In the neoliberal mainstream media, there is a narrative that only the private sector can hire all the unemployed in India due to the large population size. This is based on the false notion that if the government tries to hire all the unemployed into the public sector, it will run out of money and go bankrupt.
Numerous economists demonstrated over a century ago that a sovereign state has no financial constraints, only real resource constraints. The Indian government cannot run out of money, and given the unwillingness of the private sector to employ all the unemployed, only the government can solve the unemployment issue facing the country.
The ELI Schemes presented in the recent budget will not have any significant effect on employment because they are underfunded, due to the government thinking it is financially constrained. ELI is fundamentally inefficient and inherently increases income and wealth inequality if not accompanied by higher taxes on capitalists.
How so? Because the amount of wage subsidies that must be given to capitalists must be high enough to ensure that they make sufficient profit. Given the stinginess of the present government, the ELI Scheme will not increase employment significantly.
There is a much more efficient way to increase employment without giving free public money to the capitalists. It is to enact a universal unconditional job guarantee with wages equal to the minimum wage. I’ve previously talked about it in this blog. What makes a job guarantee more efficient?
a. The workers are only paid minimum wage which gives the Government more space to spend on other programs without hitting inflation bottlenecks in certain sectors.
b. No need to pay exorbitant amounts to capitalists who will pocket at least some of the money.
Unfortunately, the government continues doing the opposite, clearly showing they are not changing their colors despite the recent election results. The MGNREGS allocation has been stagnant at ₹86,000 crore, which is the same as last year in nominal terms but a reduction in real terms due to inflation.
The Indian government has also been trying to reduce spending on MGNREGS under the guise of ‘digitalization’ by forcing Aadhar payments.1
I’ve also talked previously about the central government strangling state governments and forcing them to spend in ways that favor big businesses. The central government’s stranglehold is only becoming tighter. It effectively prevents any state government from spending in a way that goes against the wishes of the big bourgeoisie.
I do not see much improvement happening in living standards for much of the country as long as the government continues pursuing neoliberal policies based on junk economics.
That’s all.
- https://thewire.in/labour/mgnregs-aadhaar-system-payment ↩︎