“I am quite concerned about MGNREGS being hollowed out,” says Thiemo Fetzer, associate professor in the department of economics at the University of Warwick, “It is a policy that– far from being perfect–is delivering something that has been missing in India’s social policy.”

The Warwick university study, based on events between 2005 and 2014, focused on the links between MGNREGS and conflict in 10 states that have a history of Maoist insurgency. This conflict resulted in 5,235 casualties between 2007 and 2013, including around 3,000 civilians, 1,000 security personnel and 900 Naxals, IndiaSpend reported in 2013.

“The districts where agricultural labour markets and output depend the most on monsoon rainfall benefited the most from MGNREGS providing insurance, seeing drops in conflict of up to 50%,” said Thiemo Fetzer, the author of the study, and associate professor in the department of economics at the University of Warwick.

Shock events such as droughts that affect income stability in rural areas are being increasingly pegged to climate change, and the impacts of climate change on rural areas are being increasingly viewed as global security risks. India is located in the world’s most disaster-prone region. Almost half its land area faced drought last year with rainfall reduced to a third of the annual average.

But in 2019, MGNREGS, the world’s largest rural workers programme, had its budget cut for the first time in five years–from Rs 61,084 crore in 2018-19 to Rs 60,000 crore in 2019-20. The scheme has been criticised for failing to provide the work promised, not paying wages on time, and not being viably implementable in India’s weaker states.
None of these shortcomings take away from the programme’s vital social value, Fetzer said.

Fetzer is an Associate Professor of Economics at the University of Warwick, a visiting fellow at the London School of Economics, and is also affiliated with the Pears on Institute at the University of Chicago and the Centre for Economic Policy Research in London.

The rise in demand for MGNREGS during poor monsoons coincided with a reduction in conflict levels in around 60% of villages located in Naxalism-prone areas, or the ‘red corridor’ as it is called, your study has found. Can you explain the link?
Yes, what the paper does is study the patterns between conflict in the red corridor and monsoon season rainfall. I observe that prior to the introduction of MGNREGS, droughts were associated with significantly more conflict and insurgent activities in the year after a bad harvest. This relationship seems to have become much weaker since the introduction of MGNREGS. This raises the question–is this due to MGNREGS or not?

To answer this question, I study in detail how MGNREGS participation indeed follows this seasonal pattern–with significant increases in participation in the programme following a bad monsoon. This observation–that MGNREGS participation is strong in areas that are experiencing periods of drought–is particularly pronounced in districts where agricultural labour markets and production rely heavily on the monsoon. It is those districts, where the value of insurance is the biggest, that see the biggest drops in conflict.

Despite the introduction of the MGNREGS programme, the total number of conflict events has increased over time across Maoist areas between 2005 and 2014. How significant was MGNREGS to the Maoist conflict overall?
From the aggregate trends, we do not really learn much about what is happening on the ground in places and how MGNREGS affected places. The aggregate trend could be driven by a whole lot of factors and changes, for example, improved reporting on the conflict–which is definitely a factor.

My study focuses on detailed micro data and suggests that had MGNREGS not been introduced, the overall increase in conflict would likely have been significantly higher. The parts of the country that benefited most from the scheme–specifically districts where agricultural labour markets and output depend strongly on monsoon rainfall–saw drops in conflict of up to 50%. This is sizeable and, of course, while aggregating back up from the micro evidence is difficult, would nevertheless suggest sizeable impacts at the aggregate level.

In 2017, it was estimated for 89 countries that natural disasters would put an additional 26 million people into extreme poverty (living on less than $1.90 a day) in the next year. Studies (such as this) have shown that climate-related natural disasters such as storms, floods and droughts have also affected the risk of civil war. Could programmes such as MGNREGS offer preventive and post-disaster reconstruction solutions?
This is a very important question. Countries around the world struggle with the climate emergency. It is a dramatic challenge especially for developing countries as they are set to bear most of the cost and have the least state capacity to mitigate the climate crisis. I think MGNREGS provides an interesting example of a potential policy that can work in reducing the experienced volatility of incomes among people in rural areas.

A basic form of social insurance can encourage productive investments, increase growth and development more broadly. It is a myth to say that a welfare state is undermining development–a basic social security net is absolutely crucial.

And this is where the problem is: How to design such an insurance programme in a context with weak state capacity? You want to ensure that insurance is well-targeted, i.e. only people in need actually benefit. You also want to make it easy for central governments and civil society to monitor programme implementation to reduce corruption.

