Here's Why MGNREGA Might Potentially Save Rural Economy

The pandemic has not only led to the loss of lives but also impacted the source of livelihood for many. It has kickstarted a gradual but persistent erosion of employment opportunities, especially in the unorganised sector of our economy. And with several urban production centres coming to a halt, reverse migration to the villages has become a trend. This has increased the dependency of a considerable population on the limited number of non-farm jobs available in those villages.

The policymakers have yet again turned to MGNREGA– India's rural employment guarantee programme. The proponents of MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) believe that expanding the scope of work under this will increase the buying power of the rural poor, which will, in turn, help the economy recover. What interests them is whether it can provide impetus to the badly hit rural economy.

According to an April report by the Centre for Monitoring Indian Economy (CMIE), among salaried employees, there was a higher share of unemployment in rural areas. This suggests a significant impact on the small- and medium-sized industries in villages, contributing to India's non-farm economy. And since this non-farm economy contributes nearly 60% to the overall rural income, an impact that cannot simply be ignored.

MGNREGA– The Rural Employment Guarantee Programme

Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) was introduced in the country in three phases. The first phase launched across 200 rural districts on 2nd February 2006. In layman's terms: under this scheme, a household can obtain a job card issued by the local Gram Panchayat, listing all adult members in the household who are eligible for work. Each household is entitled to 100 days of work per financial year.

A person from such a household can apply for any work of their choice in writing. Such work will be provided to them within 15 days of application, and their workplace will be situated within 5 km of their village. If their workplace is beyond 5 km, they will be eligible for travel costs. Workers are assigned to specific projects that involve unskilled manual labour with limited use of machines.

Importance In Rural Economy

Despite facing rampant criticism in the public discourse, the academic opinion on MGNREGA has almost always been favourable. Studies suggest that by employing the unemployed, MGNREGA has reduced poverty and distress migration. A National Council of Applied Economic Research (NCAER) study has stated that MGNREGA "has reduced poverty overall by up to 32% and has prevented 14 million people from falling into poverty". It has increased the daily wage rate of workers from INR 182 to 202, according to a study by MicroSave Consulting.

Not just the unemployed, the scheme has benefitted the employed as well. A United Nations Development Programme Report has shown that MGNREGA has offered the most impoverished households a safety net, raising their living standards, as quoted by Mint.

But perhaps the biggest beneficiaries of the scheme have been the lower caste and the women. The central government mandates a minimum of one-third participation of women in MGNREGA. But according to data in the fiscal year 2020-21, women comprised 53% of people employed under the scheme.

Moreover, the scheme is implemented by the local panchayats, which must have at least 50% women representatives. Having women participation in both the programme and its implementing body have resulted in a significant increase in participation of women.

Significance During Pandemic

A 2014 study by the University of Heidelberg found that MGNREGA had reduced poverty by nearly 50% during the agricultural lean season. An agricultural lean season in a developing country is the time interval between planting crops and harvesting them for the uninitiated. During this period, job prospects are rare, incomes shrink, food stocks get scarce, and low-income families skip meals regularly.

Therefore, the consumption power (and thereby the purchasing power) of these families develop an erratic pattern, impacting the rural economy adversely. However, since the introduction of MGNREGA, these low-income families fare much better through the agricultural lean seasons. The scheme also helps smoothen the seasonal spikes in these families' consumption patterns and purchasing power, stabilising the economy. This feature of MGNREGA has allowed the rural poor's purchasing power to stay afloat during the pandemic.

Within 50 days between April 1 and May 20 last year, 3.5 million workers applied for jobs under this scheme. In comparison, only 1.5 million had applied for MGNREGA jobs during 2019-20. Addressing higher demand, the government provided more employment opportunities. Except in April (when the lockdowns restricted work), the number of person-days in 2020 were much higher than in 2019. In May, the official data showed just 15% of households receiving work. By September, this had increased to 53%.

Capacities Built With MGNREGA

Since the nature of work, the scale of work, and the capacities of stakeholders under MGNREGAs are diverse; separate training modules are built for different target groups. For example, according to a Press Information Bureau (PIB) release of January 2018, 6,367 local youths were trained to become Bare Foot Technicians. This training was imparted mainly to bridge the gap in the availability of technical resources at the Gram Panchayat level. During the same period, 47,000 women Self Help Group members were trained over four days to conduct Social Audits at the Gram Panchayat level.

An Institute of Economic Growth (IEG) study on MGNREGA beneficiaries across 21 states had revealed that it had helped intensify and diversify crops, increasing incomes in rural households. 76% of the households surveyed reported that the quality of assets under MGNREGA was very good or good. It also reported an 11% increase in gross annual income per household (HH) over two consecutive fiscal years, 2015-16 and 2016-17.

State-wise Performance On MGNREGA

According to the official data of the fiscal year 2020-21, more than 11 crore people across 7.5 crore households have benefitted from the scheme. Nearly 6 lakhs of them were disabled individuals. West Bengal generated the highest employment (1,18,27,575) followed by Uttar Pradesh (1,16,59,011) and Rajasthan (1,10,97,990). The lowest employment generation was observed in Dadra and Nagar Haveli and Daman and Diu (0), followed by Lakshadweep (75) and Goa (4,365).

Three of the largest migrant home-states Bihar, Jharkhand, and Odisha, saw employment generation of almost 97 lakh persons during this period, increasing from last year's 93 lakhs. It is also important to note here that the union government had increased the budget allocation of MGNREGA from Rs. 61,500 crores to nearly 1 lakh crore after the stimulus package to fight the pandemic was declared last year.

Can Urban Areas Have MGNREGA?

When businesses were gradually opening up in a phased manner after June 1 last year, another CMIE report revealed that rural unemployment was in a much better situation than its urban counterpart. Layoffs and salary cuts were a common occurrence. Resultantly, most of these urban unemployed people had to take up odd jobs. This amplified the problem of informality and reversed whatever growth had been achieved till then. The government-sponsored relief measures could help a considerable portion of both the rural and urban populations. Still, it failed to identify the informally employed urban labour force that was affected. This presented an opportunity to introduce an urban replica of MGNREGA.

In an article published by Mint last year, Nitya Chutani (erstwhile Assistant Professor of Economics at the University of Delhi) brought up an interesting point. Chutani proposed a hypothetical scheme under which the states would take more capital-focused expenditure, having a greater multiplier effect and create more public goods like roads and bridges. What's most interesting, Chutani believed that the government had already started to roll out schemes in this direction.

For example, Pradhan Mantri Kaushal Vikas Yojana (PMKVY), for its next phase, had agreed to focus on digitisation, entrepreneurship, and skill mapping-based database creation. Artificial Intelligence (AI) based Atmanirbhar Skilled Employee Employer Mapping (ASEEM) portal — yet another government scheme — can also serve as an urban employment guarantee scheme in trying times. The academic further suggested that the government might develop a wage subsidy for the formally employed so that people's consumption demand stays afloat.

Also read: In Rajasthan, People To Get COVID Vaccine At MNREGA Sites