Reports that the National Democratic Alliance (NDA) government intends to radically restructure the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) have re-ignited public discussion on the scheme. Since its launch, debate on MGNREGA has been synonymous with ideological contestations on the role of the state and its welfare functions. Inevitably, the contours of the debate have been shrill, leaving little space for an evidence-based discussion on the shape that a re-designed MGNREGA should take.
The first and the most important question that ought to be considered is: has the scheme met its primary objective of guaranteeing employment to India’s poorest? The most intuitive way of answering this is by comparing employment levels with poverty rates across States.
If the scheme was well-targeted, households in poorer States would presumably demand more work and these States would provide the largest share of employment. However, on this metric, the data presents a damning story. Accountability Initiative’s analysis found that in 2010-11, poorer States such as Uttar Pradesh, Bihar, West Bengal and Madhya Pradesh, which together account for 59 per cent of the country’s rural BPL population, generated only 34 per cent of employment through MGNREGA. On the other hand, Andhra Pradesh and Tamil Nadu, which house eight per cent of the BPL population, accounted for 23 per cent of the total employment generated that year.
On participation Other research studies also confirm that poorer States are unable to provide employment. MGNREGA is designed as a “self-targeting” programme where participation is a function of demand for work and the extent to which this demand is actually met. Using National Sample Survey (NSS) data from 2009-10, economist Martin Ravallion and his colleagues examined participation through precisely this lens.
Across India, 45 per cent of rural households wanted to work on the MGNREGA. Of these 56 per cent received work. Put differently, 44 per cent of those who wanted work were not given employment or, to use the authors’ definition, were “rationed” out of the scheme. Importantly, demand for work was strongly correlated with poverty rates, but actual employment was not. While demand for work in poorer States like Bihar and Uttar Pradesh was high, richer States like Andhra Pradesh and Tamil Nadu were able to provide more employment.
While low participation in poorer States is cause for serious concern, the analytical consequences for the design of MGNREGA and its ability to reach the poorest can be completely understood only by looking at who actually receives work under the programme. In other words, where employment is being provided, do the benefits of MGNREGA accrue to those who need it? In its study, Accountability Initiative drew on the work of Rahul Pathak, a researcher, to answer this question. Using monthly per-capita household expenditure (MPCE) from the 2009-10 NSS, Mr. Pathak examined participation across consumption deciles and compared participation of the lowest 30 per cent (per-capita expenditure of up to Rs.657) with the middle 40 per cent (per capita expenditure between Rs.657 and Rs.1058) and the top 30 per cent. He found that the bulk of participant households were nearly equally divided between the lowest 30 per cent (which accounted for 40 per cent participants) and the middle 40 per cent (accounting for another 42 per cent). Of course, there are inter-State variations. The quantum of participants from the lowest 30 per cent is highest in Maharashtra (63 per cent) and Orissa (51 per cent) and far lower in Rajasthan (36 per cent), and Bihar (37 per cent). High participation of middle 40 per cent households could be argued to indicate poor targeting. However, the difference in consumption patterns of households in the lowest and middle deciles, particularly in poorer States is as little as Rs.250-Rs.400 per month or Rs.8-13 per day. Thus, many middle households are not that much better off and are as vulnerable to shocks as the poorest. Moreover, given the high participation of women (48 per cent in 2009-10), it is likely that a significant number of participants from the middle 40 per cent are women, who need extra income. Thus employment under MGNREGA is largely received by those who need it the most.
The work of Mr. Ravallion and his colleagues reinforce this fact. They find that rationing in the scheme does not discriminate against the poor. Demand for work is higher among the poor than among the non-poor. And amongst those who demand work, the poor are more likely to receive it than the non-poor. So the self-targeting mechanism works.
Two important conclusions emerge from this discussion. First, the real implementation failure in MGNREGA is that demand for work does not translate in to actual employment in India’s poorer States. But this is less a function of flawed targeting design than of weak governance. Poorer States spend lower per-capita on MGNREGA, have higher vacancies, lower staff motivation with limited technical capacities and are therefore unable to meet the demands of the programme. This will only be resolved by building the institutional capabilities of frontline administration and local governments to deliver the scheme.
Of course there are serious problems of corruption and weak implementation both in poor and non-poor States. There is ample evidence that the poor often receive less than their share of wages, that payment is delayed and that corruption in the use of materials in MGRNEGA work sites is on the increase. But the reform challenge this poses is one of governance and this ought to be the focus of the debate on re-structuring MGNREGA.
Delayed payments, corruption Second, that self-targeting works suggests that in a country where the debate on identifying the poor is riddled with controversy, MGNREGA’s “self-targeting” design may well be the most effective way of ensuring that income support programmes reach those who need it. Any restructuring ought to strengthen rather than weaken this self-targeting design. This is why the debate on MGNREGA versus cash transfers, as it is currently framed, simply misses the point. Whatever the arguments for and against cash transfers, if cash transfers are to work, we first need to know who India’s poor are and how best to reach them — two things over which there is more controversy than consensus.
It is in this context that the proposed changes to tweak the wage-material ratio and restrict the MGNREGA to backward regions need to be discussed. Will the shift in the wage-material ratio compromise self-targeting? Increasing the material component is likely to result in an increase in the use of machines thereby limiting the scope of employing unskilled labour. This may lead to further rationing of work, especially in poorly governed states. Moreover, given that there are already leakages when it comes to the use of materials for worksites, greater use of materials will only enhance rather than reduce corruption. The policy question therefore is whether the objective of building infrastructure and an employment guarantee can be achieved through the same programme. And if so, how best to design it?
An important argument being made in favour of changing the wage-material ratio is that of ensuring flexibility. No doubt, in a country as large and varied as India, a one-size-fits-all centralised rule is a recipe for failure. But if greater flexibility is the objective then the restructuring ought to move beyond just the wage-material issue to ensure more effective devolution of powers to Panchayats so that they have real authority to identify infrastructure works and plan for MGNREGA expenditure, which today is determined almost entirely by the diktats of the Indian government and the whims and fancies of the district magistrates.
Finally, MGNREGA’s Achilles heel is weak governance capacity. It is unclear how the move to restrict the scheme to backward regions, that already have capacity constraints, will solve this problem. Re-structuring should rather focus on building the frontline — improving staff capacity and deepening local government involvement in delivering the programme.
The good news is that MGNREGA has witnessed a proliferation of experiments, mostly in better governed States, from creating improved financial management systems to using technology-enabled banking solutions like smart cards, social audits and building grievance redressal systems. The focus must now be on evaluating these experiments and drawing lessons to improve administration in the poorly governed States.
( Yamini Aiyar is a senior research fellow at the Centre for Policy Research and Director of the Accountability Initiative )