CHAPTER - 3
PERFORMANCE OF WAGE EMPLOYMENT
PROGRAMME IN INDIA
“In the true democracy of India,
the unit is the Village. True
democracy has to be worked from
below by the people of every
village. Village unit as conceived
by me is as strong as the
strongest. Such a unit can give a
good account of itself fit is well
organized on a basis of self -
sufficiency. If anyone can
produce one ideal village, he will
have provided a pattern not only
to the whole country, but
perhaps for the whole world”
MAHATMA GANDHI
3.1 Rural Poverty in India
On being sworn in as the first Prime Minister of India in 1947, Nehru called
for “the ending of poverty and ignorance and disease and inequality of opportunity.”
Mahatma Gandhi had always insisted that India would become truly independent only
when the poorest of its people would be free from human suffering. The basic causes
of necessitate and poverty include unequal access to and ownership of means of
production and subsistence patriarchy and the gender-based division of labour, social
status and ethnicity, exploitation through debt related usury and labour bondage, etc.
The lack of purchasing power due to inadequate employment at remunerative wages,
food insecurity, low and variable productivity of land and other assets, lack of access
82
to public services, especially health and education, non-farm employment, scarcity,
etc. are further causal factors. Performance in poverty reduction varies across the
Indian states. It has been most impressive in the South, Andhra Pradesh, Karnataka,
Kerala and Tamil Nadu, Haryana, Gujarat, Punjab and Rajasthan. On the other, the
absolute number of poor increased despite falling poverty rates in central and eastern
India, in Bihar, Orissa, Madhya Pradesh and Uttar Pradesh owing to unsatisfactory
poverty reduction. Differential performance in poverty reduction and „initial
conditions‟ have therefore led to the disproportionate concentration of the poor in
these areas Bihar, Jharkhand, Uttar Pradesh, Madhya Pradesh, Chhattisgarh, West
Bengal and Orissa account for 54 percent of the rural poor in 1973-74 which go up to
69 percent in 1999-2000 (Biswal, 1998).
Bihar and Madhya Pradesh combine low agricultural development and high
rural poverty with low unemployment rates, while Punjab has high agricultural
development and high unemployment but a lower poverty ratio. Real rural wage rates
are positively related to poverty reduction and the rate of growth of real rural wages
was associated with the growth of non-farm employment in the period of high poverty
reduction in 1980s. The structure of employment growth was therefore far more
important than employment growth the respective shares of agricultural and non-
agricultural employment in the workforce, with high non-agricultural work associated
with low poverty. This is not for the reason that anything essential to the non-farm
sector, but the relatively lower productivity in agriculture. Datt and Ravallon show
that, in addition to the effect of prices, output and government spending, the
magnitude of poverty reduction in the states was dependent on the initial conditions in
physical and human infrastructure in terms of irrigation, female literacy and infant
mortality. The importance of initial conditions for poverty reduction, such as health
and education status, land distribution, etc. it is found that no matter which measure of
poverty was used development and health expenditures help reduce poverty (Bhalla,
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2005). Social and Economic infrastructure plays a vital role in shaping poverty. This
finds one correspondence between index of infrastructure and the incidence of
poverty with the important exception of Rajasthan, a state with low infrastructure
index and a low incidence of poverty. This is possibly because of the low population
density and high area in the desert region, which brings down indicators with area in
the denominator. The role of infrastructure is thus vital for poverty alleviation. One
more key part in poverty alleviation is food security at the household level, which in
turn requires national self-sufficiency in production and a universal, efficient and
effective public procurement and distribution system. The socio-economically
backward sections have a higher dependence on the PDS, especially in the Southern
parts of the country (Ranjan, 2004).
In the 1980s, inactive per capita agricultural output far slower growth in
agricultural employment viz., the rural labour force was accompanied by real
agricultural wages increase, owing to the growth of rural non-agricultural
employment ensuing in the reduction of poverty. However, the importance of
agricultural development for poverty reduction cannot be over emphasized in
underdeveloped tribal areas characterized by a rough, breakable and strong ecology
which rain fed agriculture and variability of rainfall. The poor are a heterogeneous
group, ranging from tribal cultivators, scheduled castes, agricultural labourers, female
headed households, etc. A large section of marginal farmers and agricultural labourers
belong to the Scheduled Castes and the gap between percentage SC population in
poverty and overall poverty ratio is reducing only marginally. SC population in
poverty in urban and rural areas was 10 percentage points higher than the total
population. The Scheduled Tribe population has got poorer and the gap between the
total population and STs has widened. The development of backward areas through
the development of dry land agriculture is an important factor in explaining high
poverty. These areas require labour-intensive, location-specific preservationist soil
84
and water management strategies for poverty-reducing broad-based agriculture
growth (Gupta, 2005).
3.2 Wage Employment Programme and Development Agencies
The government of India was taken up various measures to surmount the
problem of poverty. Poverty alleviation programmes comprising of wage employment
programmes, rural housing schemes and a public distribution system have been
initiated from time to time. Some were moderately successful in addressing the issue
of poverty whereas others suffered from major flaws in their implementation.
National Rural Employment Programme (NREP) 1980-89, Rural Landless
Employment Guarantee Programme (RLEGP) 1983-89, Jawahar Rozgar Yojana
(JRY) 1989-99, Employment Assurance Scheme (EAS) 1993-99, Jawahar Gram
Samridhi Yojana (JGSY) 1999- 2002, Sampoorna Grameen Rozgar Yojana (SGRY)
as September 2001, National Food for Work Programme (NFFWP) as November 14,
2004 (SGRY and NFFWP now merged with NREGS 2005) were national level rural
employment generation schemes. However these programmes could not provide
social security to the rural poor. The Central Government launched NREGA on
February 2, 2006. The Act guarantees the right to work to by providing 100 days of
guaranteed wage employment in a financial year to every rural household whose adult
members are willing to do unskilled manual work. NREGA is the first ever law
internationally, that guarantees wage employment on an extraordinary scale. NREGA
covers the entire country with the omission of districts that have 100 percent urban
population. NREGA provides a statutory guarantee of wage employment and is
demand driven which ensures that employment is provided where and when it is most
needed. An employment guarantee gives labourers more confidence in the prospect of
local employment and discourages seasonal migration.
