we have already discussed, because of the MGNREGA, GDP is supposed to increase, interest rate is higher than earlier. Because of the increase in government spending, consumption also increases, i. e. , demand in the goods market increases leading to a rightward shift of the demand writhe. With an increase in output, interest rate also increases.As interest rate increase, investors will be less willing to soak up money from b anks. As a result, capital Investment will produce down. Decreasing investment will have a negative effect on GDP which will eventually come down. So the bread effect on GDP by government sPending for MGNREGA employment will be little less. 5 INDIAN INSTITUTE OF MANAGEMENT KOZHIKODE Effect on Inflation Because of the MGNREGA, (i) unemployment is reducing and (ii) people who had a no / nominal income previously are now having nominal /higher income. The general effect would be reduction of unemployment in the economy. MGNREGA leads to inflation but only in the short run.The higher wage rates in MGNREGA increases the wages of the workers who are working under MGNREGA thereby increasing their marginal propensity to consume. This leads to increase in the demand of food items. In the short run this leads to increase in the prices of the commodities mainly the food items and thus leading to increase in inflation. Also the workers employed under MGNREGA are unavailable for agricultural work during the harvest season, this leads to shortage of farm workers. As a result labourers need to be hired by offering higher wages than that offered under NREGA. As the cost of labour is increased, the effect of this can be observed in the form of increase in the prices of the farm output and thus shifting the Aggregate supply AS curve to the left.The above mentioned phenomenon can be observed only in the short run because in the long run the infrastructure activities carried out under MGNREGA like construction of wells and dams for irrigation purpose, leveling of roads and water conservation and harvest will increase the farm output produced thereby leading to increase in the supply of food items thus shifting the AS curve back to the right and thus reducing inflation. Implications Since its inception, the Act has generated 1112. 03 crore person-days. Almost 70% of the MG NREGA labour. The average wage earned has risen from ? 65 per person day in 2006 to ? 100 in 2011. Inclus ive Growth The donation of SC/ST families in the work provided under MGNREGA over the previous tailfin years has ranged between 51-61%. Women workforce participation under the Scheme has surpassed the statutory minimum requirement of 33 per cent. Over the previous five years it has ranged between 40-48%. In 2011, there were allegations that the programme was no more impelling than other poverty alleviation plans in India.Rumors and reports had a buzz of corruption, careen and scam written all over MGNREGA. Corrupt officials puncturing the budgets that are allocated, government expenditure routed from the funds for deficit financing, poor quality of infrastructure construct under this program, were some of the issues that were being pointed at and questioned. 6 INDIAN INSTITUTE OF MANAGEMENT KOZHIKODE Recommendations The MGNREGA scheme has been designed as a supply-based model, where the number of works undertaken is dependent on the amount of labourers that register with the scheme. This caters to the primary objective of generating wage employment in India.Although to ensure quality-driven growth, the model has to incorporate a demand-based side, where the labourers are given work according to the value-addition required. The clause about providing an employment within five kilometers of the residence of a labourer needs tweaking. 7 INDIAN INSTITUTE OF MANAGEMENT KOZHIKODE REFERENCES * NREGA Report to the people 2nd Feb 12 (http//nrega. nic. in/circular/Report%20to%20the%20people_english%20web. pdf) * NREGA Website (http//nrega. nic. in/netnrega/home. aspx) * The Macroeconomics of NREGA Live Mint article (http//www. livemint. com/ confidence/nKoASa6hFXSX3w8Wd0EeWI/ViewsThe-macroeconomicsof-Nrega. html) * Macroeconomics N. Gregory Mankiw * The Modern Minimum-Wage Controversy and Its Antecedents A paper by Thomas C. Leonard