Poverty & Inequality

Afterword: What lies ahead for MNREGA?

  • Blog Post Date 28 March, 2016
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Farzana Afridi

Indian Statistical Institute, Delhi Centre


In an afterword to the e-symposium on ‘10 years of MNREGA and the way forward’, I4I Editor Farzana Afridi contends that the evidence summarised in the e-symposium suggests that MNREGA is not merely a poverty alleviation programme. Given its multiple potential benefits, MNREGA needs more than mere lip service or it risks dwindling into irrelevance.

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The 2016-17 Union Budget has proposed raising the budgetary allocation to the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) to Rs. 38,500 crore. Does this imply that the programme is going to receive renewed emphasis by the current government? Apparently not! The rise in budgetary allocation is a mere 4% (in nominal terms) compared to revised estimates of the 2015-16 budgetary allocation. Further, any increase needs to be evaluated in the context of the declining trend in the budget allocations to the programme in the previous years: from a peak of Rs. 40,100 crore in 2010-11 under the UPA (United Progressive Alliance) regime to Rs. 34,699 crore in 2015-16 (Ministry of Rural Development reports; nominal figures).

Perhaps a more relevant yardstick of commitment to the programme is actual fund utilisation or expenditures on MNREGA. This metric has also shown a steady decline, which is also reflected in the actual release of funds. Total programme expenditures have fallen from a peak of Rs. 39,880 crore in 2012-13 to Rs. 36,000 crore in 2014-15 (Ministry of Rural Development reports; nominal figures).

Do these numbers suggest a decline in demand for employment or shrinking supply of works under the programme? In view of the reports of drought across several districts in the country and stagnating rural wages (Himanshu 2016), there is a near consensus among both academics as well as activists that bottlenecks in the implementation of the programme accompanied by decreased fund allocations are primarily responsible for dwindling fund utilisation.

So if the current establishment is indeed serious about renewing the programme to alleviate the current rural distress, is it sufficient to increase programme allocations? It seems not.

A multi-pronged approach may be needed to revive MNREGA in its current avatar.

  • Strengthen the capacity of states to utilise allocated funds and forecast demand: The administration of the programme imposes stringent central government requirements for release of funds to state governments (Chakraborty 2007): each state has to prepare an annual work plan and a budget proposal – a bottom-up approach, where information is collated from the panchayats, the block and finally the district administration. States that have potentially high demand for work have low capacity to undertake this exercise, particularly at the panchayat level. To illustrate, data on fund utilisation as a proportion of total funds released in Bihar is very low relative to the average for the country (Chakraborty 2007). A top-down approach to forecast demand (in terms of states’ poverty estimates), in such instances, may improve demand forecasts.
    Utilisation of funds allocated requires a smooth flow of resources to the district, block and the panchayats (in fact, the central government owes arrears to states for past expenditures on MNREGA (Sethi 2016)). Even if projects are available, non-payment or significant delays in wage payments can discourage demand. This may reflect limited capacity on the part of the state bureaucracy at the block or panchayat level to disburse funds in a timely manner.
  • Stem corruption in the programme through technological innovations and improved monitoring: Timely and correct payment of benefits under the programme calls for stemming leakages (and ensuring smooth flow of benefits) through direct benefit transfer (DBT) and stringent monitoring of materials expenditures. While the focus of administrative reforms has been on reducing theft in the labour component of the programme (75% of programme expenditures), research suggests that malfeasance may shift to the harder-to-detect materials component in response to closer scrutiny and reduced opportunities to steal from labour expenditures (Afridi and Iversen 2014).
  • The above should be coupled with measures to increase awareness of the programme at the grassroots to raise demand (see recent I4I article by Martin Ravallion).
    The articles in this e-symposium, particularly the surveys of the existing literature, suggest that MNREGA is not merely a poverty alleviation programme. It has, or has the potential to, play a key role in providing economic security to individuals and households (see article by Laura Zimmerman), raising awareness of entitlements (see article by Kunal Sen), creating durable community assets (see article by Sudha Narayanan), and empowering women and improving child-level outcomes (see article by Subha Mani).

Given the multiple potential benefits of MNREGA, the programme needs more than mere lip service or it risks dwindling into irrelevance.

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