85
3.3 National Rural Employment Guarantee Scheme and Earlier
Wage Employment Programmes – A Comparison
In the past, there have been a series of Wage Employment Programmes for the
poor but the National Rural Employment Guarantee Scheme represents a model
change and is different from the early Wage Employment Programmes in several
aspects. The differences points are given under:
NREGS EARLIER PROGRAMMES
Concept
Legal guarantee of right to employment
– a complete blown power
– a new vision of rights-based
development for the poor
No impressive vision
– concepts supplementary to schemes
– based on decision-making and advice
Non-exclusive and total coverage Limited in capacity and treatment
Demand-based Supply-based
Self-targeting Patronage-based
Focus on employ Focus on resources
Focal point on creative sector for
sustainable development
Focus on public works for the most part
roads
Natural supply management True property development
Labour position of sight
– influence of the employee
Angle of the official / wangle /
middleman-contractor
Gender aware Gentleman / mechanism – subject
Off season employ Peak season outflow
Genuine participatory preparation Negotiated priorities – decision based on
neighboring authority affairs
Able to be seen Difficult
Answerable Controlling
Vision-based insight planning Short term main concern listing
Natural, inner role for PRIs Secondary group role for PRIs
86
Long introductory phase Sudden quick-fix plans
Complex communication and extension Schedule motions for form‟s sake
Actual arrangement covering who, what,
where, when and how.
Hotchpotch list of works
Detailed budget – work to match demand Financial budget – work to match
resources
Can be incorporated with different
progress works
Partial to representation works
Integrated plan Isolated works
Statutory across - level linkages in the
Panchayat Raj system
Autonomous and repetitive plans
Multi-dimensional action plans covering
time, space, manpower and resources
Two-dimensional action plan covering
resources and works
Results-based and outcome-oriented Expenditure oriented
Real People‟s Plan Bureaucratic / technocratic plan
Organization
Panchayat in central place – development
from within
Middleman-contractor in central place –
outsourcing development
Administrative approve and technical
approve before organization of work
AS & TS in response to middlemen
contractor thump
All actions completed in home
- Receiving together workers
- Executing the work
- Mustering
- Substance procuring
- Measuring
- Paying
Most of the actions carried out by the
middlemen, contractor, except
measurement and payment
Fortnightly measuring and payment Often once or twice per work
People‟s estimates Engineer‟s estimates
Minimum wages Market wages
87
Equal wages – strong subsidizing the
weak
Differential wages
Piece rate Mostly bulk measurement
Local labour Often outside labour
Payment throughout Bank Direct cash payment
Payment by Government Payment by middleman-contractor
Work without whip – new dynamics of
mutual help and group discipline
Ruthless supervision by middleman
contractor
Actual substance labour ratio Theoretical and pretended ratio
No abandoned works Quite a number of abandoned works
Administration
Outside DRDA DRDA centered
Clear role for District Project Coordinator,
Block Programme Officer.
Roles routines over the years
Real records
- Estimates
- Muster rolls
- Vouchers
- Capacity
Often "created" records
Integrated and consistent data base
- Unique ID of workers
- Unique ID of work
- ID of muster rolls
- Payment vouchers
- Bank Accounts of persons
No such data base
Close monitor
- National level monitor
- State level monitor
- District level monitor
- Inspection schedule
Routine monitor
88
Clear accountability systems
- Proactive disclosures
- Vigilance and Monitoring
Committees
- Social Audit
- Penalties
Ritualized and routine
Special features
Difficult to control Easy to control
Criticality of Panchayat capacity No such issue
Proactive role of Government of India Routine role of Government of India
High visibility, watched with interest by
supporters and opponents
No such interest
Clearly articulated political will No such will
Sources: Government of India (2007). Adopted Annual Five Year Plan Document,
Planning Commission, New Delhi
To demonstrate the theoretical, conceptual and developmental differences
among NREGS and its prototypes the distinctions planned below are important.
Rights-based Patronage-based
Inclusive Exclusive
Participatory Co-optive
Redistributive Rent-seeking
Liberating Domesticating
Empowering Exploiting
Transparent Manipulated
Integrated Automized
Planned Schemed
People-centered Power-centered
Engendered Male dominated
Organic Disjointed
89
Ecological Mechanical
Outcome-based Target-based
Developmental Departmental
Democratic Bureaucratic
Humanistic Materialistic
Vision-based Greed-based
Real Make Believe
Sources: Government of India (2010). Report on various studies, Ministry of Rural
Development, New Delhi
MGNREGA attempts to address two of the key concerns related to poverty in
India: unemployment and a flagging agriculture sector. Although it is seen as a key
policy tool to support poverty reduction, it has been criticized for not addressing the
gap in skills that rural labourers need to take advantage of new growth opportunities
for focusing on employment at the expense of development (e.g. where infrastructure
and assets have not been completed or are unproductive) and for protective the
mobility of the poor to areas with more growth probable. In order to address these
problems, the present policy frame is based on three-pronged accomplishment to
alleviate and reduce poverty in the country which constitutes:
a) Stepping up of economic growth
b) Direct strike on poverty through employment, income-generating programmes
and assets creation for the poor and
c) Human and social development policies for the poor and the needy.
