Inflation happens when the total amount of money increases relative to the total amount of goods that are produced in the economy. If a scheme merely adds more money to the pot without increasing production, it will cause inflation. If you increase production and at the same time increase the total amount of money appropriately, there is no inflation.
If you do a pure income transfer, without raising the total amount of money, you do not have inflation.
So what is the NREGS doing? If it is merely printing money and handing it to unemployed people (who are not producing anything), then it leads to inflation. This inflation reduces the real incomes of people who are producing something. So in this case, it is a pure income redistribution scheme. Drèze knows this as he knows basic economics. But he cannot admit the truth because his job depends on being economical with the truth.
Very well said by Mr.Atanu Dey
TO support the above article, Inflation is basically caused by either excess of demand heavy cost of production,
Narega basically is joke that the government is playing the tax payer's hard earned money wasting it in un-productive services,a and giving another opportunity to bureaucrats for increasing the corruption and bribery, this situation has catastrophically worsend the position of small scale labor intensive units posing a acute labor problem, then again decreasing the productivity having an adverse effect on cost, giving rise to inflation.
I hereby urge to all the group members who ever support the idea of anti Narega movement come forward and share their view points.........
