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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

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Page 1: PERFORMANCE OF WAGE EMPLOYMENT PROGRAMME IN INDIAshodhganga.inflibnet.ac.in/bitstream/10603/31999/8/h8-chapter 3.pdf · On being sworn in as the first Prime Minister of India in 1947,

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

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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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83

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

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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.

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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

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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

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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

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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

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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

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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

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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

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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

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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.

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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

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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

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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.

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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,

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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.

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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

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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

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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

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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

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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.

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