A decade of MGNREGA

The relevance of MGNREGA in rural areas goes beyond its success in creating public employment and its impact on wages

This week, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) completes a decade of existence. The Act came into force on 2 February 2006 covering only the 200 poorest districts of the country and was expanded to cover all rural areas of the country from April 2008. This is the largest programme of its nature for providing employment in rural areas anywhere in the world.

In the short span of 10 years that the Act has been in existence, it has generated 19.86 billion person-days of employment benefitting 276 million workers, with more than half the jobs going to women workers and almost a third to members of scheduled castes and scheduled tribes. These numbers are staggering by themselves but what is relatively less known is the impact of MGNREGA on several other aspects of the rural economy, such as wages, agricultural productivity and gender empowerment. While most critics lament the quality of assets created under MGNREGA, there is now increasing evidence based on rigorous studies, which suggest that not only has the asset quality been better than comparable government programmes, they are also used more by the community. An anthology of research studies on MGNREGA (MGNREGA Sameeksha) was brought out by the United Progressive Alliance (UPA) government in 2012 and a follow-up by the current government last year.

However, a proper evaluation of the impact of MGNREGA has to go beyond the standard metrics of programme evaluation. The achievements of the programme in terms of its impact on rural demand, political participation, women’s empowerment and improvement in rural infrastructure are hard to quantify, but are visible to anyone who has been tracking developments in rural India. And it is these that have been crucial in sustaining the demand for the programme, despite efforts to downsize it. While these were important drivers of the buoyancy in rural economy during the UPA regime, MGNREGA has emerged as an important intervention by the current National Democratic Alliance government during a period of severe distress in the rural economy.

However, the improvement in performance of the MGNREGA in the latter half of last year has come too late. Even with the improvements, the current year’s performance indicators are much less than the performance of the programme in 2009-10 or in 2010-11. The UPA, which to its credit legislated the Act, has also been responsible for the programme losing steam after 2010. Not only was there a cutback in funds available for MGNREGA, there were attempts to change the nature of the programme from essentially demand-driven to supply-driven.

The result was a sharp decline in employment generated, which fell from 2.84 billion person-days in 2009-10 to 1.66 billion person-days in 2014-15. This was also the case with the average number of days of employment provided, which fell from 54 person-days per household in 2009-10 to just 40 person-days per household in 2014-15. Whereas seven million households completed 100 days of employment in 2009-10, it was down to only 2.5 million in 2014-15.

This was largely a result of a decline in funds made available to MGNREGA, which fell not only in nominal terms after 2009-10, but also in real terms, by more than half by 2013-14 compared with the peak years of 2009-10. This happened at a time when the wage rates in rural areas were increasing at more than 5% per annum since 2009-10. To add to the problems, the administrative reforms in MGNREGA were designed to keep the poor and vulnerable out of the programme, with insistence on technological quick-fixes. The net result of these financial and administrative measures was a decline in participation in the programme, a classic case of discouraged worker syndrome.

However, the relevance of MGNREGA in rural areas goes beyond its success in creating public employment and its impact on wages. MGNREGA has played a much larger role in revitalizing the labour market in rural areas. Not only has it led to the creation of a class of workers who are using the MGNREGA as a safety net, but these workers are also able to use it as a bargaining tool for extraction of higher wages. There is consensus that it did play a role in the acceleration in wage rate growth after 2008, directly through upward pressure on wages and tightening of the supply of casual labour to the market and indirectly through the pressure on the state governments to increase minimum wages. Although to a lesser extent, there is also evidence that it did lead to a slowdown in rural-urban migration along with contributing to an increase in agricultural productivity through the creation of rural infrastructure.

While the attempt of the current government to revive the MGNREGA is welcome, it is difficult to attribute it to any change in perception towards the scheme. Not only have the last two budgets of the NDA government failed to increase the budget for MGNREGA, there was hardly any effort to address the issues of delay in wage payments or improving the financial flow to the lowest functionaries until late last year. However, better late than never. The rebound in demand for work from MGNREGA is a clear indicator of the need of MGNREGA. More so in a situation of rural distress, where the rural economy has not only suffered back-to-back droughts but the decline in agricultural commodity prices has led to declining agricultural incomes. The fact that wages in rural areas have been stagnant in real terms since November 2013 has also contributed to the rural distress. Given the severe stress in the rural economy, reviving MGNREGA will not only require strengthening the administrative structure of the programme but also financial support to make it truly demand-based. This budget is not just an opportunity to reverse the years of neglect by financial infusion in MGNREGA, it may also be the only opportunity to revive the rural economy.