Rajasthan govt set to launch job guarantee scheme for the urban poor

The Rajasthan government will later today inaugurate the Indira Gandhi Urban Employment Guarantee Scheme in all the urban bodies of the state. This is so far the biggest scheme among all 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 per year to families in need in urban areas, according to the state government. It is modelled on 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 schemes.

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These are very small schemes and any such fruitful scheme would require it 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, had recommended in May that such a scheme on the basis of its assessment that a gap between the labour force participation rate (LFPR) in rural and urban areas is widening.

LFPR is the percentage of persons in the labour force (working or seeking jobs) in the population.

The LFPR was slightly lower in urban areas at 36.8 per cent, compared with 37 per cent in rural areas in 2017-18, according to the annual Periodic Labour Force Survey (PLFS). However, this gap widened over the next few years. The LFPR was 36.9 per cent in urban areas and 37.7 per cent in rural areas the following year. It rose to 38.6 per cent in urban areas in 2019-20, but the rise was higher in rural areas, at 40.8 per cent. The following year, 2020-21, when the first wave of Covid-19 struck and nationwide lockdowns were announced for months, the LFPR rose to 42.7 per cent in rural areas and 38.9 per cent in urban areas.

The Rajasthan government said Covid-19 affected the livelihood of the common man, besides the economy. While the MGNREGA provided support to the people living in rural areas to come out of the livelihood crisis, there was no such scheme in urban areas.

However, launching it at the national level will face the crucial issue of financial burden that the Centre alone or with the help of the states may have to bear.

The financial burden depends on the design of the scheme.

There were around 471 million workers in India in 2021, according to World Bank data. Extrapolating from an earlier NSS report that says 20 per cent of the labour force is in the unorganised sector in urban India, around 94.2 million persons were in the unorganised sector in 2021.

However, urban MNREGA may not target the unorganised sector entirely.

Earlier, the Azim Premji University came out with a report on a job guarantee programme for urban India, in 2019. The report had proposed Rs 500 a day as wages for casual workers and Rs 13,000 a month as stipend for persons with some education.

It proposed providing 100 days of guaranteed work to casual workers and 150 contiguous days of training and apprenticeship for the educated youth in such urban clusters.

Some 4,000 urban local bodies, accounting for about 50 per cent of the population (Census 2011 data), could be covered under the scheme through an Act, it suggested.

According to that report, the total budgetary requirement will have three components — labour, material, and administrative cost. It proposed a ratio of 60:40, that is, 60 per cent of the total budgetary allocation would be labour cost and 40 per cent would be a combination of material and administrative cost. Labour costs should be split between the Centre and the states in a ratio of 80:20, while the non-labour costs would be shared between the Centre, the states, and the urban local bodies (ULBs), the report suggested.

The report proposed two options for the programme: Option 1 will give work of 100 days in a year for one person in a household, and option 2 was to provide it to every adult.

The first option would, under certain assumptions, cost a total of Rs 2.8 trillion or 1.7 per cent of gross domestic product (GDP) at that time. The second option would cost Rs 4.5 trillion or 2.7 per cent of GDP.

The question, however, is where such funds would come from, given that the Centre and states are grappling with rising expenditure and scarce resources, though the goods and services tax (GST) is providing them some buffer.

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