The programmes which are intended at directly helping the poor instead of
the entire population are termed as targeted poverty alleviation programmes. This
section draws largely on (Banerjee, 2010) constitute the second component of the
three-pronged advance as described above. The benefits derived from these
programmes are in addition to those that accumulate to the poor from the normal
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economic activities. The targeted poverty alleviation programmes are basically
conceived of as income redistributive schemes are expected at direct income
generation of the poor. The objective of the employment generation programme is to
generate continued and supplementary employment for the rural poor.
3.4 Public Works Program, Employment Situation and Wage rate:
An Outline
There is a growing theoretical and empirical literature on the impact of public
works programmes on poverty alleviation (Sen, 1995). As Maharashtra Employment
Guarantee Scheme apart, India has a long history of public works programmes,
particularly in rural areas as a poverty reduction strategy. After India‟s independence
in 1947, there were many central government schemes for public employment,
beginning with the rural manpower programmes from 1960. Public employment has
proved to be an effective strategy for prevention of famine and alleviation of poverty
(World Bank, 1990). NREGA also focuses on the districts which have high rate of
poverty However, NREGA goes beyond poverty reduction and recognizes
employment as a legal right. Skeptics considered it as a populist measure while others
have considered it as a landmark initiative measure towards poverty alleviation and
empowerment of poor. It is argued that this would not only increase the income of the
poor, but the created asset through the process of employment would generate a much
needed productive infrastructure for poverty alleviation on a permanent basis. It is
also seen as an initiative work to operationalize the concept of the right to work
enshrined in the Constitution under the Directive Principles of State Policy (Papola
2005), by guaranteeing work to those who are seeking jobs. However, if one looks at
the employment scenario of the country during the 1980s and 1990s, one would
observe that during the tenth five year plan, the growth rate of employment has
slowed down considerably. The annual rate of growth of rural employment was
around 0.5 percent per annum between 1993–94 and 1999–2000, as compared to 1.7
91
percent per annum between 1983 and 1993–94 and also the current daily status
unemployment rate in rural areas increased from 5.63 percent in 1993–94 to 7.21
percent in 1999–2000. The deceleration in employment growth was further reinforced
by a sharp in public spending on rural employment programmes (Dev 2002).
In this situation, the performance of NREGA is the appropriate and right time.
Although, the aggregate employment figure have a decline, national sample survey
estimates of unemployment rates in 1999–2000 showed that the rate of unemployment
in usually unemployed category in 1999–2000 was only 2 percent for the male labor
force and less than 2 percent for the female labor force. Despite low unemployment
rates, the data or rate of poor income in rural areas is at least four times the number of
unemployment as per the current daily status, which implies that the number of poor
far outweighs the number of rich for lack of productive activities (Kannan 2005).
This, in other words, implies that the quality of employment is so low that the wage
rate is inadequate to take care of even the limited notion of income poverty. Thus,
NREGA has to make an observable knock on poverty and the applicable wage rate
should be assumed paramount importance. In this context it can be said that it is the
right and appropriate time for the enactment of NREGA. From the budgetary point of
view there is rare implication of a particular wage rate. However it is highly needed in
order to make a significant impact on rural poverty that should provide “livelihood
security” In this framework, wage programme emphasized:
(i) Wages should be high enough to meet the daily subsistence need of the
workers‟ households and
(ii) In order that the really needy avail of the guaranteed work and no diversion of
labor take place from other regular productive work, wages should not be
significantly higher than the market wage rate.
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The second proposition would hold well, theoretically, if the prescribed wage rate
under NREGA is higher than the market wage rate. In Maharashtra, no clear evidence
of such an impact has been recorded, although the possibility of employment
guarantee schemes (EGS) having treated upward pressure on agricultural wages has
been indicated (Khera, 2005).
Table 3.1
Average Daily Wages for Casual Workers: Rural (in `)
State Male Female Persons St. Min.
Rate
Andhra Pradesh 48.32 31.08 40.86 25.96
Assam 58.88 54.17 57.98 33.10
Bihar 44.29 37.46 42.91 41.02
Chhattisgarh 35.40 30.21 33.19 -
Gujarat 49.22 36.31 45.20 46.80
Haryana 79.92 67.65 78.00 73.65
Himachal Pradesh 83.21 72.51 82.29 51.00
Jammu & Kashmir 94.79 77.64 93.58 30.00
Jharkhand 53.53 42.00 51.48 -
Karnataka 50.61 31.27 43.67 40.55
Kerala 123.65 68.15 112.20 30.00
Madhya Pradesh 46.56 31.47 41.36 51.80
Maharashtra 51.48 35.48 44.94 8.46
Orissa 46.72 29.48 43.22 40.00
Punjab 78.37 59.57 77.07 70.85
Rajasthan 64.68 48.73 61.55 47.05
Tamil Nadu 71.35 35.52 57.78 32.00
Uttaranchal 60.88 52.69 58.65 -
Uttar Pradesh 58.84 39.80 56.22 58.00
West Bengal 49.96 40.36 48.60 48.22
North Eastern State 66.22 48.97 63.27
All India 56.53 36.15 50.70 47.53
Sources: Government of India (2005). NSS 60th
Round, Average daily wage data,
(January 2004 to June 2005), New Delhi
Note: Statutory minimum wage pertains to June 12, 2001
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Table 3.1 explained a state by state comparison of the average daily rural
wages for casual workers and the statutory minimum wage rates in the respective
states reveals that, in many of the states, the statutory minimum wage rate is much
lower than the market wage rate. It is to be noted that the statutory wage rate data
pertain to June 2001 and the market wage rate data pertain to 2004. The statutory
wage rate to keep the real wage constant will not make it at par with the market wage
rate of 2004 in most of the states. Haryana and Punjab has the highest average wages
for casual workers in comparing to others state. Given this large positive differential
between the market and the statutory wage rate, the demand for work under NREGA
may not be as high as one would assume and the possibility of a laborer shifting from
other sectors to NREGA based employment seems remote in this context in many of
the states. But the same may not hold well in the context of a state like Bihar, where
both the wage rates are more or less equal and in Madhya Pradesh and Uttar Pradesh
where the statutory wage rate is higher than the market wage rate. The earlier wage
employment programs (WEP) have helped in many ways in stabilizing wages and
food grain prices in rural areas.
