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NREGA wages to shoot up ahead of polls; UPA looks to reap rich gains

The rural development ministry has set up a new panel one to prepare a fresh index that would lead to more generous wage revisions under the NREGA.

, ET Bureau|
Last Updated: Nov 25, 2013, 07.45 AM IST
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The rural development ministry has set up a new panel one to prepare a fresh index that would lead to more generous wage revisions under the NREGA.
The rural development ministry has set up a new panel one to prepare a fresh index that would lead to more generous wage revisions under the NREGA.
NEW DELHI: The government is looking to make a substantial hike in wages under its flagship employment generation programme, seen as a vote winner that helped UPA return to power in 2009, ahead of general elections next year.

The rural development ministry has scrapped a panel headed by National Statistical Commission Chairman Pronab Sen and set up a new one to prepare a fresh index that would lead to more generous wage revisions under the Mahatma Gandhi National Rural Employment Guarantee Act (Nrega).

"The new committee has been asked to suggest a proper index that would revise the wages under Nrega in a manner they are protected against inflation," a senior government official told ET. "Besides, it has been asked to suggest the mode of resetting the baseline in 2014 and thereafter every five years."

The Sen committee's view that the index should be based on the consumer price index-rural (CPI-rural) measure isn't acceptable to the government as it believes this would only allow for a moderate increase below the current annual hike, and would be potentially unpopular in an election year.

NREGA wages to shoot up ahead of polls; UPA looks to reap rich gains
Nrega, launched by the UPA government in 2006, is regarded by the ruling coalition as a successful welfare programme that led to its re-election three years later. UPA clearly would not want a formula that could risk its chances in the upcoming general elections.

The new committee chaired by S Mahendra Dev, vice-chancellor of the Indira Gandhi Institute of Development Research, will submit its report in three months, just in time for implementation ahead of the elections.

Wages under the flagship scheme are based on the CPI-agriculture labourers (CPI-AL) measure, which has a base year of 1986-87 and is, therefore, considered outdated.

CPI-AL indexed wage rates were revised upward by nearly 12% with effect from April, with a maximum wage of 214 in Haryana and a minimum of 135 in the north-eastern states.

Economists, however, said linking the wages to CPI-rural was the best option.

"The current inflation is largely because of higher food inflation. Going forward, it would be ideal to determine wages based on CPI-rural, which determines the cost of living in rural areas even if it means lower annual increase per annum," said DK Joshi, principal economist at Crisil.

The government has earmarked Rs 33,000 crore under Nrega in 2013-14.

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