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Just two months from now - on April 1, 2008- the government will meet one of the biggest organisational challenges any government has ever faced - the extension of the National Rural Employment Guarantee Act (NREGA) to the entire country. This is one of the most ambitious development programmes in the world, set to embark soon on a decisive new phase. Has the groundwork been done for this?

During the last two years, we have bee involved in a series of NREGA-related activities (social audits, field surveys, training programmes etc.) in seven states: Andhra Pradesh, Chhattisgarh, Himachal Pradesh, Jharkhand, Orissa, Rajasthan and Tamil Nadu. Consistent with the secondary data available, we have observed a highly uneven picture of NREGA implementation in different parts of the country.

There are states and districts where unprecedented amounts of employment have been generated and the Act has shown its ability to be a new life line for rural communities. For instance, in 2006-07, the NREGA generated as many as 77 days of employment per rural household in the six districts of Rajasthan where the Act applied. In many other states, employment is still quite limited, and there are many procedural issues, as the recent draft CAG report illustrates. Nevertheless, in all the states mentioned above we have observed that the enactment of NREGA has initiated a paradigm shift in the standards of implementation of public works schemes. For instance, the Act has made it possible to confront a range of exploitative practices such as the non-payment of minimum wages, chronic delays in wage payments, the use of labour displacing machines, and the illegal contractor system. Further, NREGA has started setting new standards of transparency of accountability, enabling people to fight corruption not only in public works schemes, but also - potentially in other development programmes. It is this broad trend of positive change that gives hope in the possibility of implementing the Act in letter and spirit across the country.

Having said this, the forthcoming extension of the NREGA presents new challenges, and there is a risk that it might boomerang unless adequate preparations are made to face them. That, indeed, is the real message of the draft CAG report, widely misrepresented in the media as an indictment of the Act. The experience of the last two years needs to be understood and built upon to ensure the success of this “new phase” of the programme.

According to official data, the NREGA was employing nearly three million workers on an average day in 2006-07 (when the Act was in force in 200 districts). As the Act is extended to the whole of rural India, this could rise to 10 million or so - the largest public works programme ever. These numbers need corresponding support structures, especially as the NREGA is a law that creates legal responsibilities to deliver. For instance, the financial allocation for administrative expenses urgently needs to be raised from the present, meagre 4 per cent to 6 per cent at the very least. However, it is not just a question of financial resources. Adequate administrative, legal, technical and institutional support structures are also essential. In their absence, there are likely to be multiple failures in the delivery system, and these will be invoked once again to argue against the Act itself.

This challenge, however, can be turned into an opportunity. The success of the NREGA depends on sustained attention to details of a range of practical arrangements, such as the distribution of job cards, work application procedures, technical planning, worksite management, staff training, record-keeping, social audits and much more. This could be done in a creative manner, where systems are put into place supported by the pool of resources and skills available at the local level. For instance, recent experiments in a, Rajasthan have shown that the shortage of technical staff can be overcome by creating a cadre of trained worksite supervisors drawn from the community. This could lead to major improvements in worksite management without having to set up a new bureaucracy. Similarly, creative use of the Gram Rozgar Sevak (the NREGA assistant at the panchayat level) could go a long way in ensuring sound record-keeping as well as strict implementation of the transparency safeguards.

The state governments have a crucial role to play in the process of preparing for this new phase of NREGA. Recent experience shows that where state governments have taken active interest in the Act, wide-ranging initiatives have emerged, making it possible to provide work and create productive assets on a massive scale. However, many states continue to have a casual attitude towards the Act. This is startling as 90 per cent of the expenditure is borne by the Centre. The state governments have never had such a good opportunity to pursue rural development goals without having to worry about the financial burden.

The Centre, for its part, has a mandate to ensure that all rural households are able to exercise the right to employment under the Act. It can perform both regulatory and constructive roles in this regard. The regulatory role involves framing the guidelines and rules that flesh out the responsibilities of states. The constructive roles are potentially wide-ranging. Aside from providing adequate funds, they include developing communication and training tools, putting in place record-keeping systems, providing technical resources, facilitating mutual learning between states, conducting or sponsoring evaluation studies, monitoring the implementation of the Act guidelines, and so on.