However, the coverage of the scheme remained poor and more than 50 percent
of the beneficiaries were not from the most economically vulnerable sections in rural
areas. Other than these, there were issues of corruption in the form of underpayment
of wages, differential wage payment to male and female workers and proliferation of
contractors in the implementation of the schemes. It has been specified in the act that
“if an applicant under this act is not provided such employment within fifteen days of
his application seeking employment,” she or he shall be entitled to a daily
unemployment allowance which will be paid by the state government. This implies a
built-in structure of incentive for performance and disincentive for nonperformance
for the state government, as inability to provide employment would cause the state
government to pay unemployment allowance for which there is no contribution from
94
the central government (Dreze and Sen, 1989). In other words, individual state
governments will have to evolve a well-coordinated approach to equate supply of
employment in accordance with the demand. This becomes all the more important as
there is no supply-side selection of beneficiaries. This requires in-depth understanding
of region-specific labor demand and its seasonality so that a demand-based scheme of
projects can be implemented at a frequency matching with the demand for work
instead of supply-side provisioning. Failure to do this may result in imprudent use of
funds, as inability to provide employment on demand will impose the burden of
compensation, in the form of unemployment allowance to the state government. Thus,
there is a need to design a monitoring mechanism by strengthening institutional
structure at the local level so that resources can be used optimally. As it is a demand-
based provisioning, the flow of resources from the higher levels of government to the
Panchayats needs to be ensured according to the demand (Datt, 1997). Thus, it needs
to change a clear mechanism of flow of funds as needed according to the demand
rather than through the normal bureaucratic procedure. This would also require good
coordination between providing work and provision of funding.
3.5 Decentralisation and Poverty Reduction
A democratic decentralisation is also predicated upon the notion that greater
participation in local political affairs will get better one‟s personality and get
government services, particularly ones expected at the upliftment of poor and
politically minor groups of the society. For proponents of democratic decentralisation,
a central challenge of improving the delivery of public services become one of
„crafting‟ institutions which can maximize participation in political life. In the
perspective of poverty reduction, access to the resources and benefits that
governments provide is connected with systems of governance that empower poor and
vulnerable groups in society (Economist, 2001).
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The emphasising importance is that all of there have problematic facts in the
sense that a system of governance is required which can ensure that public resources
are delivered efficiently and effectively. Indeed, it is the misallocation or „corruption‟
of government services that often justifies the strongest calls for public sector reform.
Studies of decentralisation have shown that devolution of authority can enhance
systems of local governance in a number of ways. First, the establishment and
empowerment of local resource user groups can improve the ways in which local
people manage and use natural resources, thereby improving the resource on which
poor people are often disproportionately dependent. Second, good relation and
collaboration between public agencies and local resource users can produce
„synergistic‟ outcomes in which citizens and civil servants cooperate to provide goods
that would not be obtained if acted by only one section. Third, the democratization
and empowerment of local administrative bodies can enhance participation in
decision-making, particularly among groups that have traditionally been marginalised
by local political processes (Agrawal and Gibson, 1999).
As pointed out by Blair (2000), „increased representation offers significant
benefits in itself.‟ Framed in this way, participation in local, democratically elected
bodies can lead to improvements in self-identity and worth, which can help to break
down customs of inequality and discrimination. Robinson (1988) expressed that
membership of local administrative bodies can provide important skills that can be
transferred to additional ways of life. While, the notion that improving participation
through decentralisation will necessarily lead to the improvements in people‟s well-
being is not entirely consistent with documented evidence. That there exists a
relationship weak correlation between democratic decentralisation and poverty
reduction that emerges from a recurring theme is shown by a sizeable body of
literature.
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3.6 Significance of Panchayati Raj in India
The concept of democratic decentralization took its shape with a view to better
administration and developmental perspectives, and for quick rural development and
co-operations of local people. State government does not possess adequate wisdom of
local affairs and problems. From this view democratic decentralization can constitutes
a significant contribution to the theory and practice of nation building activities in the
developing areas (Dreze and Sen, 1996). Panchayats are also predictable to play an
important role in Planning & implementing various development programmes. After
independence India has continually implemented development interventions with the
objective of improving the social and economic condition of the people. Now it is
strongly felt that an effective Panchayati Raj System can bring about rapid and
integrated development through people participation. To bring about these intended
goals, the Govt. of India has implemented many Anti-Poverty Programmes in the state
such as the NREGS (National Rural Employment Guarantee Scheme), SGSY
(Swarnjayanti Gram Swarozgar Yojana), IAY (Indira Awaas Yojana), PMGY
(Pradhan Mantri Gramodaya Yojana), PMGSY (Pradhan Mantri Gram Shadak
Yojana) etc. Sufficient provisions have been made for their implementation through
the Panchayati Raj Institution. But this programme could not bear the desired result
due to inconsistency between scheme aims, poor quality of asset creation, lack of
resources and manipulation of the record.
