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Killing MGNREGA slowly

Focusing on private asset creation will only exacerbate its design and implementation failures.

In the name of harmonisation of the MGNREGA with other rural development initiatives, the former risks submergence in initiatives already suffering from political clientelism and leakage of funds. (Source: PTI) In the name of harmonisation of the MGNREGA with other rural development initiatives, the former risks submergence in initiatives already suffering from political clientelism and leakage of funds. (Source: PTI)

By: Raghav Gaiha and Shylashri Shankar

In his budget speech, Arun Jaitley shied away from taking a tough stand on the MGNREGA. In a seemingly non-controversial comment, he emphasised that “wage employment would be provided under MGNREGA through works that are more productive, asset creating and substantively linked to agriculture and allied activities”. The subtext, however, is controversial. As argued below, far from a benign neglect, it will be a slow kill.

Recent debate shows a diversity of views, ranging from a defence of the MGNREGA in its present form against its proposed dilution into a scheme without any “guarantee” to a case for raising the outlay to build assets on small farms. The dilution of the guarantee would be disastrous for the “entitlements” of the poor and vulnerable (‘No going back on MGNREGA’ , Nikhil Dey and Aruna Roy, IE, July 10).

With all its drawbacks — mistargeting, corruption and unusually long delays in payment of wages — the MGNREGA has not only raised awareness about entitlements among disadvantaged groups but has also enabled them to demand them. But optimistic accounts tend to fall short on the failures.

The design and implementation failures of the MGNREGA have been pervasive and large. Its targeting accuracy in the four states studied (Madhya Pradesh, Rajasthan, Tamil Nadu and Andhra Pradesh) varied enormously, based on household surveys conducted by us (and others) during 2007-10. Two insights from our analysis are pertinent. First, frequent hikes in the minimum wage rate under the MGNREGA weaken the self-selection of poor but physically dextrous individuals. MP had the highest percentage of poor participants (81 per cent), followed by Rajasthan (50 per cent) and Tamil Nadu (40 per cent); in contrast, only 28 per cent of Andhra participants were poor. In the two southern states, the acutely poor’s probability of participating in the scheme was lower than those of others, while the moderately non-poor and affluent had higher probabilities, suggesting that the better-off benefitted more from it. In MP and Rajasthan, the acutely poor had the highest probability of participating, showing sharper targeting towards those groups in those states. In Rajasthan, however, the affluent had the second highest probability, displaying an element of capture by well-off groups.

Second, comparison of the earnings of the poor and non-poor reveals a somewhat worrisome pattern. The variation between the daily average MGNREGA wage earned by poor and non-poor groups was low in the two southern states, implying there was no discrimination against the poor. In Rajasthan too, the variation was relatively low. However, in MP, the non-poor’s daily average wage rate was markedly higher than that of a poor participant; the gap between the wage rates of the affluent and acutely poor was even larger. This implies that in MP, though the affluent worked for fewer days than the acutely poor, they were paid more than the latter.

In most studies and especially in official assessments of the benefits of the MGNREGA, transfer benefits are equated with wages earned as a fraction of household income without adjustment for foregone earnings. Other collaborative research (with R. Jha and M. Pandey, Australian National University) demonstrates that there is considerable exaggeration of real income transfers without this adjustment.
Symptoms of corruption comprise fudged muster rolls, delays in wage payments, pilferage, lack of information and low quality or non-active works. Insights into the pervasiveness of corruption emerge from our study of complaints by MGNREGA participants. Andhra (where 70 per cent were paid weekly and 20 per cent fortnightly) had lower levels of leakage in the wages component than Rajasthan and MP. MP beneficiaries, by contrast, were prey to irregular payments: only 11 per cent got weekly wages, 23 per cent fortnightly, 9 per cent monthly, and over half the beneficiaries got wages when available. Poor beneficiaries had a lower awareness of their rights and entitlements under the scheme. Over half the workers in Rajasthan and about a third in MP said that payment details had not been read aloud from muster rolls. Job card entries had not been made in front of over half the MP workers and about a third of the Rajasthan workers.

Another strand in the current debate is a shift of focus from community works to proactively promote improvements on the landholdings of small and marginal farmers, through the creation of durable assets on the grounds that it will be more beneficial for agricultural productivity and income. In other words, public funds will be heavily committed to building private assets. For example, in the name of harmonisation of the MGNREGA with other rural development initiatives, the former risks submergence in other initiatives that are already suffering from political clientelism and leakage of funds. This flies in the face of the rationale of workfare to build public assets through a self-selection mechanism of low wages and manual work. Worse, it overlooks available evidence on mistargeting of funds and bribes in the individual beneficiary scheme.

As a recent matrix on the budget speech shows, Jaitley referred to investment 34 times, growth 31 times and the MGNREGA just twice. So, growth mania is likely to dominate the policy agenda. If the quotation from the speech is juxtaposed with the case for individual asset creation under the MGNREGA, it will slowly kill off this scheme.

Gaiha, former professor of public policy, Faculty of Management Studies, Delhi University and Shankar, senior fellow, Centre for Policy Research, New Delhi are authors of the book, ‘Battling Corruption: Has NREGA Reached India’s Rural Poor’

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