1) NREGA

With unanimous support of all political parties, the National Rural Employment Generation Act was
enacted in 2005, as a far-reaching attempt to bring some much-needed economic security to the lives
of millions of people who strive to fulfil subsistence needs. It was renamed as Mahatma Gandhi NREGA
on October 2nd, 2009. Mahatma Gandhi NREGA is the first ever law internationally that guarantees
wage employment at an unprecedented scale.

The Act came into force on February 2, 2006 and was implemented in a phased manner. In Phase I it
was introduced in 200 of the most backward districts of the country. It was implemented in an
additional 130 districts in Phase II 2007-2008. The Act was notified in the remaining rural districts of the
country from April 1, 2008 in Phase III. All rural districts are covered under MGNREGA.

A raging controversy is currently going on among economists and policy makers. One argument is that
NREGA in its current form has not served its purpose and it should be totally scrapped. However, many
economists are of the view that even India’s relatively prosperous districts are unlikely to be free from
unemployment or poverty in the foreseeable future and that, gainful employment that affords basic
economic security is a human right.

METHODOLOGY

Reports of Ministry of Rural Development and analysis of CAG were referred for collection of secondary
data. Figures and criticisms were from newspaper articles and interviews of economists are included.
 2) Objectives of the Act

 Provide, on demand, not less than one hundred days of unskilled manual work in a financial
year to every household in rural areas
 Create productive assets of prescribed quality and durability through wage employment
 Strengthen the livelihood resource base of the rural poor
 Proactively ensure social inclusion
 Strengthen Panchayat Raj Institutions.

3) Funding
Central government bears the cost of:

i) The entire cost of wages of unskilled manual workers.

ii) 75% of the cost of material, wages of skilled and semi-skilled workers.
iii) Expenses of the Central Employment Guarantee Council
State government bears the cost of:

i) 25% of the cost of material, wages of skilled and semi-skilled workers.

ii) Administrative expenses of the State Employment Guarantee Council.

4) Performance of the act since inception as per MGNREGA, 2005

REPORT TO THE PEOPLE, 2nd February 2014

Enhanced Wage Earning and Livelihoods Security

About 50 million households are getting some employment at MGNREGA worksites every year at a
relatively small cost (currently 0.3% of India’s GDP). Since its inception MGNREGA has generated 1575
crore person days of employment upto December, 2013. Around 50% of the people employed, are
women and marginal community population.

From financial year 2006-07 up to financial year 2013-14 (upto December 2013) over Rs.1,55,000
crore has been spent on wages. This is almost 70% of the total expenditure. The average wage earned
per beneficiary has risen from Rs.65 per person day in 2006 to Rs.124 by 2013.

Payment through Banks and Post Offices and Financial Inclusion

To ensure transparency in wage payments and prevent misappropriations, the Government of India
mandated that all MGNREGA wage payments should be made through banks/ post office accounts
opened in the name of the worker unless exempted by the Ministry of Rural Development. As a result,
nearly 9.3 crore bank/post office accounts of rural people have been opened under MGNREGA and
around 80% of these wage payments are made through this route. The opening of accounts has brought
the poor into the organised sector and in some cases provided them with better access to credit, an
unprecedented financial inclusion initiative.
Inclusive growth

At the national level, the share of SCs and STs in the work provided under MGNREGA has been high
and ranged between 40–60% across each of the years of the Scheme’s implementation. SCs and STs
participation rate in the Scheme exceeds the percentage share in the total population in most states.
The Scheme also provides an alternative source of income for rural labourers, raising the reservation
wage and implicitly offering labourers bargaining powers in an otherwise inequitable rural labour market.

Women’s empowerment

Various provisions under the Act and its Guidelines aim to ensure that women have equitable and easy
access to work, decent working conditions, equal payment of wages and representation on decision
making bodies. From FY 2006–07 up to FY 2013–14 (upto Dec, 2013) the women participation rate
has ranged between 40-51% of the total person-days generated, much above the statutory minimum
requirement of 33%. Access to economic resources has also had a favourable impact on the social
status of women, for example women have a greater say in the way the money is spent in households.
A large percentage of these women spend their money to avoid hunger, repay small debts, paying their
child’s schooling, etc.

Natural Resource Regeneration and Sustainable Development

The works undertaken through MGNREGA give priority to activities related to water harvesting,
groundwater recharge, drought-proofing, and flood protection. Its focus on eco-restoration and
sustainable livelihoods has led over time, to an increase in land productivity and aided the workers in
moving from wage employment to sustainable employment. With almost 53% works relating to soil and
water conservation, MGNREGA works focus on regenerating the rural ecosystem and creating rural
infrastructure that supports sustainable livelihoods.
A study conducted by Indian Institute of Science, Bangalore during 2012-13 has indicated that such
works taken up under Mahatma Gandhi NREGA have contributed to improved ground water levels,
increased water availability for irrigation, increased area irrigated by ground and surface water
sources and improved drinking water availability for humans and livestock.

Impact on Agricultural Productivity

Research suggests that water-related assets created under MGNREGA have increased the number of
days in a year water is available and also the quantity of water available for irrigation. The increased
availability of water has also led to changes in crop patterns and increased area under cultivation
according to some studies.

Some quantitative performances of the Act in financial year 2013-14:

 3.8 crore households were provided employment and 135 crore persondays of employment
were generated.
 Rs. 17832 crore (76% of the total expenditure) has been on wages.
 As in each of the previous years, the programme had high work participation for marginalized
groups like SC/ST (39%)
 Works Taken up and Assets Created (by type) Around 111.64 lakh works were undertaken
(including new works as well as spill-over works from the previous FY), of which
o 41% relate to water conservation
o 23% for the provision of rural sanitation
o 11% relate to works on land owned by SC/ST/BPL, small farmers or marginal farmers
o 11% rural connectivity
o 5% for land development.

