Business Today

NREGS: The game changer

The high-profile scheme has delivered on its promise—both politically and economically— but with huge costs and inefficiencies. Fixing these is both desirable and feasible. Puja Mehra reports.

Puja Mehra | Print Edition: June 14, 2009

Like all successes, the UPA’s victory, too, has many fathers. Some are genuine, some fake. One of the more genuine fathers is undoubtedly the National Rural Employment Guarantee Scheme (NREGS)—a Rs 35,000-crore programme that guarantees a hundred days of employment, every year, to adult members of any rural household willing to do manual labour at the minimum wage. In hindsight, the populist potency of the scheme (which is what matters for electoral victories) was a given. After all, it combined the power of the three most enduring promises ever doled out in Indian politics—roti, kapada aur makaan—into one. If you have a guaranteed job, you will get all the three.

Hands down: NREGS beneficiaries voted in big numbers for the Congress
Hands down: NREGS beneficiaries voted in big numbers for the Congress
But the scheme, as promising as it is, is flawed and fixing it soon is important to ensure that political gains do not topple the economic foundations on which it rests. After all, the rural poor have been subjected to an elaborate hoax for much of India’s existence. Despite decades of socialist pro-poor agendas and myriad povertyeradication programmes, India still has some 250 million people living below the poverty line with little or no access to health, water and education. The NREGS—which is the product of a legislative Act passed in early 2006—has a chance to make a difference and the UPA has a chance to improve the NREGS in order to realise that difference. What sets the NREGS apart from other government schemes is the legal guarantee. For the first time, a person can sue the government if he doesn’t get his entitlement.

Here’s what the scheme has accomplished: According to the Ministry of Rural Development (MRD), in 2008-2009, Rs 18,036 crore was disbursed across six lakh villages, and generated employment for 44 million poor, rural households. Forty-eight per cent of the beneficiaries of this scheme have been women, and over 50 per cent come from India’s neglected scheduled castes and tribes.

Most significantly, the average minimum wage rate has jumped 30 per cent to Rs 84. Eight states increased their minimum wages substantially in 2007-08. Take these credentials with more than a pinch of salt. Social audits have revealed that in several places, estimates of wages were inflated because the actual wages received by workers were much less than what is shown in the official documents. Then there have been all too well-known cases of fictitious job musters and middlemen pocketing funds.

Trilochan Sastry, Professor, IIM Bangalore
Trilochan Sastry, Professor, IIM Bangalore
Still, as a recent NCAER report on the scheme points out, the NREGS has been effective in making a dent in rural poverty and “helping (the poor) avoid hunger and migration, allowing them to send their children to school, and helping them cope with illness”. Other gains: the bargaining power of workers, especially women, has gone up. Routing wages through banks and post offices in the hinterland—thanks, ironically, to the then Minister for Rural Development Raghuvansh Prasad Singh—is being seen as a giant step forward towards financial inclusion of the marginalised. Plus, the scheme is instrumental in easing the pressure on urban India by “facilitating reverse migration of workers, from urban areas to rural parts, for better economic opportunities,” says Trilochan Sastry, Professor, Indian Institute of Management (IIM) Bangalore, who independently monitors the scheme.

There is clear circumstantial evidence of this trend. Punjab’s gentlemen farmers are struggling to find migrant labourers for the sowing of the rabi crop this year. This is unlike previous years when workers—mostly from eastern Uttar Pradesh and Bihar—used to flood the state in search of farm work. The poorest districts of Andhra Pradesh had an annual ritual where busloads of labourers left their homes to work in richer parts of India. This migration, too, is substantially lower this year.

Given these early gains, the UPA government is in a position to act swiftly to make the scheme more efficient and effective. In some ways, it is in a unique situation to do this. The first fix that needs to happen—and urgently so—is a monitoring mechanism that can identify and strengthen districts most prone to rigging and weak administrations. A large Internet-enabled database which houses numeric as well as photo IDs of beneficiaries is vital (Such a database, complete with photo IDs, already exists for the NREGS on the MRD website, but hasn’t yet been synced with unique ID numbers; see Do It the Smart Way, pg 54). Andhra Pradesh is one role model to look at.

The state has developed a tracking tool in partnership with Tata Consultancy Services (TCS) which handles registration, work estimates, muster rolls and wages. This means payments to workers are accurate and timely and deposited directly into their bank accounts. Then, there are the scheme’s existing job cards, which are easily manipulated by corrupt middlemen and too sophisticated for the rural poor. Instead, a card with a biometric thumb print would prevent cheating. Also, the “job centre” can easily be a public IT kiosk with touch screens that use the most understandable sign symbols and local language to communicate with illiterate job seekers. These touch screens will also be able to produce documentary evidence for every single interaction, making independent monitoring a breeze.

In other words, user-friendly technology—which will have only a one-time fixed cost and on-going maintenance costs—will eliminate the need for interface with potentially corrupt state officials and could bring a halt to rigging. Though use of technology on the scale that the NREGS requires will be a challenge, it’s an attainable one and will have a huge, positive spin-off in terms of transparency and livelihood improvement. Also, the NREGS needs to set up an independent grievance redressal system for the wage earners.

There is also a tremendous opportunity for the consolidation of the various centrally-run rural employment schemes—some 200 in number ranging from irrigation programmes to sanitation projects— under the NREGS. Most of these schemes have been in place for over 40 years now, with little impact on poverty. So much so, that the Planning Commission’s studies show that the expenditure on all of them in a single year would have been enough to lift the rural poor above the poverty line. By spreading overheads over larger volumes and sharing the monitoring mechanisms with these related schemes, the NREGS can itself become an umbrella body that facilitates and strengthens other country-wide programmes. Doing so will steer India towards “comprehensive development and improve overall productivity of resources in rural areas,” says NCAER’s report.

Solid credentials

But at what cost?

Wages paid in 2008-09: Rs 18,036 crore (provisional)*
Wages paid since inception: Rs 34,616 crore
Districts covered: All 615, covering 6 lakh villages
Households covered: 44 million (provisional)
Beneficiaries: 48% are women; 55% are SC/ST
Statutory minimum wage: The average rose from Rs 65 to Rs 84

*56 per cent through post office or bank A/cs Source: Ministry of Rural Development

Various government schemes also create a huge demand for goods and services which can easily be supplied by the NREGS instead of private contractors. Also, the scheme today is solely focussed on manual labour as an income provider. This needs to change. An incentive structure for skilled employment, where workers in rural India can be moved up the value chain through a legal guarantee, will not only free them from a future of menial work, but will also enhance India’s per capita productivity levels. Basically, the NREGS can become a vehicle that enables today’s manual labourers to become skilled workers in future.

The big risk the NREGS runs is that the statutory minimum wages go the minimum support price way and become a tool for vote bank politics. Given the size of the programme, this could wreck the Centre’s finances. Given the checkered performance across different states, there is scope to learn from the successes in some pockets and transfer that learning to other areaswhenever it is feasible. These are challenges to overcome, not arguments to impede the scheme’s progress.

For the NREGS to be a game changer for the rural poor as it has been for the UPA and include them in India’s growth story, the NREGS needs to be closeended: it cannot go on endlessly. For which, the UPA needs to urgently solve these many inadequacies—in transparency, monitoring and efficiency. Otherwise it will remain yet another scheme that attempted to bring Bharat and India closer—and failed.

Additional reporting by Manu Kaushik

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