According to the World Bank, almost 30 per cent of the Indian population are living on less than $1 a day, and the percentage of rural poverty is likely to be much higher.
While there have been many attempts to combat poverty in the past, the limited success of such efforts implies that we need a new and innovative strategy.
The National Rural Employment Guarantee Act may be just what we need. It certainly has the potential to significantly improve the livelihood of millions of rural poor in India, but for this potential to be realised the government must take some crucial steps.
The National Rural Employment Guarantee Act, which guarantees 100 days of employment to every rural household, could go a long way in reducing rural underemployment, an important contributing factor in rural poverty.
Critics, such as Surjit Bhalla, point to the official rural unemployment estimates of less than 3 per cent in 1999 to support the claim that rural unemployment is not a serious concern in the context of rural poverty. But, such an argument is clearly flawed.
First, it overlooks the fact that these statistics are seriously misleading, as there is significant disguised unemployment due to low workforce participation rates and chronic underemployment during slack agricultural seasons.
More significantly, as studies of the Maharashtra Employment Guarantee Scheme have documented, participation in such schemes does indeed replace unemployment in rural areas, showing that unemployment is a problem to be tackled.
Another issue of concern is whether the programme will be effective in targeting the poor and not be captured by relatively wealthy households.
Employment schemes, however, are generally relatively well targeted, due to low wages and the unpleasant nature of the work.
Indeed, evidence from Maharashtra supports this by showing that a significant majority of participants were below the poverty line.
The potential benefits for rural welfare as a result of an employment guarantee scheme are huge. The work involved in the programme would build infrastructure, such as roads, irrigation, and health facilities.
This could help reverse the recent neglect of rural infrastructure, and be a crucial part of regenerating the rural economy.
Providing employment would have a beneficial impact on health, education, and other determinants of social welfare, by breaking the cycle of rural poverty.
There may also be indirect benefits if more women are given the opportunity to work, as higher levels of female labour force participation are associated with lower infant mortality rates and higher primary school enrolment rates, for example.
The revival of rural employment opportunities would reduce migration to urban centres, and help ease congestion and other problems in these areas.
Finally, the introduction of an employment guarantee act which establishes employment as a right would give greater bargaining power to traditionally disadvantaged groups and lead to a greater mobilisation of the rural poor.
The main criticism of the National Rural Employment Guarantee Act is that it would cost too much. It is estimated to cost between Rs 30,000 crore (Rs 300 billion) and Rs 50,000 crore (Rs 500 billion) annually, which is less than 2 per cent of GDP.
Given that the new government was elected on a platform of doing more for the aam aadmi, this should clearly be a priority. To argue that the government lacks the funds is not acceptable.
There is mismanagement of resources at all levels; cracking down on this would undoubtedly free up enough funds for the programme. For instance, fertiliser subsidies are known to be poorly targeted, as they primarily benefit higher-income farmers.
Reducing such subsidies in order to provide funding for schemes that have greater direct positive impacts on the poorest of society may be one way to address the cost of implementing the programme. The government needs to realise what the priorities must be, and adjust spending accordingly.
A significant block to the success of the programme is corruption and the consequent leakage of funds. In his oft-repeated statement on corruption, Rajiv Gandhi noted that only 15 paise out of every rupee allocated for a programme actually reaches the beneficiary.
However, this potential leakage should not be seen as grounds to halt the introduction of the programme. Corruption breeds further corruption, and so we must examine comprehensive ways to break this cycle.
If the government is serious about ensuring the success of this programme -- and more broadly, the development of the economy and the improvement of the conditions of the poor--it must not only introduce employment guarantee but also put its support behind a strong Right to Information Act.
It is a step in the right direction to make this programme a legally binding act, rather than just an ad hoc scheme, as officials would be accountable if they fail to fulfil their duties in providing employment.
In order to hold them accountable, however, there must be greater transparency in the administration of this programme, which can be assured by the introduction of a powerful Right to Information Act.
There are examples from Rajasthan--which passed the Right to Information Act in 2000 -- of citizens using the publicly available information to conduct public hearings of panchayat officers accused of corruption. The central government must ensure that all the citizens have this right.
The draft of the National Rural Employment Guarantee Act is a diluted version, which limits the guarantee to a few districts without setting a timeframe for a nationwide employment guarantee.
By not having a specified future plan for the expansion of the programme, the draft loses much of its strength. Only if employment is a nationwide guarantee can we expect to observe many of the benefits.
Nor does the Act ensure that a minimum percentage of workers in each block would be women.
This last point is particularly worrying when considered alongside the restriction to 100 days of work per household, as it would inevitably result in households sending only the men to work under the scheme.
In its current form, the draft makes few real promises. If this indicates a lack of political will, the programme risks becoming yet another failed rural employment expansion scheme.
The government must return to a strong draft Act that includes a definite timeframe, reservations for women, and provisions to extend employment from 100 days per household to 100 days per person per year at some later point, to signal its commitment to ensuring its long-term success.
The government is at the crossroads right now. It can either put its full political support behind the National Rural Employment Guarantee Act in a genuine effort to address the problem of chronic rural underemployment and poverty, or continue to 'dilute' the National Advisory Council's draft and make only a half-hearted attempt to deal with the issues at hand.
By ignoring basic provisions of the draft, the government is essentially choosing the second option. This must not be allowed to occur.
There is far too much at stake for the country, given the programme's potential for alleviating rural unemployment and poverty, to let the government sidestep the issues.
The authors are studying Economics at Harvard University.
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