Dilip Mookherjee supports Drèze’s suggestion to decentralise employment generation to urban local bodies, and contends that the moribund nature of urban local government is a key reason for the neglect of urban renewal, sanitation, and public health so far. However, more thought needs to be devoted to issues of corruption and potential for politicisation, as well as funding.

I have long wondered why the idea of a public employment programme has not been extended to urban areas of India. There is a great need for more spending on urban renewal, sanitation and public health – one of the most important needs in the country that has been neglected so far – along with some kind of employment and income security for the urban poor. Part of the reason has been the moribund nature of urban local government, which has not been activated by the 74th Amendment of the Constitution in a way that rural panchayats have since the 73rd Amendment. And that problem in turn has been due to the reluctance of state governments to devolve power and finances to urban bodies. So Drèze’s suggestion to decentralise the employment generation to various local bodies is an excellent one

Of course there are important differences between rural and urban areas with regard to the role of a public employment programme. Urban areas are not subject to the same kind of seasonality of employment, so the logic is not one of insurance. Infrastructural needs differ, as do problems of sanitation, public health, housing, transportation and overcrowding. The DUET proposal is not an employment guarantee scheme. Instead it deals with an entirely different problem: failure to provide decent urban garbage collection/sanitation and public infrastructure/collective spaces in cities. At the same time, there is a growing pool of urban unemployed, anxious to work and earn a livelihood instead of turning to anti-social activities. This is a long-term need, not just something to relieve the effects of Covid-19. Urban renewal and Swachh Bharat have been on the government’s agenda over the past decade. But there has been no reform in urban local government or finances necessary to make significant progress in cities. State governments do not have the will or means to do this. So the central government needs to step in and provide a mechanism and the funding for it. 

As an aside, on the broader role of urban infrastructure, there is steady accumulation of research showing that growth in India is hampered by an exceptionally slow rate of structural transformation from rural to urban sectors. Permanent migration is low, while rural livelihoods continue to be depressed by growing population pressure that increasingly subdivides land in rural areas. School enrolments are rising, and the aspirations of the educated youth today essentially involve urban rather than rural lifestyles. Urban-rural wages gaps are larger compared to most other Asian countries, indicating unexploited gains from migration. Yet actual rates of migration, especially permanent migration are low. While a number of explanations have been given, it seems to me part of the problem has been an unusually slow rate of creation of good jobs in urban areas, combined with high levels of urban squalor, overcrowding, lack of decent housing, transport and income protection mechanisms. There appears to be a lot of temporary migration, tied to specific projects: once the project ends the workers return to their villages as they neither have access to earning opportunities in the city, nor a decent quality of life owing to the terrible infrastructure. Even firms that try to train workers find they cannot retain them after training – I guess this is for a similar reason. One of the most obvious elements of China's growth strategy has been dynamic urban local government with powers and funds, with entrepreneurial mayors who have done an amazing job in creating urban infrastructure that provides decent housing and public services to migrants, which makes them want to stay there, and an environment that welcomes and sustains private investment.

DUET of course would not solve all these problems all at once. But it would be a step in the right direction. Urban local governments have been plagued by long-term weaknesses resulting from insufficient fiscal capacity, resources, manpower, overlapping jurisdictions with state government bodies, and politicisation. This has partly owed to insufficient devolution of funds and responsibilities to local governments by state governments, and lack of suitable legislation and implementation of local property taxes and user fees (Rao and Bird 2010, Jha 2020). DUET has the merit of decentralising the provision of employment opportunities to various approved institutions. At the same time, workers are channeled to the employers by an independent placement agency. This makes a lot of sense, as the employment need in any given institution would typically be of a one-time or short-term nature, and there would be a need to coordinate search and placement of workers looking for employment among different employers scattered throughout the municipal area. Drèze adds various other functions: certifying worker skills, protecting workers against exploitation, providing social benefits (and training, I may add).

Added to this is the advantage of separation from the employing institution, which helps limit problems of collusion. More thought needs to be devoted to how problems of corruption and potential for politicisation (for example, captured by the incumbent political party and used as a clientelistic instrument) can be limited. Drèze mentions various options for the placement agency, including the municipal government itself, a worker cooperative, or multiple placement agencies run by NGOs. I am personally in favour of the third alternative, both to limit the scope for corruption (as different agencies compete with one another, limiting scope for bribery) and politicisation. There will be issues about how to prevent abuse by workers seeking work at multiple placement agencies, and so creating a common information platform with safeguards will be necessary. Also, oversight and auditing mechanisms will be needed. But all this is certainly doable. 

The other issue is funding. Especially at the current juncture the bulk of the funding will have to come from the central government, so it will be another large centrally sponsored programme. I am personally in favour of this, but wonder how the Central government would fund it, and how consistent it will be with the new fiscal federalism. Right now the central government could jumpstart the process as a special stimulus measure in the midst of the pandemic, but in due course the responsibility would have to shift back to state governments. I think it is important to invite more discussion of these macro issues.  

Further Reading

• Jha, R (2020),‘The Unfinished Business of Decentralised Urban Governance in India’, Observer Research Foundation Issue Brief, Issue No. 340, February.
• Rao, MG and RM Bird (2010), ‘Urban Governance and Finance in India’, NIPFP Working Paper No. 2010-68R.