The Central Employment Guarantee Council (CEGC) was expected to facilitate many of these roles. Unfortunately, it has been kept on ’standby’ mode most of the time during the last two years. Recent CEGC delegations to Jharkhand, Tamil Nadu, Orissa and Uttar Pradesh have been very productive, and demonstrate the scope for further initiatives of this kind, as well as for activating the council in other ways.

By default, the immense burden of overseeing this ‘flagship programme’ rests on the frail shoulders of a small team of overworked civil servants at the Ministry of Rural Development. This crucial support base of NREGA needs to be expanded into a full-fledged ‘Employment Guarantee Mission’, with strong political mandate and a full secretariat.

   
But ultimately, what needs to be activated most of all is the political leadership. The NREGA presents unique possibilities for grassroots political mobilisation and organisational work. This opportunity exists for both ruling parties and opposition groups. It is a telling commentary on the state of Indian democracy that, with few exceptions, political parties across the spectrum have - so far - failed to seize this opportunity.

This point applies even to the parties that took the initiative of enacting the NREGA. In fact, there is schizophrenia about the attitude of the UPA towards the Act. On the one hand, political leaders parade NREGA as one of the main achievements of this government (the Prime Minister himself described it as “historic and revolutionary”). On the other hand, the government is doing far too little to face the organisational challenges involved in ensuring that the Act achieves its potential. Hopefully, the extension of the NREGA will provide an opportunity to correct this bias. Let it not be said, a few years from now, that this extension took place appropriately on April Fools’.

Impacted by a strong domestic currency against the US’s dollar, India’s exports during December 2007 grew by a paltry 2.54 per cent even as in dollar terms it grew by a healthy 16.04 per cent. Amid exporters’ concerns over slowdown in the US economy and over 12 per cent appreciation in rupee against the dollar, exports went up to $12.31 billion in December 2007 as against $10.61 billion during December 2006.

According to the government data released, in rupee terms, exports touched Rs 48,569.64 crore, which was 2.54 per cent higher than the value of exports during December 2006. Imports during the month were valued at $17.68 billion, up 18.06 per cent from $14.97 billion in December 2006. In rupee terms, imports increased by 4.31 per cent to Rs 69,731.56 crore in December 2007.

The cumulative value of India’s exports for the first nine months of the current fiscal (April-December 2007) was $111.04 billion as against $91.20 billion, registering a growth of 21.76 per cent in dollar terms and 7.74 per cent in rupee terms during the same period last year.

India’s trade deficit for April-December period, of the current fiscal, widened by $14.97 billion to $57.82 billion from $42.85 billion in the year-ago period. Oil imports during December 2007 were valued at $5.96 billion, up 23.78 per cent from $4.81 billion in 2006. For the nine-month period of the current fiscal, oil imports were to the tune of $49.31 billion, 11.68 per cent higher than $44.15 billion in the corresponding period of previous fiscal.

Finance Minister P Chidambaram said that Central tax to GDP ratio is estimated to have increased to 11.8 per cent in 2007-08 as per budget estimates, providing additional resources to the Centre for social expenditure and achieve fiscal consolidation.

Buoyant economic growth along with efforts to improve the tax administration system has yielded rich dividends. As a result, the Central tax to GDP ratio is estimated to have increased from 8.2 per cent in 2001-02 to 11.8 per cent in 2007-08 as per budget estimates, Chidambaram said.

While speaking at this year’s first meeting of the Parliamentary Consultative Committee attached to his ministry, he said this increase has provided the government with additional resources that are being shared with the states besides being utilized for meeting expenditure in the social and infrastructure sectors and for fiscal consolidation.

Gross Tax Revenues are budgeted at Rs 5, 48,122 crore in 2007-08 he said, while inviting suggestions from the members for the Union Budget for 2008-09. He said the overall macroeconomic fundamentals continue to be strong.