3.7 Budgetary Incidence of Wage Programme
In order to recognized whether NREGA implementation is a huge fiscal strain,
examined budgetary incidence of other employment programs (self and wage
employment) prior to NREGA and compared them with NREGA-based allocation. As
can be seen from Table 3.2 though the central government mobilizes around 10
percent of GDP as revenue and size of the government measured as a percentage of
GDP is around 15 percent, the direct expenditure on rural employment constituted 0.2
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percent of GDP in 1996-97, which declined to 0.13 percent of GDP in 2001,
particularly at a time when human deprivation increased in rural India. Although there
was an increase in the direct expenditure on rural employment to 0.40 percent of
GDP, it tended to decline thereafter and reached to 0.33 percent of GDP in 2006–07,
even with the introduction of a NREG program in that year.
Table 3.2
Key Budgetary Indicators to GDP Ratio (in percent)
Particulars 2000-
01
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
Revenue
Receipts 9.22 8.87 9.41 9.56 9.80 9.87 10.32
Revenue
Expenditure 13.30 13.28 13.79 13.12 12.31 12.47 12.49
Expenditure:
MORD 0.43 0.59 0.74 0.70 0.58 0.78 0.81
Rural
Employment 0.13 0.20 0.40 0.37 0.23 0.33 0.33
Total
Expenditure 15.58 15.95 16.25 17.08 15.94 14.40 14.43
Sources: Government of India (2008). Ministry of Finance, Union Budget Documents
(various issues)
From the Table 3.3, the allocation under Swaranjayanti Gram Swarozgar
Yojana (SGSY) shows a decreasing trend with a corresponding increase in the share
of SGRY from 23.3 to 62.1 percent between 1999-00 and 2003-04 except in the year
2000-2001 with 15.1 percent. The share of SGRY allocation declined sharply
thereafter, with a corresponding increase in the allocation for the National Food for
Work Program (NFFWP). The NFFWP has been stopped with the introduction of
NREGA in 2005-06. A sharp decline in SGRY is evident in 2006-07, with a
corresponding increase in the share of allocation under NREGA with 42.3 percent.
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Table 3.3
Allocation of fund under Wage programme
Name of the
Programme
1999 -
2000
2000-
2001
2001-
2002
2002-
2003
2003-
2004
2004-
2005
2005-
2006
2006-
2007
Swaran Jayanti Gram
Swarozgar Yojana 13.1 4.2 4.5 4.3 4.6 6.5 4.2 4.5
Sampoorna Gramin
Rozgar Yojana 23.3 15.1 32.2 56.9 62.1 33.1 35.8 11.2
National Food for
Work Programme 28.2 16.4 7.5 5.7 0.0 13.1 19.0 0.0
National Rural
Employment
Guarantee Scheme
0.0 0.0 0.0 0.0 0.0 0.0 0.0 42.3
Other Expenditure 35.4 64.4 55.7 33.1 33.2 47.4 41.0 42.0
Total 100 100 100 100 100 100 100 100
Source: Government of India (2008). Ministry of Finance, Union Budget Documents
(various issues)
Jonathan, (2005) highlighted some of the possessions that rural local bodies,
especially the village Panchayats, can engage in for effective implementation of this
act are: (i) demand based budgeting (ii) advance planning to offer work on demand
and (iii) holistic and inter sectoral planning of projects for work to avoid duplication.
The “social audit” through Gram Sabha, as mentioned in the Act, can also help to
revitalize the ineffective Gram Sabhas in many of these districts.
The Gram Sabha can play an active role in planning, monitoring, and
supervision of projects. To institutionalize the implementation of the NREGA, there is
an urgent need for defining the clear agreement of roles and responsibilities through
activity mapping, capacity building of all the agencies involved in the process of
implementation, and imparting training for that purpose. By strengthening the
institutional structure for community participation in decision making, a holistic
approach would evolve towards convergence of asset creation and management. In
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many places, Panchayats do not have the necessary capacity to manage the schemes
and capacity building ought to take place at Panchayat level. Devolution of
responsibilities and strict accountability norms would accelerate capacity building at
the levels of Panchayats and the scheme can effectively function as a demand-driven
one. In assessing the demand for labor, Panchayat level preparation of labor budget,
district wage list and schedule of rates at the district Panchayat level would go a long
way for effective implementation. Keeping the spatial dimension of the
implementation in mind, the importance of the smooth flow of funds for
implementation of projects in accordance with the demand, capacity building at
village level, right to information to enable social audit effectively and accountability
of functionaries, and an effective grievance redressal mechanism assumes critical
importance. Based on the above analysis, it can be concluded that the existing
institutional arrangement is not sufficient enough in poorer states to implement
NREGA in an effective manner. There is an urgent need for both vertical and
horizontal coordination across levels of governments within the states.
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Dig. 3.1 Mahatama Gandhi National Rural Employment Guarantee Act Agencies
Sources: World Bank Report (2007). Attacking Poverty, Oxford: Oxford University
Press
101
Table 3.4
Time-Line of MGNREGA
August 25th
, 2005 NREGA enacted by legalization
September 5th
, 2005 Assent of the President
September 7th
, 2005 Notified in the Gazette of India
February 2nd
, 2006 Came into force in 200 districts
April 1st, 2007 113 more districts were notified
May 15th
, 2007 17 more districts were notified
April 1st , 2008 Notified in the remaining rural districts
October 2nd
, 2009 Renamed as MGNREGA
Sources: Compiled from various reports of MGNREGA
The Table 3.4 depicts that the Mahatma Gandhi National Rural Employment
Guarantee Act (MGNREGA) is an Indian job guarantee scheme, enacted by
legislation on August 25, 2005. The Act received assent of the President on
September 5, 2005 and was notified in the Gazette of India on September 7, 2005.
The law was initially called the National Rural Employment Guarantee Act
(NREGA) but was renamed as Mahatma Gandhi National Rural Employment
Guarantee Scheme (MGNREGA) on 2nd
October 2009. The Act was legalized and
notified in 200 districts in the first phase with effect from February 2nd
2006 and then
extended to an additional 130 districts in the financial year 2007-2008 out of it 113
districts were notified with effect from April 1st 2007 and 17 districts in Uttar Pradesh
were notified with effect from May 15th
2007. The remaining districts have been
notified under MGNREGS with effect from April 1st 2008. Thus, the MGNREGS
covers the entire country with the exception of districts that have a hundred percent
urban population.
