By Kartikeya Batra

Over time, the discourse surrounding Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has made it impossible to think of a scenario characterized by harmony between opposing views regarding the scheme’s efficacy. In the following paragraphs, I seek to prove the thesis that opinions on either side are primarily a function of MGNREGA’s stated objective as decided by the Central Government, and that the latter will have to choose one outcome over the other, if the confusion surrounding the program is to end. At this point, I must admit that this piece does not delve into leakages and corruption that mar the scheme – an issue which deserves a separate article to itself.

Failure? Success? Wait, What is the Intended Outcome Again?

MGNREGA promises at least 100 days of unskilled employment each year to each rural household across India. Literally, the objective of the scheme seems to be straightforward – raising rural incomes and alleviating poverty. Yet, this simple statement conveys more than what it seems to. A cursory glance at MGNREGA wage rates suggests that they are nowhere near the market rate. A daily labourer entitled to an MGNREGA wage of Rs. 174 in areas around Lucknow, for instance, can seek employment in the city for as high as Rs. 400. Another element to notice is the universal coverage that the scheme provides across rural households, i.e. unlike a number of social schemes, MGNREGA is not targeted at certain socio-economic strata (say BPL families). A third critical element is the demand-based nature of the scheme; beneficiaries who demand work are entitled to employment within 15 days of demand registration.

The aforementioned elements, low wage rates, universal coverage and the scheme’s demand-driven format, point to the central premise of the act, i.e. providing money (through MGNREGA employment) to all those households among the larger universe of households that are ready to work for a wage rate lower than the market rate. In other words, one can think of MGNREGA as a welfare scheme that provides beneficiaries an opportunity to “work and earn”, where the beneficiaries’ opportunity cost of working under the scheme is less than the MGNREGA wage (which in itself is rock bottom). The wage rate differentials across states capture the underlying differences in price levels and the amount of money that the Government deems fit for basic survival.

As per this perspective, the “earn” component of MGNREGA should get primacy over the “work” component. MGNREGA, under this paradigm, should be a filter separating those with higher opportunity costs (who despite universal coverage do not turn up for work because they have better opportunities that will pay them more) from those with lower opportunity costs (beneficiaries who turn up for work because they do not have a better source of income). In other words, in purely theoretical terms, I will not hesitate in saying that per the direct income support objective of the policy, it should not concern a policymaker whether the beneficiaries are digging holes (and filling them again) or constructing toilets.

Nevertheless, this extremely theoretical premise in its absolute form is not plausible for a variety of reasons. This is reflected well in the 2005 version of the Act, which underscores that wages may be paid as per a Schedule of Rates, which pegs wages to be paid to the amount of work done, fixed by the concerned State Government. Yet, the primary point of this perspective remains that if the objective of MGNREGA is to ensure income support through direct cash transfers, the quality of work may be compromised.

Come 2011…

The year 2011 though was a major turning point. The 2005 version of the Act did state the creation of “durable” assets as one of the primary objectives of the scheme. While sounding innocuous and in fact, complementary, this provision gave rise to a parallel narrative that contradicts the income support objective on several fronts. In 2011, the UPA Government turned its attention towards this component, laying out exact specifications of assets whose creation could be undertaken under the 9 broad categories enshrined in the Act. The same has been carried forward by the current NDA Government. The premise of this move seemed easy to comprehend – improved quality of assets would benefit the countryside through asset-creation aimed at rainwater harvesting, irrigation and enhancement of road connectivity, among others.

The Government’s seemingly noble intention, however, failed to account for the unintended consequences it was to set in motion. From first-hand experiences across several states in Northern India, one of the first consequences of this changed focus has been the inability of women and old-aged beneficiaries to contribute effectively to the construction of durable assets. Some of the assets under the new framework require beneficiaries to work in tough conditions (for instance, going down into the well to dig it further), which has resulted in the more productive beneficiaries being allotted extra person-days at the expense of person-days on the job cards of women and the old. Another by-product has been the illegal usage of machinery.

Similarly, as mentioned above, MGNREGA was framed as a demand-based scheme, i.e. labor will be hired when it wants to be hired and not when the Government wants it. This runs straight into the idea of focusing on only a handful of durable assets. What if demand comes from a section of beneficiaries who do not possess the ability to work under the required conditions? A rather far-fetched example of such a mismatch may be that of a village that possesses all the requisite durable assets where MGNREGA demand continues to persist. What about instances were despite the need for productive assets, land availability is an obstacle? Should workers who demand work during times of such stalemates be denied work? These and several other such questions form the rival narrative that competes with the “work and earn” paradigm.

In addition, far removed from the demand-based framework that is salient to the law, the Central Government has turned the scheme into a target-based framework with local officials being forced to ensure achievement of physical and financial targets. Interestingly, because these targets are set at the beginning of the financial year, the target-based approach discounts changes in socio-economic circumstances during the upcoming year. Ironically, this mismatch is especially problematic when beneficiaries may not be interested in MGNREGA work due to positive developments (a good monsoon, for example) during the year.


Whose MGNREGA is it anyway?

A Compromise Between Narratives?

It is, thus, safe to say that over the last decade, the Central Government has shifted goal posts, thereby causing massive confusion between the aforementioned narratives. I admit that while not communicating it in as many words, over the last 3-4 years, the Central Government (both the Dr. Singh-led UPA and the Prime Minister Modi-led NDA) has taken gradual steps towards according primacy to the second narrative, i.e. durable asset creation. For instance, MGNREGA was initiated with the idea that expenses incurred on the construction of each asset will be split 60:40 between labor costs and material. Yet, this norm would come in the way of durable assets (because of little material and high wage components). It was relaxed in 2013 with the Ministry of Rural Development clarifying that this ratio had to be maintained at the GP or Block level (depending on the implementing agency of the work). In April 2016, the Ministry of Rural Development further relaxed it by stating that the ratio has to be maintained only at the district level. Another example of the same is the Government’s focus on converging MGNREGA activity with other schemes (such as construction of toilets under the Nirmal Bharat/ Swachh Bharat Abhiyaan and Aanganwadis under the Integrated Child Development Scheme).

These moves should, however, not compromise the first narrative, i.e. job creation, which is the premise on which the Act was passed in the first place. Because it has not caught the attention of our national media (or has been demonized as a reason behind food inflation), it has gone unnoticed that job creation under MGNREGA has provided a much needed lifeline to rural India. Despite massive issues in the form of corruption and payment delays plaguing it, MGNREGA has proved to be a mitigating agent in times of crises (especially droughts) and has had a desirable impact on outward migration across several states.

If the Government has decided that asset creation will become a salient feature of MGNREGA, it should work towards striking a compromise. Policy should be aimed at productive asset creation while not reducing the number of jobs created. In this regard, the Government’s move to earmark 60% of a district’s MGNREGA budget to agriculture and allied activities is a good example. While ensuring that MGNREGA money is well spent, it may not hinder participation across demographic groups. On similar lines, the Government may earmark a certain percentage of expenditure every year towards the durable assets that it wishes be created under the scheme, while leaving the remaining at the discretion of the local administration. Skeptics might argue that this would promote pilferage. The answer to that should be better monitoring (towards which the Government is working), and not the relegation of one of the core objectives of the scheme.

Note: The views and opinions expressed in this article are those of the author’s and do not necessarily reflect the official policy or position of his organisation.

Kartikeya Batra is a Research Associate at EPoD India – a Public Policy research organization jointly run by the Harvard University (USA) and the Institute of Financial Management and Research (India).

Featured image Credits: Ron Hansen via Unsplash

Posted by The Indian Economist