IMPACT OF RURAL EMPLOYMENT GOVERNMENT POLICIES IN INDIA

Anchal Sahai

ABSTRACT

This research aims at analyzing the impact of rural skill development and direct employment
generation schemes on the employment opportunities in rural areas of India. Along with this,
the study will also see the relation between easy credit schemes in rural areas and the
generation of employment opportunities. This paper is focused on studying the effectiveness
and impact of both types of schemes on the prevailing unemployment in India.

Keywords
Rural employment, Government, Skill development, Credit policy, Public policy

INTRODUCTION

Since independence, India’s government policies have always focused on eradication of

poverty through development of assets in the economically backward regions. One of the
approaches that government has adopted is generation of employment opportunities and for
this purpose there is a threefold approach. First, there are various skill development schemes
and programs in order to increase the employability skills and meet the industry demands and
standards like National Literacy Mission Programme (NLMP), Pradhan Mantri Kaushal
Vikas Yojana (PMKVY), etc. Second, the government policies aim at providing direct
employment opportunities and increased access to the job market to the job seekers like
Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), National Career
Service (NCS), etc. Third, through various self-help groups and affiliations with NGOs and
banks, the government provides credit facilities in the rural areas to stimulate the job market
and create self-employment opportunities for which schemes like Swarnajayanti Gram
Swarozgar Yojana (SGSY), National Rural Livelihood Mission (NRLM), etc. have been
initiated in the recent years.

This research compares and focuses primarily on these six schemes and programmes to
evaluate the shortcomings, effectiveness, and impact of these three approaches to reduce the
unemployability level in India. The aim of NLMP and PMKVY is to decrease the gap
between the industry standards and the actual skill level to increase the employability and
ensure that there is no imbalance in demand and supply of skilled labor. MGNREGA focuses
on asset creation and providing at least 100 days’ worth of wage employment to all those
who are unwillingly unemployed, this serves a dual purpose of rural development and
efficient utilization of human capital at disposal in those areas. NCS is an online job portal
which serves as a common platform for job seekers and employers so there is increased
access and transparency for all the stakeholders in the job market. SGSY and NRLM are
focused on getting together people with the similar mindset and skill set to formulate Self-
Help Groups and through provisions of credit facilities via banks, NGOs and various other
financial institutions, self-employment opportunities are created through investment in rural
businesses.
LITERATURE REVIEW

(Singh K., 2016) assessed the impact of MGNERGA program in terms of funds allocated,
employment generation and rural development along with the overall impact of the scheme.
It was found that in multiple districts of West Bengal there was a lag in utilization of
allocated funds efficiently and on an average only 39.5 days of wage employment was
provided instead of 100 days as the scheme intended, the overall impact of the scheme on
standard of living, rural asset creation and reduction of poverty level was not within the
acceptable zone of 67-85 percent efficiency. (Siddaraju G., 2012) focused on the effect of
MGNERGA scheme for poverty alleviation and it was found that these employment
generation schemes are not working on full efficiency due to bureaucratic limitations and the
problem of unemployment would be eradicated only if government policies focus on
stimulating demand for human resource in secondary and tertiary sectors in rural areas.

(Gary S. Fields, 1989) analyzed that the constraint in employment generation is from the
demand side and not the supply side in the small, developing economies. The cause for this is
that the existing wage rate is higher than the market clearing wage rate and this causes a
disparity in the supply and demand of the jobs, this situation ca be rectified through two
approaches. First, by reducing the prevailing wage rate in the market, more job opportunities
can be created. Second, by increasing the level of employability of the available labor to
demand that particular level of wage rate, the disparity can be reduced. (Choudhary and
Ghosh, 2015) found a weak correlation between the industries in rural areas and the
employment generation in the period in which the industries were established. This means
that even though there was increased rural development, it did not eradicate the problem of
unemployment due to regional imbalance and insufficient promotion of these industries for
employment opportunity generation. The production by industries under the scheme of
Employment Generation Programme increased from Rs.7,133 lakhs in 2008 to Rs.14,514
lakhs in 2012 yet the average growth rate for employment was 7.67%.

(Kureel and Verma, 2018) reflected upon the effectiveness of skill development programmes.
India as developing nation has an abundance of human resource and youth which if utilized
to the full capacity can triple India’s growth rate but due to lack of skill development and
inefficiency of government initiatives, not even 10 percent annual targets of these schemes
are being met. In comparison to the funds allocated and the impact of these schemes, there is
no effective skill development in accordance to the industry demands and standards. (Basha,
2016) studied the causes for unemployment in relation to the level of higher education and
the level of mismatch in the skills demanded and the skill level available in the job market,
which is why there is unemployment prevailing in the educated population between the age
group of 15-59 years and the majority of the jobs available in the rural areas are in the
primary or agriculture sector where there is minimum skill requirement by the industry.

Through the research papers it can be established that the threefold approach of government
for eradication of unemployment is inefficient and ineffective to the extent that most of the
schemes are not meeting even 10 percent of their targets and there is no significant impact in
some regions due to bureaucratic system, regional imbalance, disparity in skills and other
factors.
METHODOLOGY

The objective of this study is to critically analyze the direct employment provision, skill
development and self-employment generation schemes run by the central government in
India. In order to achieve this objective, this study requires and uses secondary data from
published and unpublished sources on related topics like economic surveys, journals,
government organizations (HRD Ministry, Ministry of Skill Development and
Entrepreneurship, Ministry of Labour and Employment), etc.

A descriptive research methodology has been used to get the necessary data regarding the
impact, shortcomings and limitations of the three types of schemes, under which the study
has looked closely on MGNREGA for direct employment opportunities, PMKVY for skill
development schemes and SGSY for self-help groups which aim at generation of self-
employment opportunities.