Implementation of MGNREGA
At presently theoretical and empirical literature on the impact of public works
programs on poverty alleviation. Maharashtra Employment Guarantee Scheme apart
of India has a long history of public works programs particularly in rural areas as a
102
poverty reduction strategy. After India‟s independence in 1947, there were many
central government schemes for public employment, beginning with the rural
manpower program in 1960. Public employment has proved to be an effective
strategy for prevention of famine and poverty reduction (Sen 1995). The Act was
implemented through the MGNREGS which was consciously attempted to counter
weakness of earlier programs through several features in its design. According to
Santosh (2008) MGNREGA incorporate time bound action to fulfill guarantee of
works within 15 days of demand for work and a disincentive for non-performance.
Comptroller and Auditor General (2007) the basic objective of the act is “to
enhance livelihood security in rural areas. This work guarantee can also serve other
objectives, generating productive assets protecting the environment, empowering rural
women, reducing rural- urban migration and fostering social equity among others”.
Before formalizing the Act, government agencies estimated that full coverage of
MGNREGS will cost `.400 billion which was about 1 percent of GDP. Some
empirical assessments suggest that MGNREGS could help reduce rural poverty to 23
percent during lean season, at annual cost of 1.7 percent of GDP (Murgai, 2005).
Others based on simple average minimum wage aggregates of all states estimated the
national annual cost to be 1.3 percent of GDP, and a case was made that MGNREGS
will be sensitive to prevailing minimum wages in respective states (Santosh, 2008).
Table 3.5 shows budgetary allocation of funds reflecting a steady increase from 11300
crores in 2006-2007 to 40100 crores in 2010-2011. However the following years the
budgetary allocation has comedown which will adversely affected the implementation
of the MGNREGS.
103
Table 3.5
Financial Allocation of MGNREGS
Years
Budget
Allocation
(Crore)
Percenta
ge of
GDP
MGNREGS
Exp. As %
of Total
Expenses
MGNREG
S Exp. As
% of
Revenue
Receipts
MGNREG
S Exp. As
% of Fiscal
Deficit
MGNREGS
Exp. As % of
Rural
Development
2006-07 11,300 0.28 1.2 1.6 6.10 46.55
2007-08 12,000 0.26 1.5 1.9 10.0 41.71
2008-09 30,000 0.56 1.6 2.0 10.18 52.77
2009-10 39,100 0.66 2.7 4.4 9.21 69.08
2010-11 40,100 0.54 2.8 4.1 9.01 55.63
2011-12 40,000 1.02 3.1 5.0 9.70 53.98
2012-13 33,000 0.78 2.2 3.0 6.42 33.33
Sources: Government of India (2012). Ministry of Rural Development, Budgetary
Document Department of Rural Development, (MGNREGA-I Division)
Earlier wage employment programmes that required guaranteeing were forced
by the lack of budget funds and so instead of a legal guarantee assurance alone could
be offered. It is possible that the confidence of the government to commit funds was
inspired by a higher growth rate of economy.
Table 3.6
Utilisation of Fund under MGNREGS (%)
Year Expenditure on
Wages
Expenditure on
Material
Administrative
Expenditure
2006-07 66.21 30.89 2.09
2007-08 68.54 30.58 3.12
2008-09 69.27 30.08 3.48
2009-10 69.77 30.23 3.29
2010-11 68.36 31.64 4.57
2011-12 76.39 23.61 3.69
Sources: Government of India (2012). MoRD, Annual Report 2011-2012, New Delhi
104
In Table 3.6 the percentage of MGNREGS fund on wage is higher than that of
defined ratio. The share of expenditure on wage has increased from 66.21percent in
2006-07 to 76.39 percent in 2011-12, while with share of expenditure on material has
been reduced and expenditure on administration of MGNREGS has some slight
variation. The expense on wage (skilled and unskilled) material and administration in
different states shows the same trend. The MGNREGS was quite modest in scale at
the beginning in 2006-07, but it expanded quite rapidly by the year to year. It had
become the largest special wage employment programme not just in India but in the
world. However the above mentioned figures are at an aggregate level. In fact there
are large variations in performance across the state as well as the districts.
Dig. 3.2 Expenditure under MGNREGS Fund
0
10
20
30
40
50
60
70
80
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
66.21 68.54 69.27 69.77 68.36
76.39
30.89 30.58 30.08 30.23 31.64
23.61
2.09 3.12 3.48 3.29 4.57 3.69
Expenditure on Wages Expenditure on Material Administrative Expenditure
105
Government of India, Ministry of Rural Development (2005) highlighted
the following Objectives of MGNREGA.
MGNREGA is a powerful instrument for ensuring inclusive growth in rural
India through its impact on social protection, livelihood security and democratic
empowerment. Its important objectives are:
1. Social protection for the most vulnerable people living in rural India through
providing employment opportunities.
2. Livelihood security for the poor through creation of durable assets, improved water
security, soil conservation and higher land productivity.
3. Drought-proofing and flood management in rural India.
4. Empowerment of the socially disadvantaged, especially women, Scheduled Castes
(SCs) and Schedules Tribes (STs), through the processes of a rights-based
legislation.
5. Strengthening decentralization, participatory planning through convergence of
various anti-poverty and livelihoods initiatives.
6. Deepening democracy at the grass-roots by strengthening Panchayati Raj
Institutions.