Work taken up
5%
11% water
conservation

rural
11% 41% sanitation

private
owned land
23% rural
connectivity

land
development

Percentage of households received employment in 2013-14

 Percentage of women’s participation in financial year 2013-14

(Source: MGNREGA briefing book by Ministry of Rural Development)

5) Inefficiencies and drawbacks of the scheme

 Report by Comptroller and Auditor General of India (CAG)

The second performance report on MGNREGA by CAG for the period April 2007 to March
2012, analysed the correlation between rural poverty and the average number of households
delivered employment during 2009-10 till 2011-12 and found that at aggregate level there
appears to be a correlation between poverty and employment given under MGNREGA.
However, there were some notable exceptions. Maharashtra, Bihar and Uttar Pradesh which
together accounted for 46% of the rural poor utilised only 20% of GOI funds. On the other hand
Rajasthan, Andhra Pradesh, Tamil Nadu, West Bengal and Chhattisgarh utilised more funds
as compared to their poverty levels. CAG checked 3,848 gram panchayats in 28 states and
four Union territories and further reported the following:

 Only 30 per cent of 129 lakh works worth over Rs 1.26 lakh crore approved in the 14 states
selected were completed.
 Significant decline in the per household job generation in the past two years, from 54 days
in 2009-10 to 43 days in 2011-12.
 The gap between budget allocation and release of fund has widened. For the year 2011-
12, only Rs 29,215 crore was released out of Rs 40,000 crore budgeted.
 Widespread shortages in GRS (Gram Rozgar Sahayaks) posts across 9 states ranging
from 20% in Uttar Pradesh to as high as 93% in Punjab. In 4 states including Tamil Nadu
and Kerala no dedicated GRS had been appointed.
 Suspected misappropriation of wages through engagement of ghost works, incomplete or
improperly filled “muster rolls” non-payment of unemployment allowance, delays in receipt
of wages
  Block Development Officers issued cheques in their own names.
 Monitoring by the Centre is unsatisfactory.

 Wages have frozen in real terms and long delays in wage payments have further decreased
their real value. Initial provisions of the Act for compensation in the event of delayed payments
have been removed. Some highlights are given in the figure below:

(Source : NREGA, MoRD; work data for Apr to Nov : figures rounded off)

 Some economists argue that MGNREGA depreciates the worth of the worker by drawing out
cash for unproductive labour. It also dampens skill development which alone could lead to long-
term employability of the rural poor.

 In a country like India, where poverty and unemployment patterns are too diverse, one single
national employment program is improbable to succeed. This is evident in the statistics of
implementation of the scheme in various states across India. There are state that have
performed exceptionally well. Certain already well off states have benefitted more than others.
Let us examine the case of Kerala which is a socially well off state –

 NREGA became the primary source of employment for 17%

 Secondary source for one-third of the households
 Remarkable performance in women empowerment, 80% of all the beneficiaries were
women
 30% of them belonged to SC/ST, and five percent even disabled
 Around 72% of the registrants got employment within 15 days.
 Two districts- Alapuzha and Thrissur also won Union government’s award for the stunning
performance in women empowerment.

However, in spite of such remarkable performance, the reality was that there were hardly any
men available for these public works because the wages were at least one fourth of the daily
 wage rate in the state. Even the best case studies ignored the fact that these days most of the
daily wage labour is done by migrants from eastern India as men in Kerala hardly do such
works.

Kerala has about 25 lakh migrant labourers, by the state government's own admission, who
remit about Rs 17,500 crore every year out of the state. They earn about Rs 350 to 500 a day
for the types of labour that were rejected by local men.

Such cases show that there are disparity among states as well as within a state, like gender
inequality and literacy rate (as in Kerala).

 While corruption remains a concern, experience shows that it can be curbed, and the battle
against corruption in NREGA has helped to establish new standards of transparency in other
social programmes as well.

 Other problems relate to delay in issue of job cards, inflation of number of working days,
illiteracy of people, improper entries in job cards, etc. ultimately distort the implementation of
NREGA in the right perspective.

6) Conclusion
MGNREGA was implemented with unanimous support with the intention to provide livelihood to the
targeted rural poor population. However, the scheme has not achieved the desired results even after
almost a decade since its inception because of inefficiencies and drawbacks in effective implementation
as discussed above. Many economists and policy makers want this scheme to be scrapped. A better
option would be overhauling and large scale revamping to make it more effective.

7) Way forward
Immediate steps should be taken to improve the efficiency of the scheme to make it more purposeful
and development oriented:

 The programme should be designed based on the needs of each state rather than a uniform
programme across the country.
 To strengthen monitoring strict implementation of guidelines and to prevent corruption and
misappropriation.
 Strengthen the administrative machinery by filling up the vacant posts.
 Activities should result in development and asset creation.
 Programmes for skill development should be included in the scheme.
 Wages should be in line with the market wage rate prevalent in various parts of the country and
should be dynamic.
Limitations and future scope for study
 Source of the data is secondary.
 Although the sources referred were official, there was inconsistency between data reported by
different agencies.
 The latest information is not readily available. Most of the data used is 1 or 2 years old.
 As such large employment generation programme has not been attempted anywhere else in
the world, there is always scope for further improvements in the study of the scheme.