FINDINGS

1. Direct Employment Generation Schemes

With the objective of reducing urban and rural imbalance and in order to stimulate the job
market in rural areas and create assets in rural areas for development, in 2005, the
government introduced the Mahatma Gandhi National Rural Employment Guarantee Act
which ensured that everyone who was willing and able to work got 100 days’ worth of wage
employment in every financial year.
There are certain limitations in the implementation of this scheme. First, the funds are
provided by the central government which are then distributed by respective state
governments to the responsible districts, this bureaucratic system leads to a lag in wage
payments which are supposed to be paid within 15 days of the work done. Second, the
scheme hampers labour mobility as employment is supposed to be provided with 5km of
registered address and this leads to an imbalance in rural asset creation. Third, despite
increased expenditure on wage payments, the number of households that are being provided
with employment has reduced according to the DMU report available on official site of
NREGA.

Figure 1: Total Expenditure on MGNREGA Figure 2: Total Number of Households provided Employment

This scheme is a ‘big failure and a success’ at the same time as it has proved to be effective
in a few states of India like Rajasthan, Tamil Nadu and Andhra Pradesh MGNREGA was
implemented well, whereas in states like Uttar Pradesh, Orissa and Bihar the scheme was not
implemented well in terms of the ratio of households that were provided employment to the
number of households demanding employment, women participation, expenditure on wages
for households, and the asset creation in rural areas.
 2. Skill Development Programmes

In India there is not a shortage of labor but a shortage of labor with the necessary skills and
employability skills, to reduce this disparity the government introduced various schemes like
Pradhan Mantri Kaushal Vikas Yojana (PMKVY) which aims at developing skills of those
who are willing to work but are not able to find employment according to the standards of
industry. These programmes focus on skill development in secondary and tertiary sectors to
promote employment generation in those sectors which in turn promotes labor mobility and
reduces the regional imbalance in employability and development.

Some of the major challenges and hurdles these skill development programmes face in India
are lack of funds in relation to the targets set, which projects the inefficiency and
ineffectiveness of the schemes. There are a lot of schemes initiated with the same objective
which divides the available funds and resources and divides the resources for implementing
the scheme which renders it ineffective. It is not possible to include all diverse groups in
different regions and get them at the same skill level and impart same skill development
knowledge like marginalized sections, differently abled, transgenders and ensure they get
similar employment opportunities.

With the average estimates of employment and wage effects post training period, the cost
effectiveness of programmes is low because the employment rate till date since the beginning
of the schemes has increased by 7 percent and the average wage rate after training has
increased by 21 percent.

3. Self-Employment Generation Schemes

Government has several schemes which aim at generation of self-employment opportunities

through provisions of credit facilities via banks and NGOs in rural areas to stimulate small
enterprises and rural development. Majority of these businesses are in non-sophisticated and
low skill requirement industries like tailoring, electronics repair, embroidery, knitting or
other handmade products and artifacts. One of such schemes is Swarnajayanti Gram
Swarozgar Yojana (SGSY) but the scheme has faced a lot of issues. First, it is cumbersome
and difficult to cut through the red tapism to get the project approved for which then loan is
provided after months which leads to further delay in business operations. Second, the loans
are provided in installments and in order to get further installments a utilization certificate
has to be submitted to assess the efficiency of the projects which can hamper the
development of these industries. Third, there are no concrete skill development programmes
or facilities which enables the people to scale their businesses which limits their capacity and
growth and the impact they create on the society in terms of development and employment
opportunities. Fourth, despite the intensive scrutiny of projects proposal, nearly 45% of the
projects default on their payments which means that these projects are not working at their
capacity and are unable to pay back the loans and hence they are not fulfilling the main
objective of this scheme which is to promote development and employment opportunities in
economically backward regions.

Considering that only 3.3% of the people who are a part of this scheme have a graduate level
education, the main reasons for the ineffectiveness of this scheme is the lack of knowledge
and skill in entrepreneurship which hampers the success and growth of these micro and small
businesses.
CONCLUSION

It is observed that while the objectives and targets of all schemes are aimed towards
generation of employment opportunities and rural development, due to inefficiency at
implementation level, the varied profile of people in rural areas, ineffective disbursement of
allocated funds, there are limiting factors because of which the impact of these schemes is
limited to some rural areas and there is not equitable division of resources in these schemes.

RECOMMENDATIONS

There are multiple initiatives by the government which have a common objective, but due to
separate schemes there is a division of efforts and resources, in order to achieve maximum
efficiency and to make a significant impact on development schemes with common aim
should be converged and combined effort would yield a greater result. Since the maximum
impact and development is seen through direct employment opportunity generation schemes
and skill development programmes, either self-employment generation schemes should be
stopped and their resources should be combined with that of the former mentioned schemes
or self-employment generation schemes should be combined with skill development schemes
were guidance and consultation services are provided to the businesses so that they utilize
the funds provided efficiently and there is development in the regions.

Under wage employment schemes, the wages should be provided daily and the funds should
be allocated to the local administration rather than being routed from central government,
state government, districts and then being distributed to village district administration which
then distributes them to the labour. This leads to a lag which is greater than the intended 15
days and discourages the people who are involved in the scheme from working. For skill
development programmes, the courses should be designed according to the industry demands
and skill development courses should be offered even after people are gainfully employed to
ensure that there is an increased retention rate by the organization and the people who are
graduating from these short courses are able to get employed in high paying positions in
tertiary sector as well because currently these courses focus on creating employment
opportunities in just primary and secondary sectors so this would enable greater labor
mobility and increased impact of the literacy and skill development programmes.

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