Revising India’s economic growth rate to 9.6 per cent for 2006-07, the highest in 18 years, the government expressed confidence that the economy would expand at close to 9 per cent in the current fiscal. The earlier estimate had put the economic growth rate at 9.4 per cent last fiscal. According to the revised figures released by the Central Statistical Organisation (CSO), India’s per capita income growth rate stood at 8.1 per cent last fiscal. CSO also revised upwards economic growth rate in 2005-06 to 9.4 per cent from the earlier 9 per cent.

Commenting on the figures, Finance Minister P. Chidambaram exuded optimism that the growth during the current fiscal would be close to 9 per cent. “My goal is to continue to maintain the same level of growth but at the same time, government reserves the right to make rapid adjustments depending upon evolving global economic situation,” Chidambaram told reporters.

The Indian economy has grown by over 8.5 per cent during the past four years. The economy expanded by 9.3 per cent in the first quarter and 8.9 per cent in the second quarter of this fiscal. Echoing Chidambaram’s optimism, economist D K Joshi said the economy is likely to grow at 9 per cent this fiscal. Economic think tank NCAER revised GDP growth projections for this fiscal to 9.1 per cent against its earlier forecast of 8.9 per cent. However, rising interest rates had adverse impact on industrial production growth, which nosedived to 5.3 per cent in November this year against a whopping 15.8 per cent a year ago.

During the first eight months of this fiscal, the Index of Industrial Production slid to 9.2 per cent from 10.9 per cent during the corresponding period a year ago. In its recent monetary review, RBI, belied expectations of interest rates cut 5 by maintaining status quo on all signalling rates.  However, some PSU banks have said interest rates could still be cut as there· is enough liquidity in the system.

Chidambaram said, “We are not making policies and we are not taking administrative steps in a vacuum. We are doing so where there is heightened uncertainty and we are making rapid adjustments. We are confident that if we keep firm hands on the wheel, the Indian economy will sail through turbulent waters. We are maintaining a balance between growth and inflation,” adding that inflation is still below 4 per cent and growth is well above 8 per cent.

The improved growth in the GDP during 2006-07 has been achieved due to all-round improvement in mining, manufacturing and services sectors, which helped to offset the slower growth in agriculture sector. While agriculture sector grew by 3.8 per cent, down from 6.1 per cent, manufacturing sector recorded 12 per cent growth, which is substantially higher than 9 per cent growth recorded in the previous year.

Anil Ambani is planning another initial public office (IPO). After Reliance Power and Reliance Infratel, Reliance-ADA Group Company Reliance Entertainment is now understood to be finalising plans for an IPO.

The company is expected to file the Draft Red Herring Prospectus (DHRP) with the Securities and Exchange Board of India (SEBI) soon after the budget. Reliance Infratel, which had filed the DHRP prospectus on February 4, would receive the mandatory approval in the next 15 days.

For the Reliance Entertainment issue, Kotak Mahindra and JM Financials are likely to be the investment bankers. A spokesperson for the ADA Group said: “We do not want to comment on speculation.” An analyst with a Mumbai-based research firm said: “Right now, it is difficult to arrive at a valuation for Reliance Entertainment. There could be restructuring of the company’s businesses. This could involve transferring certain related businesses to Reliance Entertainment.”

After soaring to their peaks, valuations of entertainment companies have taken a major hit during the recent market meltdown. While TV 18 has a market capitalisation (price multiplied by the number of traded shares) of Rs 4,961 crore as on February 6, 2007, UTV’s market capitalisation was at Rs 1,961 crore. The group has put all its new-age businesses like gaming and home entertainment under Reliance Entertainment. While Zapak is company’s gaming business, BigFlicks is its home entertainment venture.

The company is also eyeing a presence in the television segment through channels it has planned to launch. “Reliance Entertainment is taking its time to decide whether the IPO should be timed before the launch of its DTH service-Big TV or after it,” said the executive of an entertainment channel.