MGNREGS does a fairly decent job at delivering on these two fronts. First, the fact that MGNREGS pays wages at the state minimum wage-level means that it is only attractive when wages in labour markets are low (for example, following a bad monsoon). Also, in order to get an income from the scheme people need to actually work–this ensures that people with good outside options or high incomes are not skimming the system as is for example the case with the PDS (public distribution system). In the PDS, it is well known that lots of households benefiting from the system are not needy by any reasonable definition.

And lastly, the requirement that MGNREGS produces physical assets and infrastructure makes monitoring and enforcement easier as civil society, the press and higher levels of government can always check on whether infrastructure actually gets built.

Of course, it would be great if one would not have to rely on these indirect mechanisms to ensure that social insurance becomes targeted–I am a bit doubtful about the quality and the social value of some of the infrastructure that ends up being built. But if a state is not able to provide directed targeted transfers to people affected by a shock that is none of their own making–such as a bad monsoon–MGNREGS does represent a valuable and important policy tool.

The programme, in that sense, serves as a significant inter-Indian transfer that helps stabilise rural economies following a shock and thereby, actually reduces the impact of the monsoon on the economic cycle.

At the end of April 2018, 57% of MGNREGS wages remained unpaid. In 2014-15, only 6% of households were able to hit 100 days of work, with the average being 40 days. Can it still play an effective role in providing income security and stemming conflict?
It is clear that there are many problems–after all the programme is just gigantic in scale. Regarding the two figures you mention, there is an evident erosion in the quality of MGNREGS in recent years and that really needs to be tackled. After all, its value is that it does provide for a stable wage floor and assured alternative for rural households in distress. This in and of itself has an effect on rural labour markets, helping stabilise wages following a bad shock. So the programme also indirectly has some benefits even for people not participating in it. But this indirect benefit is only maintained if those who do opt for MGNREGS actually end up getting paid.

Regarding the 100 days–it is true that there are cases of rationing. This can have many reasons. For example, panchayats may be unwilling to provide employment if only a small number of people request employment because there is an actual cost to panchayats to come up with public works projects. There are also likely conflicts of interest if village officials are also agricultural land owners who have an incentive in not providing MGNREGS work during the agricultural season. These all contribute to a problem whereby the scheme is not really effective in providing insurance against household idiosyncratic shocks that affect individual households, but not whole villages. This highlights that MGNREGS is not a genuine social insurance because it predominantly provides insurance against shocks that affect whole districts of villages at the same time.

This is, in fact, what I show in my paper. While there is rationing of MGNREGS work, participation for the programme is high following district-level shocks, for example following a bad monsoon.

In its first term, the ruling National Democratic Alliance put emphasis on promoting entrepreneurship through the Skill India Initiative and Make in India programme. Budget allocation to the Ministry of Skill Development and Entrepreneurship (MSDE) has increased 237% over the last four years, according to government data. But, for the first time since 2013, MGNREGS funding will drop by 1.8% in the 2019-20 budget. Are other programmes likely to work better than MGNREGS? In its second term, what should the NDA government’s approach be?
I am quite concerned about MGNREGS being hollowed out. It is a policy that–(though) far from being perfect–is delivering something that has been missing in India’s social policy: An effective form of social insurance particularly benefiting the rural parts of India. Rather than hollowing it out by depriving it of the funds it needs, focus should be on investing in the programme to ensure even less leakage to allow it to function.

Upskilling is definitely important but I have yet to see evidence that these programmes actually work. It is very important that MSDE engages with academics to evaluate the initiatives against their effectiveness.

The Make in India initiative is interesting but again, it does raise important questions as to what policy instruments are being used. Manufacturing of tradable goods is likely to be an important source of private sector employment that can absorb workforce from rural areas but I worry that the policy tools used focus around the government picking select industries or even companies, rather than focus on building the right institutional support to facilitate private initiative. It is important for any such policy for the government to transparently engage with all stakeholders–the focus should be on developing an enabling and supportive institutional environment to foster private initiative.

India ranked amongst the highest religion-related social hostilities index, at 9.6 compared to the world average of 1.8 in 2016, according to a Pew Research Center study. The motivations for this kind of conflict are identity-based, whereas the Maoist conflict is to a significant extent motivated by land rights and other development factors. Do you believe rural income guarantee programmes such as MGNREGS could mitigate conflict motivated by religion/ethnicity?
This is an interesting question. The focus of my study was indeed on the Maoist conflict. But I do think that the scheme may have some positive features as well that may be of relevance to other conflicts. The fact that people participating in MGNREGS work side by side is something that may actually foster and improve social cohesion. Of course, if at the local level implementation and access to work becomes co-opted then just as any other government programme it can become a tool fostering exclusion and producing grievances. So again, it depends on the specific design and the realities on the ground.

