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In the greater scheme of things

MGNREGA can be improved, but not by restricting access

Written by Rohini Somanathan |
Updated: November 3, 2014 8:53:15 am
An energetic government can profitably use and improve the MGNREGA. An energetic government can profitably use and improve the MGNREGA.

Recent announcements on possible changes to the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and restrictions on its coverage are baffling and worrisome. The passing of the MGNREGA and the Right to Information Act heralded a new vision of citizenship and state responsibility. The former created a safety net for the rural poor. The latter gave taxpayers and voters an opportunity to bridge the gap between state promise and process.

An energetic government can profitably use and improve the MGNREGA. The proposal to restrict access based on whether a household lives in a “backward” block is retrograde. A vulnerable family would then only get benefits if it lives among the poor. This undermines one of the main objectives of the act, namely to provide relief in the face of unexpected disasters. When coastal Andhra Pradesh and Odisha are hit by cyclones, or ethnic or religious conflict erupts in Assam, Bengal or Gujarat, do we really want to ask whether families are living in an MGNREGA block?

Some might argue that the MGNREGA has not achieved its objectives. The report of the Comptroller and Auditor General (CAG) last year revealed unspent allocations, unfinished projects and financial irregularities in materials-contracts. It would be hard to find a government programme without these. In contrast, there are reported results from survey of a sample of almost 40,000 listed beneficiaries: three-quarters knew the minimum wage and their entitlement to 100 days of work, two-thirds received wages within 15 days of completing work, 70 per cent reported useful assets in the village as a result of the scheme and the average wait between a job request and employment was only nine days. Although minimum wages have been in force since Independence, rural households in my own surveys prior to the scheme rarely knew of them, since they were never paid.

One of the main advantages of the MGNREGA is that it is self-targeted. As long as transfers are not made to fictitious workers, those with better work options will simply not enrol. Households will opt for unskilled labour at minimum wage only when they cannot do better. This is evident in the CAG sample of beneficiaries: average annual household income is Rs 20,000, 43 per cent are illiterate and a majority live in impermanent structures. Access restrictions are unnecessary in well-designed and self-targeted programmes.

When public education expands and economic growth leads to increases in the demand for skilled labour, spending will decline without executive intervention. This, again, is in contrast to many other government programmes for which the National Sample Survey Organisation data show little correlation between household expenditure and the probability of being classified as “poor”.

The design of the act is innovative because it uses temporary transfers to needy households to bring about long-term improvements in their wellbeing through the better management of village resources and increases in local wage rates. Benefits are therefore much larger than direct transfers under the scheme. Figures published by the ministry of agriculture show that after rising in the 1990s, real farm wages declined between 1999 and 2005, and then rose rapidly after the passing of the act. In 2011-12, farm wages in over half of the 16 major states were higher than minimum wages under the MGNREGA. Although careful research is needed to causally link agricultural productivity to projects under the scheme, the growth in wages and the availability of employment on demand in most states do “provide for the enhancement of livelihood security of the households in rural areas of the country” — the stated purpose of the act.

There are also several stories of beneficiaries who found help at critical stages in their lives on the MGNREGA website. I’ll conclude with one of my own. Three years ago, we were trekking in the Annapurna range in Nepal. On our way up, we stopped and bought a couple of bananas from a man laden with two baskets suspended from a bamboo stick across his shoulders. We saw him again while descending a couple of days later, and the surprise of a second encounter got us talking and walking together. He was from Gorakhpur and regularly bought bananas from Pokhara, walked up the trail with them, down with empty baskets and then started again the next day. Were there many like him? There used to be before the MGNREGA. Now there are only a few. He still comes because his wife’s village is close to the border.

Hopefully, the current government will have the wisdom and grace to enhance the MGNREGA rather than curtail it.

The writer is professor of economics at the Delhi School of Economics

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