theindialog

August 16, 2009

Ludhiana, NREGS, Dr. Montek Singh Ahluwalia

Filed under: Conversation,Economics,NREGS,Punjab,Small Businesses — loggers @ 4:14 pm

Our stay in Ludhiana revolved around multiple factory visits. In the richest district and most populous city of Punjab, we toured a small (Rajnish International), a medium (Avon Cycles) and a large manufacturing unit (Vardhman Spinning). We were fortunate enough to meet the proprietors of 2 of the 3 factories and seek their thoughts on business conditions in India. Specifically, we asked them about the impact of NREGS on their concern.

The Chairman of Rajnish International (an automotive components manufacturer), Mr. Rajnish Ahuja, spoke candidly about the ramifications of NREGS. According to him, the scheme epitomizes “political corruption.” He lamented the inadequate supply of labor from states like Uttar Pradesh and Bihar, which has led to a sharp escalation of wages. According to him, salaries for unskilled labour have gone up by 200-300% as a result of the scheme. This increase in labour costs has compelled him to consider a move towards a capital-intensive production chain. This was evident in the factory as we saw that most of the labour was employed for low skill jobs such as alignment, material moving or handling. Mr. Ahuja believes that the labour force has become lazy due to the availability of free money and has been given unfair bargaining power. For over a decade, he paid INR 2,000/month/head. Now, he must recalibrate that figure.

Outside almost every factory in Ludhiana, we saw ‘wanted’ posters soliciting skilled labour. Due to the pre-existing shortage of skilled manpower, coupled with consequences of NREGS, wages for skilled labour have also gone up. Since factories are cutting down on labour usage in production and are moving towards a more mechanized process, demand for skilled labour seems to have also increased. Again, business owners are slow, if not reluctant, to accept this change. This, we think, is neo-capitalism in India – labour is no longer inexpensive.

In Delhi, we met the Deputy Chairman of the Planning Commission, Dr. Montek Singh Ahluwalia, in order to seek his thoughts on NREGS. He sees the scheme as a “social security provision”, one that is not supposed to train people. When asked about the impact the scheme has had on the industrial sector in the form of a higher wage bill, he acknowledged that this was an intended, and even welcomed, consequence. He did acknowledge that the lack of long term skill development was a concern. About the restrictive approved projects list that NREGS beneficiaries and contractors have to abide by, Dr. Ahluwalia pointed to other public welfare schemes that address the relevant issues. Dr. Ahluwalia urged us to visit a dozen districts where the scheme is being implemented in order to check the actual progress of the programme. This, he felt, would be a meaningful study.

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