By 2030, the share of the global poor living in fragile and conflict-affected areas is projected to reach nearly 50%. How do we prepare for this?
As indicated, I sincerely think that developing countries more broadly should consider programmes like MGNREGS–not because they are perfect, but because they can actually work vis-à-vis other initiatives that may end up providing un-targeted transfers to households that do not actually need them. It is absolutely important that the organisation of these programmes is sufficiently decentralised to ensure that they do not become a tool to be co-opted for political gain. MGNREGS is a good example because since its introduction we have learned quite a few things already as to how we can make it work better. So other countries can really learn from the Indian experience here.

It is also important to not confound MGNREGS with other types of cash-for-work programmes–some of which have been studied, for example in Tunisia. The key value of MGNREGS is the fact that it is there to fall back on. Most cash-for-work programmes are temporary by nature and hence, do fail to provide social insurance simply because they are not guaranteed to be available in the future when demand may be there.

So MGNREGS has a social value. Even if nobody is doing any work, the certainty that there is a fall-back has a significant positive effect by itself.

(Habershon, a graduate from the University of Manchester, is an intern with IndiaSpend.)

Courtesy: India Spend
 

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The well constructed by Lakhan
 

Calling it a “major administrative failure”, as Lakhan was “literally forced to take risky loans while the government has the responsibility to make all payments under MGNREGA and the beneficiaries are not supposed to invest a single penny”, the report states that “28 other MGNREGA well beneficiaries are also facing similar situations.”

Text of the report:

On July 25, 2019, Lakhan Mahto, 43, a resident of Patratu village of Patratu Gram panchayat in Chanho block, jumped into a well that he himself had constructed and gave his life. He was the lone earning member of the household. While the family was dependent on cultivation, Lakhan also had to work as labourer for coping with the distress. Lakhan’s 85-year-old mother (Gujari Devi), 36-year-old wife (Vimala Devi) and three children Suraj (18 years), Neeraj (15 years) and Praveen (12 years) were the other members of the family.
 

Cause of death

Lakhan Mahto had constructed a well under the Mahatma Gandhi Rural Employment Guarantee Act (MGREGA) on his land. The work code of this scheme is 3401005010/IF/7080901221509 and was sanctioned in December 2017. Lakhan had to pay for the materials as well as for the labour wages as the payments were not made on time. He had to take loans for this purpose and was hoping that the money will be soon received from the government.

However, despite a lot of efforts he could not get back the money for materials which he had already invested. This resulted in a lot of stress and soon, Lakhan was under great psychological trauma and depression.

On the day of the tragedy, Lakhan woke up at around 4’o clock in the morning and went to the nearby farm where he had the well, constructed. When he did not return for a long time, people went in search for him and found him dead inside the well.
 

Lakhan’s wife

Administration’s negligence

Lakhan’s wife, Vimla Devi, said that her husband had to borrow a total Rs 1.70 Lakh from three of his relatives between January and February 2018 for completion of the well, but he could not repay the loan even after 14 months as wages and material payments were not released to the concerned labourers and vendors in their bank accounts, by the government.

It is a major administrative failure that Lakhan was literally forced to take risky loans while the government has the responsibility to make all payments under MGNREGA and the beneficiaries are not supposed to invest a single penny.

Further, it is important to understand that Lakhan had to pay to the labourers at a local rate which is much higher than the then MGNREGA wage rate of Rs 168 per day. The block administration could not ensure a timely material supply to the worksite which compelled him to take loan from others for procuring the materials in order to complete the scheme.

Lakhan, for the last 13 months, had been regularly visiting the block office, hoping for re-imbursement of the outstanding amount of Rs 1,18,545 from the government for the wages and material payments. Apart from Lakhan Mahto, in Patratu Panchayat, 28 other MGNREGA well beneficiaries are also facing similar situations.
 

Present situation

Even after five days of this tragic event, the government has neither offered a single benefit or compensation to the family and nor had paid the outstanding money which led to the tragic death of Lakhan Mahto. The mother of Lakhan, Gujri Devi, an 85-year-old elderly lady, did not get the benefit of old age pension under the central pension scheme despite being eligible for the benefit. 
 

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Bachcha Lal’s family in Banda, Uttar Pradesh, depend on his wages from MGNREGS work. Inadequate work, and delays in wage payment, have added to his problems.
 
