PERFORMANCE OF WAGE EMPLOYMENT PROGRAMME IN INDIA

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

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 nonagricultural 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,

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

84 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.

85 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 No impressive vision concepts supplementary to schemes a new vision of rights-based based on decision-making and advice development for the poor 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

86 Long introductory phase Complex communication and extension Actual arrangement covering who, what, where, when and how. Detailed budget work to match demand Can be incorporated with different progress works Integrated plan Statutory across - level linkages in the Panchayat Raj system Multi-dimensional action plans covering time, space, manpower and resources Results-based and outcome-oriented Real People s Plan Organization Panchayat in central place development from within Administrative approve and technical approve before organization of work All actions completed in home Receiving together workers Executing the work Mustering Substance procuring Measuring Paying Fortnightly measuring and payment People s estimates Minimum wages Sudden quick-fix plans Schedule motions for form s sake Hotchpotch list of works Financial budget work to match resources Partial to representation works Isolated works Autonomous and repetitive plans Two-dimensional action plan covering resources and works Expenditure oriented Bureaucratic / technocratic plan Middleman-contractor in central place outsourcing development AS & TS in response to middlemen contractor thump Most of the actions carried out by the middlemen, contractor, except measurement and payment Often once or twice per work Engineer s estimates Market wages

87 Equal wages strong subsidizing the weak Piece rate Local labour Payment throughout Bank Payment by Government Work without whip new dynamics of mutual help and group discipline Actual substance labour ratio No abandoned works Administration Outside DRDA Clear role for District Project Coordinator, Block Programme Officer. Real records Estimates Muster rolls Vouchers Capacity Integrated and consistent data base Unique ID of workers Unique ID of work ID of muster rolls Payment vouchers Bank Accounts of persons Close monitor National level monitor State level monitor District level monitor Inspection schedule Differential wages Mostly bulk measurement Often outside labour Direct cash payment Payment by middleman-contractor Ruthless supervision by middleman contractor Theoretical and pretended ratio Quite a number of abandoned works DRDA centered Roles routines over the years Often "created" records No such data base Routine monitor

88 Clear accountability systems Ritualized and routine Proactive disclosures Vigilance and Monitoring Committees Social Audit Penalties 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 No such interest supporters and opponents 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 Inclusive Participatory Redistributive Liberating Empowering Transparent Integrated Planned People-centered Engendered Organic Patronage-based Exclusive Co-optive Rent-seeking Domesticating Exploiting Manipulated Automized Schemed Power-centered Male dominated Disjointed

89 Ecological Outcome-based Developmental Democratic Humanistic Vision-based Real Mechanical Target-based Departmental Bureaucratic Materialistic Greed-based 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

90 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

91 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.

92 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 60 th Round, Average daily wage data, (January 2004 to June 2005), New Delhi Note: Statutory minimum wage pertains to June 12, 2001

93 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

94 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 demandbased 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).

95 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 wellbeing 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.

96 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

97 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. Particulars Revenue Receipts Revenue Expenditure Expenditure: MORD Rural Employment Total Expenditure Table 3.2 Key Budgetary Indicators to GDP Ratio (in percent) 2000-2001- 2002-2003- 2004-2005- 01 02 03 04 05 06 2006-07 9.22 8.87 9.41 9.56 9.80 9.87 10.32 13.30 13.28 13.79 13.12 12.31 12.47 12.49 0.43 0.59 0.74 0.70 0.58 0.78 0.81 0.13 0.20 0.40 0.37 0.23 0.33 0.33 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.

98 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 National Food for Work Programme National Rural Employment Guarantee Scheme 23.3 15.1 32.2 56.9 62.1 33.1 35.8 11.2 28.2 16.4 7.5 5.7 0.0 13.1 19.0 0.0 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

99 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.

100 Dig. 3.1 Mahatama Gandhi National Rural Employment Guarantee Act Agencies Sources: World Bank Report (2007). Attacking Poverty, Oxford: Oxford University Press

101 Table 3.4 Time-Line of MGNREGA August 25 th, 2005 NREGA enacted by legalization September 5 th, 2005 September 7 th, 2005 February 2 nd, 2006 April 1 st, 2007 May 15 th, 2007 April 1 st, 2008 October 2 nd, 2009 Sources: Compiled from various reports of MGNREGA Assent of the President Notified in the Gazette of India Came into force in 200 districts 113 more districts were notified 17 more districts were notified Notified in the remaining rural districts Renamed as 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 2 nd October 2009. The Act was legalized and notified in 200 districts in the first phase with effect from February 2 nd 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 1 st 2007 and 17 districts in Uttar Pradesh were notified with effect from May 15 th 2007. The remaining districts have been notified under MGNREGS with effect from April 1 st 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

102 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.

103 Years Budget Allocation (Crore) Table 3.5 Financial Allocation of MGNREGS MGNREG MGNREGS S Exp. As Exp. As % % of of Total Revenue Expenses Receipts Percenta ge of GDP 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 (%) Expenditure on Expenditure on Administrative Year Wages Material 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

104 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 Expenditure on Wages Expenditure on Material Administrative Expenditure 80 70 66.21 68.54 69.27 69.77 68.36 76.39 60 50 40 30 20 30.89 30.58 30.08 30.23 31.64 23.61 10 0 2.09 3.12 3.48 3.29 4.57 3.69 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

105 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.

106 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,

107 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.

108 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) Employment provided to households (in crores) 6.48 10.01 11.25 11.98 12.07 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) Total available fund (including OB) (` in crores) 12610.39 29939.60 33506.61 35768.95 22251.84 19305.81 37397.06 49579.19 54172.14 38836.22 Expenditure (` in crores) 15856.89 27250.10 37905.23 39377.27 20866.56

109 Percentage of Expenditure against available funds Expenditure on Wages (`.in crores) Total Works taken up ( in Lakhs) 82 73 76 73 54 10738.47 18200.03 25579.32 25686.53 14404.82 (68%) (67%) (70%) (68%) (72%) 17.88 27.75 46.17 50.99 62.72 Works break up: Water Conservation 8.73 12.79 23.43 (49%) (46%) (51%) 24.26 (48%) 33.34 (53%) Provision of irrigation facility to land owned by 2.63 5.67 7.73 SC/ST/BPL and IAY (15%) (20%) (17%) 9.15 (18%) 7.33 (12%) beneficiaries Rural Connectivity 3.08 5.03 7.64 (17%) (18%) (17%) 9.31 (18%) 13.76 (22%) Land Development 2.88 3.98 6.38 (16%) (15%) (14%) 7.04 (14%) 5.74 (9%) Any other activity 0.56 0.28 0.98 approved by MoRD (3%) (1%) (2%) 1.06 (2%) 2.31 (4%) Rajiv Gandhi Seva Kendra - - - 0.17 0.23 (0.33%) (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

110 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

111 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