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Rural Employment

A Bird's Eye View Into the Mahatma Gandhi National Rural Employment Guarantee Act

Rumela Ghosh's picture

World Bank / Curt Carnemark
The 10th South Asian Economics Students Meet (SAESM) was held in Lahore, Pakistan, bringing together 82 top economics undergraduate students from the region. The theme was the Political Economy of South Asia, with a winning paper selected for each of the six sub-themes. In this post, Rumela Ghosh presents her winning paper on the political economy of social security. Posts from the other winning authors will follow over the next few weeks.

Employment is one of the burning problems affecting South Asia. India now has a diminished growth rate below 6% per year. In recent years although the living standards of the 'middle classes' have improved, reform for underprivileged groups has not been so exciting. According to National Service Scheme (NSS) data the average per capita expenditure rose at the exceedingly low rate of 1% per year in India. There has been a sharp decline in real agricultural wages also. A quantitative assessment of the impact of various rural wage employment schemes during the last two five-year plans and the current one shows that the results in terms of employment generated have been steadily decreasing.
My paper looked at schemes to tackle unemployment in India. A Bird's Eye View into Mahatma Gandhi National Rural Employment Guarantee Act firstly examines the Maharashtra Employment Guarantee Scheme (MEGS) introduced in the 1970s. It examines how at different time frames and contexts the elite managed to maintain their support base and reinforced its legitimacy by supporting a poverty alleviation program – the EGS. It also highlights the issue of gender concern and the problem of migrant workers.
Among various EGS, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is the flagship program implemented at the national level which achieved measurable success, though with some flaws. It guarantees every rural household up to 100 days of wage employment in a year within 15 days of demand for such employment. My study highlights the significant interstate differences in the supply of employment and tries to explore the reasons why. Supply falls far short of demand, particularly in low-income states, where the organizational capacity to implement the scheme is limited.

The paper examines the conceptual design and delivery of MGNREGA to assess its effectiveness against unemployment and poverty. I discuss existing labor laws applicable to workers in the unorganized sector covering wages, contract and poverty incidence. The paper also seeks to derive the short run and long run implications of a minimum wage law. A detailed empirical analysis of the spatial dimension of implementation, problems of funding, and budgetary incidence of MGNREGA.
A comparative study of MGNREGA scheme as implemented in Tamil Nadu where it is largely fair and corruption free with respect to that in Uttar Pradesh where the implementation has some serious flaws with corrupt practices of local officials paying wage payments to non-existing laborers has been illustrated. It studies the differences in utilization, extent of targeting, magnitude of income transfers and the cost-effectiveness of food subsidies.

I designed a game-theoretic model to design a near-perfect scheme with suggestions to eliminate the loop holes. Various falsified implementation strategies by contractors like fictitious names in muster rolls, commission to the contractor for partially/not working laborers has undermined the objectives of MGNREGA. This illegal money laundering from a subsidized scheme like MGNREGA digs a deep hole in India's economic pocket when the economy is reeling under inflation and rupee value depreciation pains. The model attempts a systematic game theory based solution approach for restricting these scheme implementation faults. A graphical presentation shows that, with such a policy laborers in the long run will have an incentive to deliver under MGNREGA only.

Strengthening the Mahatma Gandhi National Rural Employment Guarantee Act in India to Foster Participation, Access and Accountability

Abhilaksh Likhi's picture

The initiation and countrywide implementation of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) represents a milestone in social policy and employment creation with its right based approach and focus on livelihood security. The flagship program has benefitted millions of marginalized rural households by providing them unskilled work and led to prevention of stress migration from rural areas in lean agricultural seasons. A UNDP/Carnegie Endowment for Peace study points out that from the scheme’s first year of operation in 2006-2007 till 2010-2011, job creation accelerated from less than 1 billion workdays distributed amongst 20 million households to 2.5 billion workdays for 50 million households.
In the above context, the 2013 performance audit conducted by the Comptroller and Auditor General of India (CAG) should be a timely opportunity to analyze the immense management and convergence challenges that a program of MGNREGA’s size poses. This is especially relevant in view of CAG’s observation that undertaking of non permissible works, non completion of works and lack of creation of durable assets during the period 2007-2012 indicated that the poorest were not able to fully exercise their rights under the program. 

One of the ‘bottom up’ features’ of the program is its reliance on rural local self government structures i.e. Panchayati Raj Institutions (PRIs) to reinvigorate community driven participation and decision making in service delivery.  The first key institutional challenge, therefore, is to make MGNREGA’S program implementation effective by enforcing PRI ‘activity mapping’ (unbundling subjects into smaller units of work and assigning these units to different levels of government) that was set in motion after the historic 73rd Constitutional Amendment, 1993.  Herein, the Central Government and the States of the Union, have to jointly actualize the principle of subsidiarity- what can be best done at lower levels of government should not be centralized at higher levels. Empowering PRIs especially Gram Panchayats (last mile units in villages) with funds, functions and functionaries (3F’s) is a critical incentive to build their institutional capacity for service delivery. This, in turn, would provide them the teeth to carry out their core responsibilities under MGNREGA such as planning of works, registration of beneficiaries, allotting employment, executing works, making timely payments, maintaining records of measurement and muster rolls.