The Global economy without a doubt is in a slump, exports have shrunk as a consequence and hence India can only look back at its biggest strength for growth i.e., domestic consumption. China is known for it export-led growth whilst India is known for its consumption-led growth, the latter certainly shows the rising standards of living of Indian citizens. Given the gloom in the global economy, the government was right to implement the 7th pay commission recommendations. Implementation of the 7th pay commission will increase the core government employees salary by 2.57 times. The pay hike alone will cost the government 1.02 lakh crore a year. On the contrary MGNREGA budget allocation for 2015-16 has been 38,500 crores, that is the sum of the entire budget. Yes, the 7th pay commission is expected to boost domestic consumption and growth, however, rural spending power has been overlooked despite the cascading benefits it entails.
What is the difference?
The implementation of 7th pay commission at a cost of 1.02 lakh crores to government employees will boost consumption, how much it will boost investments are yet to be ascertained. The additional money spent also will not build any capacities i.e., roads, infrastructure, sanitation etc. The most important benefit of the pay commission recommendation is boost in consumption. The MGNREGA on the other hand with 1/3rd of the budget not only guarantees employment for many in the agricultural sector who are unemployed during different times of the year based on crops sowed but also builds capacities as the projects untaken under MGNREGA are enormous besides the planning is decentralized and the implementation is transparent and inclusive. Yes there are certain aspects of MGNREGA which needs improvement in implementation.
It is the substantial benefits which MGNREGA offers that could or should have caught the attention of the government, yet, the previous UPA and NDA seem to have scant regard, will and commitment to boost the rural economy which the MGNREGA has the potential to do so. Pay hikes are not a sustainable solution for growth and neither it is inclusive. Government should take the leap by increasing allocation of funds for MGNREGA and boost India’s economy through the rural growth besides states which are lying on unutilised MGNREGA funds should spend it in a time bound manner without any delay. India’s rural-urban divide is growing by the day and parity can be restored and sustainable growth can be ensured through prioritising MGNREGA over other schemes.