Business Today

Reforming governance and society at one go

India's biggest social welfare scheme has its share of problems, but innovations in its design and delivery hold out promise.

Print Edition: May 30, 2010

Breakthrough innovation in a government scheme! The very thought sounds far-fetched. The only innovation public programmes in India have been known for are the novel ways used to siphon off public money for private gains. No wonder, over 25 per cent Indians still live on less than $1 (Rs 45) a day and 70 per cent of the money allocated to welfare schemes does not reach the intended beneficiary. The problem is not the objectives or the lack of funds, it is always poor governance.

But what if there was a scheme that was designed to improve governance and society at the same time? What if there was a scheme that legally mandated the delivery of prescribed benefits? What if there was a scheme that is pulled in by the intended beneficiary (people demanding it as their right) rather than being pushed by the official machinery? What if there was a scheme that could emerge as a single platform to deliver several other existing public programmes—each more efficiently and effectively than earlier? Such a welfare scheme would truely qualify to be a breakthrough innovation.

Key Challenge
To guarantee right to work to one unemployed adult in every rural family all over the country.

Delivery of benefits legally mandated, flexibility for customisation, enforced financial inclusion.

This is exactly what the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) is evolving into. That is why Monitor's innovation framework was applied to this scheme. The idea was to understand innovation in the social sector, even if the main goal of government welfare schemes isn't profit generation or outsmarting the competition. The core message of the Monitor framework is that it is essential to innovate on multiple fronts at once to create a truly compelling and differentiated offering—something MNREGA is morphing into. We found the scheme covering at least four types of innovation included in the framework.

The key innovation is that MNREGA is a law—an intended beneficiary can sue the government for not getting his entitlement. Multiple courts, including high courts, regularly hear cases from people being denied wage under the scheme. Uttar Pradesh has become the first state to invite applications for the post of ombudsmen to hear MNREGA complaints from every village.

As awareness about redress through legal routes spreads, the efficiency of the scheme will increase further through both better governance in local administration and increased demand from people. "Programmes belong to government, but laws belong to people. MNREGA is supposed to transform society and governance at the same time," says Amita Sharma, Joint Secretary in the Ministry of Rural Development and the key person in implementation and modification of this scheme.

MNREGA has been designed to be inherently customisable—the second important differentiator for the scheme. Beneficiaries continuously decide new ways to use wages provided under the scheme. Such usages vary from helping create assets (like orchards) to skill development to starting new village industries. For example, when villagers in Karnataka's Gulbarga district had a problem with wells going dry, farmers had this idea of building check dams on a nullah that ran along their property.

The MNREGA funded Rs 2 lakh for this project; the check dams soon recharged all wells in the area. Says Sharma: "The scheme benefits from the learning on the field as it allows creative deviations." It has also found new ways of using features of old welfare schemes somewhat more efficiently—like job cards and social audits. This has been possible because of decentralised decision-making. MNREGA works on two legs—gram panchayat and administration—and the two are supposed to keep checks on each other.

Even such checks and balances have not rid the scheme of frauds and leakages, though. In some places, the administration is experimenting with technology to improve the monitoring mechanisms to cap diversion of funds. For example, Andhra Pradesh has developed a tracking tool in partnership with Tata Consultancy Services, which handles registration, work estimates, muster rolls and wages.

This means payments to workers are accurate and deposited directly to their bank account. MNREGA is also piloting advanced technologies like biometric job cards and IT kiosks, though fixed costs and maintenance continue to pose a challenge. Still, the scheme has provided employment to 5.06 crore households for a total of 4,774 crore person days. It has taken up nearly 43 lakh work projects, of which 18 lakh are completed.

The average minimum wage has jumped 30 per cent to Rs 84 a day in three years. The scheme's budget has risen more than 150 per cent—from Rs 16,000 crore in 2005 to Rs 41,000 crore in 2010—which is an indication of increase in demand for work. This, when only about half of its mandate is achieved—so far, average all-India wage days generated (per person per year ) is 49—against the upper limit of 100.

A National Council of Applied Economic Research review points out that MNREGA 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.

Apart from existing leakages, the scheme faces two more unintended problems. It's a social security that could become an entrapment and lead to a phenomenon called de-skilling—e.g. trained artisans will gladly become stone breakers if that pays more. For the same reason, it is perhaps also stoking wage price inflation, especially for small scale industries, at a time when inflation has been unmanageably high. But these aren't really problems with the scheme.

They are more like consequences of its success. It's for the sponsor of the scheme—the government—to devise ways to handle such fallouts. Moreover, relative price adjustments do take care of such consequences over a period of time. Besides, the best hope for remedy to such, and several other issues with MNREGA, is its inbuilt system of self-criticism and transparency. It's one of those rare schemes that advertises its own deficiencies—which is another social sector innovation.


1. Enabling process: Partnering with TCS to improve and automate monitoring mechanisms.

2. Core process: Legal guarantee and accountability built into the scheme.

3. Product performance: "Demand-driven" nature of the act, allowing it to reach further than other schemes.

4. Product system: Customisability of the scheme to satisfy the local community needs.

5. Customer experience: Choice between multiple public works; financial inclusion through bank deposits.

Schemes that achieve breakthrough innovation usually cover at least 3-4 types of innovation included in the framework. MNREGA fulfils five.

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