“When the government first presented the MGNREGS to us, I thought that we’d get our money on time. I thought that I wouldn’t have to deal with abuse or unnecessary altercations, and that I’d be able to work well since it was a government initiative,” Lal told IndiaSpend. His experience could not have been more different. “We don’t get our wages on time. We could work for two days, but then remain unemployed for the next month or even the next year and a half or two years,” he said.
 
Launched in 2006, MGNREGS, the world’s largest rural jobs programme, guarantees 100 days of unskilled work to rural Indians such as Lal. It has 110 million active workers, and the wages it pays are an important source of income in Indian villages at a time when the farm sector is in crisis, more villagers are working as farm labour than as cultivators, and non-farm jobs are not enough to accommodate the large number of people entering the labour force.
 
Starting today, IndiaSpend will analyse the successes and failures of this scheme, and the challenges it faces, in a three-part series. This first part analyses budget allocations to find that despite heightened farm unrest, this year the government has set aside the least proportion of money for the scheme–48% of the budget of the rural development ministry–in the three years since 2016-17.
 
Reduced funding has resulted in 48% fewer projects getting completed over the six years to 2016. Although expenditure on wages now constitutes 73% of expenditure against the stipulated 60:40 wages-to-materials ratio under MGNREGS guidelines, delays in wage payment are frequent, as the second part will explore.
 
The final part will focus on how women in the state of Kerala have benefitted from MGNREGS, and what lessons that holds for policymakers.
 
This investigation is part of IndiaSpend’s series on the government’s performance on key flagship programmes in the run-up to the 2019 elections.
 
Inadequate funding
 
“There is massive under-funding of [MGNREGS] by the Centre leading to dilution of the programme,” Rajendran Narayanan, assistant professor at the School of Liberal Studies at Azim Premji University (APU), told IndiaSpend. He said allocation for MGNREGS as a percentage of gross domestic product (GDP) has steadily fallen–in 2010-11, it was 0.53% of GDP, and in 2017-18, 0.42%.
 
Adjusting for inflation and percentage of GDP (1.3-1.7%), the allocation for 2017-18 should have been no less than Rs 71,000 crore, Narayanan said. The actual allocation was Rs 48,000 crore.
 
Making this Rs 48,000 crore allocation, the government had claimed it was the highest ever. However, the programme had accumulated arrears of close to Rs 11,644 crore from the previous year that had to be paid, Narayanan said, adding that after taking out the arrears, the allocation amounted to about Rs 36,000 crore.
 
The allocation for the current year, 2018-19, is no more than last year’s revised estimate (additional funds requested beyond the budget allocation to meet excess expenditure) of Rs 55,000 crore.
 
As a proportion of the rural development ministry’s expenditure, too, MGNREGS spending is now the lowest in three years. In 2012-13, the share of MGNREGS was 55% of the ministry’s allocation. Since then, it has dropped seven percentage points to 48%.
 
The central government is responsible for 96% of MGNREGS implementation costs, as per the scheme guidelines: it pays the wages for unskilled and semi-skilled labour, and up to three-fourths of the cost of materials used. The state governments pay the unemployment allowance and the remaining cost of materials.
 
An applicant is entitled to an unemployment allowance if they are not given work within 15 days of their application being received. The allowance is at least one-fourth the wage rate for the first 30 days and not less than half the wage rate for the remaining period of the financial year.
 
Between 2012-13 and 2017-18, no more than 10% of households got 100 days of employment each fiscal year, defeating the professed objective of enhancing livelihood security in rural areas.
 
In 2017-18, the households provided 100 days of employment fell further by four percentage points to 6%, compared with 2012-13, as per figures available on April 28, 2018.
 

Source: MGNREGA Dashboard
*Figures have been rounded off
 
When MGNREGS expenditure overshoots the allocation by the central government, state governments make up the shortfall, which becomes a ‘pending liability’ for the Centre–the arrears mentioned above–this brief from Accountability Initiative explains. The cumulative liabilities until 2017-18 amounted to Rs 12,601 crore, twice the liabilities of Rs 6,355 crore in 2015-16.
 

Source: Accountability Initiative, 2018, Accountability Initiative, 2012
*Budget Estimate 2018-19
 
Assets created are useful, but few projects get completed
 
The scheme is designed to generate employment and create durable assets in rural areas.
 
With expenditure overshooting allocated budget, asset creation has been affected, largely due to payment delays.
 
“I do digging work mostly [under MGNREGS]. I worked as a farm labourer before this,” Lal told IndiaSpend in November 2017. Since MGNREGS employs unskilled manual labour, workers like him are often involved in digging-related works for soil conservation, horticulture, creation of sheds and farm ponds, etc.  
 
