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The near death, and revival, of MGNREGS

Back-to-back droughts and record-low farm commodity prices have forced the NDA government to look at MGNREGS in a new light.Things have started to look up for the scheme, but many loose ends still nee

Sanjeeb Mukherjee 


About a year back, Raqibul Hussain, Assam's rural development minister, was unhappy because he could not stop the Central government from lowering the state's annual entitlement under the Mahatma Gandhi National Rural Employment Guarantee Scheme for 2014-15.

This, he said in a day-long conference of state rural development ministers held in New Delhi's Vigyan Bhawan, was killing the scheme gradually. What was left unsaid was that there would be political consequences if the tap was turned off.

In fact, state after state, including those ruled by the Bharatiya Janata Party like Chhattisgarh and Jharkhand, criticised the Centre's step-motherly attitude towards the scheme and protested any attempt to wind it up.

They were clearly apprehensive that the rural jobs scheme was dying and they put the blame for that at Prime Minister Narendra Modi's doorstep. Started by his predecessor, Manmohan Singh, Modi had made no secret of his contempt for the redistributive scheme.

Fast forward to February 2016: the government in a press statement commemorating 10 years of the scheme termed its achievement as a cause for national pride and celebration.

Rural Development Minister Chaudhury Birender Singh in an interview to this newspaper called the celebrations not a commemoration of 10 years of MGNREGS but 14 months of reviving the scheme. And there are full indications that the scheme might get significant budgetary support in 2016-17.

What has happened in one year that has turned the National Democratic Alliance government from a non-believer to a steadfast supporter of MGNREGS?

It was the two back-to-back droughts and record low farm commodity prices. As rural distress increased, the Modi government, which came under attack early on for being a suit-boot ki sarkar, hit upon MGNREGS as a ready medicine for the situation. It was the only way to keep rural demand alive, without which the industrial sector too would have suffered.

The near death, and revival, of MGNREGS
Agriculture growth in the last two years has been lower than the average population growth. This, as agriculture economist Ashok Gulati says, means that per capita income in rural India is falling, which has a direct impact on more than 50 per cent of India's population. This could have prompted the government to look at the scheme in a new light.

Jobs for all

MGNREGS was conceived and started in 2006 as one of the largest right-based entitlement framework in the country. It guaranteed a minimum 100 days of employment in a year to every willing household within 15 days of making such a requisition. Any inability to provide employment within 15 days from the date had to be compensated through an unemployment allowance.

The wages as notified by the Central government and indexed to inflation were to be given on a weekly basis and not beyond a fortnight in any case.

The provisions made MGNREGS popular amongst the rural poor and within no time, its reach was expanded to cover almost the entire country.

In the initial years, MGNREGS was a true game-changer: rural wages started climbing and reports also pointed towards a decline in migration to urban centres. A study carried out by the National Council for Applied Economic Research in 2015 showed that the scheme helped in lowering poverty by almost a third between 2004-05 and 2011-12 and prevented almost 14 million people from falling into poverty.

Political experts count the scheme among the reasons that helped the Congress-lead United Progressive Alliance emerge victorious in the 2009 general elections for a second term.

In a 2009 article after the UPA victory, social economists Aruna Roy and Nikhil Dey said MGNREGS had stood on its promise of inclusive growth, right to work and dignity of labour, which has been vindicated by the people's mandate.

But, thereafter, the scheme's performance and its impact on the rural economy started waning, especially after 2009-10. A slowing Indian economy, the faltering job scenario and rising incidents of corruption took the sheen off the scheme.

Several experts blamed MGNREGS, along with the highly inefficient public distribution system, for being a scheme where crores were being swindled at various levels.

A 2013 Comptroller & Auditor General report showed that from 2009-10 to 2011-12, only 20 per cent of total funds allocated under the scheme were released for Bihar, Maharashtra and Uttar Pradesh where almost 46 per cent of India's rural poor reside.

In other words, the auditor found the scheme was faltering in those very states where it was needed the most. It found rampant corruption and misappropriation of public funds.

The scheme's claim of improving rural wages also came under a cloud. A study by Gulati, then chairman of the Commission for Agriculture Costs and Prices, showed that though real farm wages rose by almost 6.8 per cent per annum from 2006-07 onwards, the impact of growth variables like overall GDP, agriculture GDP and construction GDP was almost 4-6 times higher than MGNREGS. Gulati's analysis showed that unlike popular perception, MGNREGS was not the reason for growth in rural wages.

The number of person-days employed went down to historic lows and wage arrears started mounting, forcing many MGNREGS workers to commit suicide. Clearly, the scheme was not going anywhere and a fresh approach was needed.

A change in plan

The NDA government was not a big advocate of the scheme in the initial days. Prime Minister Modi in one of his addresses to Parliament had very categorically said that he would keep the Act alive just as a monument of Congress's incompetence. His government also tried to limit the scheme's coverage to a few extremely poor districts.

Then came two consecutive droughts; interspersed with a historic low in farm prices due to a slump in the global commodities market. Rural distress was a reality. It was in such circumstances that MNREGS found a new lease of life.

For 2015-16, , Finance Minister Arun Jaitley allocated Rs 34,699 crore to the scheme in the budget and later topped it up with another Rs 7,000 crore, taking the allocation for the year to Rs 41,699 crore, the highest ever for any year and higher than the previous financial year's revised estimates by around 26 per cent.

MGNREGS's performance also started looking up and in 2015-16 the person day generation in the second quarter (458.8 million) and third quarter (461 million) was the highest in the last five years.

Its marriage with irrigation schemes has been formalised and now the Centre wants to construct 500,000 farm ponds and dugwells and a million compost-pits every year through MGNREGS.

The scheme's convergence with related programmes in the departments of agriculture, irrigation, animal husbandry and even road transport is being planned.

The delay in wage transfers has come down. The Centre claims that it now transfers funds to state governments within 48 hours of generation of FTO (Fund Transfer Order); earlier, this took more than a month. Of the 97.3 million active MGNREGS workers, 55.3 million have Aadhaar-seeded bank accounts - this facilitates direct transfer of the benefits.

"The next stage would be to cut down on the time taken in the work done and wages received by the worker," a senior official remarks.

In all indications, the Modi government has adopted MGNREGS fully, maybe out of compulsion, but controversies surrounding the scheme refuse to die down.

Last month, some activists accessed a letter written by Rural Development Minister Singh wherein he had sent a distress missive to Finance Minister Jaitley to immediately release the promised additional Rs 5,000 crore for the scheme in order to partially meet the spike in demand for work in the current year when large parts of rural India face hardships. Government data reveal the Centre still owes states Rs 5,595 crore dues for work already completed in 2015-16-16 per cent of the budgeted funds for the scheme - causing stress to people, particularly in drought-hit states.

To many, Budget 2016-17 is an ideal time to fundamentally tweak the scheme and give it a new life in order to meet its growing demand in rural areas.

An alternative could be an altogether new scheme to enhance public spending in rural areas with an objective to boost consumption.

"Linking MGNREGS wages to inflation could ensure that farm labours get a big financial boost which in turn might help in lowering the rural distress," says Sudhir Panwar, member of Uttar Pradesh Planning Commission and president of Kisan Jagriti Manch.

First Published: Sat, February 27 2016. 20:42 IST