The purpose of the proposal is to show the Govt & other stakeholders that it is possible to provide employment and basic essentials to entire citizenry, particularly a country like India which is resource rich. And we are providing a model & structure to do that.
Is it possible to provide basic essentials?
India occupies top 3 position in production of many of the farm products. To sustain this and get the maximum benefit out of this, we need to streamline the entire process. India gets plenty of rain, but storage is very limited. Rural India is home to farming and vast number of unorganised labour, who are not productively employed. Rural India also is lacking in facilities to produce value added farm products & other essentials which could be produced with rural workforce itself. Rural population is 980 million, out of which 400 million could be part of this productive activity.
So, rural India has all the necessary real resources to create facilities to produce basic essentials.
Water security is an integral part of this process, as only 8% of rainwater is stored in a year (detailed presentation on water security is provided in our Oct 9th proposal). Multiple water bodies to store rain water have to be built.
Energy needs can be met by local solar projects to encourage distributed power systems and our traditional gobar gas system could be revived.
Additionally need to have investment in educational facilities/research facilities/health facilities/sports facilities/supporting infrastructure to promote high quality/emission friendly service sector expansion and greatly enhanced real wealth/higher standard of living without adding to emissions, etc.
We have availability of all the raw materials, including cultivable land, water which needs to be stored, human resources which needs to be employed and sunlight throughout the year to generate solar power. So, real resources are available to produce basic essentials. As producer, consumer forces are in Rural India itself, if production, value addition & consumption are localised to the extent possible, it would reduce carbon footprint, in addition to plethora of other benefits.
Rural enterprises owned by workers & managed by local & district administration would be an ideal model to execute this.
Is it possible to sustain full employment?
India is a vast country with huge population, predominantly living in villages. It has an extremely high share of informal workers, 85% of the workforce. Dependence on agriculture & related activities are at least 65%. Everybody wants to transition to better employment, but the problem is lack of choice in villages. So, they become migrants, live in pitiable conditions in cities, as their work is not valued much wherever they work. As big farmers shifted to mechanisation, small farmers & farm labourers move to Cities & other States for most part of an year to earn some money, leaving their families behind. So, an ideal solution is providing better employment opportunities in the village itself, as the size of the rural workforce is humongous & there are many issues connected to migration.
Given the above context, we are talking about providing guaranteed work to at least 400 million people. This is massive for a transitional job guarantee program, both in numbers and works that could be provided on a transitional basis. Also, as the organised sector employment is very low, to meet the necessity of having a larger organised workforce in private sector for the transitional mechanism to work efficiently, the rural program could be operated as private enterprises. The existing NREGA, expanded to urban areas with the number of days extended to 300 in stages, could be the transitional job guarantee program.
With this, we could employ all available workforce, which will generate a vast producer, consumer community consisting of at least 400 & 980 million people respectively, the largest in the world in both, also the largest self reliant community in the history of humanity.
Nature of work in rural enterprises is production related. NREGA works are related to asset creation & maintenance in water storage & conservation, ground water recharge, soil productivity enhancement, rural housing, livestock promotion infrastructure and other social infrastructure. With the growth of rural enterprises, infrastructure demands in villages will grow. Water storage in series of ponds should be expanded massively to capture most of the rain water.
So, NREGA could be expanded to 300 days in a year and acts as a transitional job guarantee program, expanding during downturn and shrinking during upturn in economy, so that it supports it as an automatic stabilizer. NREGA wage also has to be increased in stages.
As long as loose enough fiscal is maintained, the NREGA pool won't grow all that much as workers transition to private sector employment.
The infrastructure required for the rural enterprises could be created as part of the NREGA work. As the rural enterprise is a producing-consuming group, additionally producing value added essential products for sale, it is structurally self reliant and profitable. So, within a year of operation, it could become self sustaining and start making profit.
So, with this model, full employment is sustainable.
As this program streamlines the existing production based on actual need/demand and also increases and makes available all the essentials, it leads to great price stability. The plan clearly shows, real human resources produce and consume real products and services and in this real economy, the role of nominal money is to make it all work.
The following execution & funding plan is our suggestion, particularly funding through direct Government spending arises out of MMT view of fiat monetary system operation. Alternatively, the plan execution could spread over longer period, instead of 3 years, thereby reducing annual outlay.
We have clearly shown that if the entire operation is seen in real terms, the funding part could be seen for what it is, just facilitating real products & services produced by real labour. But, if MMT view of real monetary operation is not acceptable, the second option given could be utilized.
(I) The rural enterprises program is suggested to be executed over 3 years & program outlay for the first year is taken at Rs 20 Lakh Crore ($270 billion). During second & third year, Rs 10 Lakh Crore respectively would be required. Instead of 3 years, if implementation period is taken as 10 years, annual outlay would be Rs 4 Lakh Cr. Program implementation employing 400 million people in 3 years would be extremely challenging.
It will be funded by direct Government deficit spending, issuing treasury bills of maturities 3 months. RBI then simply 'offsets operating factors' to keep rates on target.
NREGA gets funded by the Government as usual.
(ii) As the rural enterprises will achieve self sustenance within 1 year, beyond that it doesn't need funding support. If Govt is delaying the decision making or reluctant, it could be availed as a loan at concessional rate of interest & repaid over 5 years.
This essential economy requires only planning & will, everything else is available! A country of 138 Cr people with assured income and basic facilities would be a land of peace & comfort, one of its kinds in the world!
The above proposal has evolved out of conversation with Warren Mosler & the verbatim extract of the correspondence is given