 
All such works fall under the natural resource management (NRM) component of MGNREGS, which account for 100 of the 153 kinds of projects that can be undertaken under the scheme. Of all NRM projects, 71 are water-related works such as creating recharge wells, water harvesting structures and check dams.
 
Thanks to NRM projects, 78% of households reported an increase in the water table, ranging from 30% in Muktsar in Punjab to 95% in Vizianagaram in Andhra Pradesh, according to a 2017 study of 30 districts in 29 states conducted by the Institute of Economic Growth, a think-tank.
 
Further, 66% of households said there was more fodder available after water-conservation projects on public and private lands belonging to marginal and small farmers (farmers who cultivate up to 2.5 acres and 5 acres of land, respectively).
 
Verification of 926 MGNREGS wells across six randomly selected districts in Jharkhand found that 60% of sanctioned MGNREGS wells were completed, according to this May 2016 Economic and Political Weekly report. Nearly 95% of completed wells were being utilised for irrigation, leading to a near tripling of agricultural income.
 
“Assets do get created on the lands of small and marginal farmers,” APU’s Narayanan said, “For example, land leveling is something that a farmer can requisition from the gram panchayat. It isn’t true that only large farm owners are benefiting from the scheme.”
 
However, nearly 12% of all sanctioned wells were abandoned before completion reportedly due to payment-related issues, the report said.
 
The scheme is designed so that material ratios are lower than labour or wage costs, Avani Kapur, director of Accountability Initiative, told IndiaSpend, citing as examples works such as water conservation, pond digging and tree plantation that require little material input. “Programmes in which material costs are significant, such as sanitation or housing, are usually run as convergence programmes with existing schemes,” she said.    
 
The gram sabha (village council) selects the works to be undertaken in the panchayat, and is expected to uphold the spirit of MGNREGS’ demand-driven approach. Often, this is not the case, however.
 
“If asset creation becomes targets-based and top-down, then one will hazard creating assets that are not useful,” said Narayanan, “How can somebody sitting in the state capital know or decide what is best for a gram panchayat that is far away?” The law under which MGNREGS operates clearly intended a gram panchayat-led, demand-driven scheme, he added.
 
At the same time, the quality of works has also been a cause for concern. One of the fallouts of low fund allocation of late has been that the recommended labour-to-material ratio of 60:40 has not been maintained.

The percentage of water conservation and water harvesting projects completed fell from 57% in 2009-10 to 2.5% in 2016-17. “Once you close a work officially, it becomes very hard to reopen (you’ll have to get three types of sanction–technical, administrative and financial). That is one reason for the percentage of works completed to remain low,” said Reetika Khera, an economics professor at the Indian Institute of Technology in Delhi.
 
The proportion of works completed has mostly remained below 50% through the 12 years of MGNREGS, and has been falling in recent years. In 2016-17, work completed dropped nearly 13 percentage points to 2.74%, from 15.6% the previous year. The present allocation is unlikely to improve the situation.
 
Wages unpaid
 
“They owe me Rs 6,000 for the work I have done,” said Sukhrani, a 50-year-old woman who goes by one name, sitting on a charpai (string bed) in her small, unplastered home in Mavai village in Banda district. She said two people in her family have enrolled under MGNREGS. “It’s been two months we haven’t been able to afford milk. We scrounge and borrow to feed ourselves. We don’t even have slippers,” she said, “Sometimes we sell or rent parts of our field.” 
 
 
Delays in wage payment have been a constant throughout MGNREGS implementation. The guidelines recommend that wages be paid within 15 days of closing of the ‘muster roll’, the attendance register for a site.
 
However, a recent study by Azim Premji University has found that 78% of payments were not made on time, and as many as 45% payments did not include compensation for delayed payment as per guidelines.
 
Government data show the percentage of wages unpaid increased from 63.5% in February 2018 to 85.5% in March 2018 to 99% in April 2018, which part two of this series will explore in greater detail.
 
This is the first of a three-part series on the successes and failures of the Mahatma Gandhi National Rural Employment Guarantee Scheme.
 
Next: Despite ‘Record’ Allocation, 59% MGNREGS Wages Due Remained Unpaid In April 2018  
 
(This story has been produced in partnership with Khabar Lahariya, the country’s only indie, rural media platform, working out of Bundelkhand in Uttar Pradesh and Madhya Pradesh, with an all-women reporters’ network. Paliath is a policy analyst with IndiaSpend.)

Courtesy: India Spend
 

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