7. Effecting greater transparency and accountability in governance.
Government of India, Ministry of Rural Development (2005) highlighted
the subsequent important salient features of MGNREGA:
1. Adult members of a rural household willing to do unskilled manual works may
apply for registration in writing or orally to the local Gram Panchayat.
2. The Gram Panchayat after due verification will issue a Job Card and is free of cost.
3. The Job Card should be issued within 15 days of application.
4. The Gram Panchayat will issue a dated receipt of the written application for
employment against which the guarantee of providing employment within 15
days operates.
106
5. Employment will be given within 15 days of application for work, if it is not then
daily unemployment allowance as per the Act, has to be paid. Liability of
payment of unemployment allowance is of the States.
6. Work should ordinarily be provided within 5 km radius of the village. In case work
is provided beyond 5 km, extra wages of 10 percent are payable to meet
additional transportation and living expenses.
7. Wages are to be paid according to the Minimum Wages Act 1948. Equal wages
will be provided to both men and women.
8. Wages are to be paid according to piece rate or daily rate. Disbursement of wages
has to be done on weekly basis and not beyond a fortnight in any case.
9. Panchayat Raj Institutions (PRIs) have a principal role in planning and
implementation.
10. At least one-third beneficiaries shall be women who have registered and requested
work under the scheme.
11. Each district has to prepare a shelf of projects. The selected works to provide
employment are to be selected from the list of permissible works.
The different categories of permissible works are as follows:
Water conservation and water harvesting,
Drought proofing (including plantation and a forestation),
Irrigation canals including micro and minor irrigation works,
Provision of irrigation facility, horticulture plantation and land development
facilities to land owned by households belonging to the Scheduled Castes and
the Scheduled Tribes or below poverty line families,
Renovation of traditional water bodies including desilting of tanks,
Land development,
Flood control and protection works including drainage in water logged areas,
107
Rural connectivity to provide all-weather access. The construction of roads
may include culverts where necessary, and within the village area may be
taken up along with drains,
Any other work which may be notified by the Central Government in
consultation with the State Government. In addition construction of Bharat
Nirman Rajiv Gandhi Sewa Kendra as Village Knowledge Resource Centers
and Gram Panchayat Bhawan at Gram Panchayat level has also been notified
by the Central Government.
Work site facilities such as crèche, drinking water, shade have to be provided.
The shelf of projects for a village will be recommended by the Gram Sabha
and approved by the Zilla Panchayat.
At least 50 percent of works will be allotted to gram Panchayats for execution.
Permissible works predominantly include water and soil conservation, a
forestation and land development works.
A 60:40 wage and material ratio has to be maintained. No contractors and
machinery is allowed.
The Central Government bears the 100 percent wage cost of unskilled manual
labour and 75 percent of the material cost including the wages of skilled and
semi-skilled workers.
Social Audit has to be done by the Gram Sabha at least once in every six
months.
Grievance redressal mechanisms have to be put in place for ensuring a
responsive implementation process.
All accounts and records relating to the scheme should be available for public
scrutiny and to any person desirous of obtaining a copy of such records, on
demand and after paying a specified fee.
108
3.8 Performance of MGNREGA
Since its beginning, the Act has generated 1112.03 crore persondays. In the
current financial year upto December, 2011 MGNREGA has provided employment to
3.77 crore households generating 120.88 crore persondays. Almost 70 percent of the
expenditure is on wages. Over the last six years (upto December, 2011), `.100452
crore has been spent on the wages of Mahatma Gandhi NREGA labour. The average
wage earned has risen from `.65 per person day in 2006 to `.100 by 2011.
Table 3.7
Performance of MGNREGA (National Overview) During 2007-08 to 2011-12
Indicator 2007-08 2008-09 2009-10
2010-11
2011-12 (up
to Dec, 11)
No. of Districts 330 615 619 626 626
Total Job Cards Issued (in
crores) 6.48 10.01 11.25 11.98 12.07
Employment provided to
households (in crores) 3.39 4.51 5.26 5.49 3.77
Persondays (in crores) 143.59 216.32 283.59 257.15 120.88
SC-days(in crores) 39.36 63.36 86.45 78.76 27.40
% SC-days 27 29 30 31 23
ST-days(in crores) 42.07 55.02 58.74 53.62 20.69
% ST-days 29 25 21 21 17
Women-day (in crores) 61.15 103.57 136.40 122.74 59.82
% Women-days 43 48 48 48 49
Others (in crores) 62.16 97.95 138.40 124.78 72.78
% Others 43 45 49 48 60
Persondays per HH 42 days 48 days 54 days 47 days 32 days
Budget Outlay (` in crores) 12000 30000 39100 40100 40000
Central Release (` in
crores) 12610.39 29939.60 33506.61 35768.95 22251.84
Total available fund
(including OB) (` in
crores)
19305.81 37397.06 49579.19 54172.14 38836.22
Expenditure (` in crores) 15856.89 27250.10 37905.23 39377.27 20866.56
109
Percentage of Expenditure
against available funds 82 73 76 73 54
Expenditure on Wages
(`.in crores)
10738.47
(68%)
18200.03
(67%)
25579.32
(70%)
25686.53
(68%)
14404.82
(72%)
Total Works taken up ( in
Lakhs) 17.88 27.75 46.17 50.99 62.72
Works break up:
Water Conservation 8.73
(49%)
12.79
(46%)
23.43
(51%) 24.26 (48%) 33.34 (53%)
Provision of irrigation
facility to land owned by
SC/ST/BPL and IAY
beneficiaries
2.63
(15%)
5.67
(20%)
7.73
(17%) 9.15 (18%) 7.33 (12%)
Rural Connectivity 3.08
(17%)
5.03
(18%)
7.64
(17%) 9.31 (18%) 13.76 (22%)
Land Development 2.88
(16%)
3.98
(15%)
6.38
(14%) 7.04 (14%) 5.74 (9%)
Any other activity
approved by MoRD
0.56
(3%)
0.28
(1%)
0.98
(2%) 1.06 (2%) 2.31 (4%)
Rajiv Gandhi Seva Kendra - - - 0.17
(0.33%)
0.23
(0.37%)
Sources: Government of India (2012). MoRD, Annual Report 2011-2012, New Delhi
The share of SC/ST families in the work provided under MGNREGA over the
previous five years has ranged between 51-61 percent. Women workforce
participation under the scheme has surpassed the statutory minimum requirement of
33 percent. Over the previous five years it has ranged between 40- 48 percent. The
overall performance of MGNREGA during the year from 2007-08 to 2011-12 is
presented in Table 3.7. The Table reveals that the performance of MGNREGA has
been major in quantitative terms in the learning period. The number of households has
increased a lot from 3.39 crores in 2007-08 to 5.49 crores in 2010-11 and able to
December 2012, MGNREGA has provided employment to 3.77crore households
generating 120.88 crore persondays. Total Job Cards issued were doubled during the
study period i.e. 6.48 crores in 2007-08 and 12.07 crores in 2011-12. The number of
110
districts have also increased from 330 to 626 during the period from 2007-08 to 2011-
12. In 2009-10, number of person-days created was `.283.59 crores which declined to
`.257.15 crore person-days in 2010-11. In total person-days, Scheduled Castes‟ share
has increased a lot from 27 per cent in 2007-08 to 31 per cent in 2010-11. The share
of Scheduled Tribes in total person-days created has declined from 29 percent in
2007-08 to 25 percent in 2008-09 and during 2009-10 and 2010-11 it was 21 percent
each. Women-days increased a lot from 61.15 crores in 2007-08 to 122.74 crores in
2010-11. Budget outlay was `.12000 crores in the year 2007-08 and increased to
`.40100 crores in 2010-11. The expenditure against available funds ranges between
73 to 82 percent during the learning period from 2007-08 to 2010-11 and expenditure
on wages occupied the lion share throughout the learning period. Total works taken
up in 2007-08 were 17.88 lakhs increased to 50.99 lakhs in 2010-11 registering a
growth of 185 percent. Out of the total works taken up, works for water conservation
occupied the major share and other works shared the remaining work more or less the
same. Any other activity approved by MoRD is negligible during the study period.
3.9 Conclusion
The challenge of reducing poverty in India is large, because of the sheer
numbers and the multiple layers of poverty, highly governed by social norms and
social discrimination and influenced by factors such as location, gender, age, religion
and ethnicity. In this context, MGNREGA has made a substantial and unique
contribution through the mass coverage of over 40 million rural households in just
four years, generating over 1.7 billion person days of employment. This success has
been possible as a result of the mobilisation of domestic finances and existing
institutional structures for delivering the programme. The institutionalization of
MGNREGA as a right in the Indian Constitution has embedded it as a sustainable
programme, one which cannot be subject to political whims. The key factors that have
111
influenced the progress of MGNREGA include: strong national leadership and the
legislation of MGNREGA in the Indian constitution, a vibrant civil society at the
national and local level, devolved roles, responsibilities and resources to the local
government and high levels of poverty and inequality. Since its inception, the act has
generated 1112.03 crore persondays. The average wage earned has risen from `.65
per person day in 2006 to `.100 by 2011. The number of households has increased
significantly from 3.39 crores in 2007-08 to 5.49 crores in 2010-11 and upto
December 2012, MGNREGA has provided employment to 3.77 crore households
generating 120.88 crore persondays. Total job cards issued were doubled during the
study period i.e., 6.48 crores in 2007-08 and 12.07 crores in 2011-12. The number of
districts have also increased from 330 to 626 during the period from 2007-08 to 2011-
12. In 2009-10, number of person-days created was 283.59 crores which declined to
257.15 crore person-days in 2010-11. In total person-days, scheduled castes‟ share has
increased significantly from 27 per cent in 2007-08 to 31 per cent in 2010-11. The
share of scheduled tribes in total person-days created has declined from 29 percent in
2007-08 to 25 per cent in 2008-09 and during 2009-10 and 2010-11 it was 21 percent
each. Women-days increased significantly from 61.15 crores in 2007-08 to 122.74
crores in 2010-11. Budget outlay was `.12000 crores in the year 2007-08 and
increased to `.40100 crores in 2010-11. The enhanced wage earnings have led to a
strengthening of the livelihood resource base of the rural poor in India, 72 percent of
funds utilized were in the form of wages paid to the workers. Self-targeting in nature,
the programme has high work participation for marginalized groups like SC/STs
(40%) and women (49%) in 2011-12 (upto December, 2011). Total works undertaken
were 62.72 lakh in the same period, of which 53 percent relates to Water
Conservation, 12 percent for the provision of Irrigation facility to lands owned by
SC/ST/BPL/S & M farmers and IAY beneficiaries, 22 percent for rural connectivity, 9
112
percent for land development, 4 percent for any other activity approved by MoRD and
0.37 percent for Bharat Nirman Rajiv Gandhi Seva Kendra.
India‟s MGNREGA is the only Act which gives its rural people such a right
and that too in the era of Liberalization, Privatization and Globalization (LPG). It has
a vital role because of its humane approach. It serves as an effective safety net for the
unemployed especially during famine and drought. It has enabled them with sufficient
purchasing power and they are able at least to support their basic necessity i.e., food.
The Act has confined the rural poor to their areas and prevents migration to the cities.
It not only gives rural livelihoods but also involves them in other non-agricultural
work. This has helped in handling disguised workers. Employment in other non-
agricultural work also improve the rural infrastructure i.e., rural asset building. It will
ultimately lead to sustainable development.
113
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