MGNREGA : Impact &

Implications
Business, Government & Society GROUP 4

Akash Ghosh [1611001] Adarsh Nair [1611005] Raj Parikh [1611047]

Abhinav Mishra [1611004] Mohamed Fazil [1611030] Rishi Vohra [1611052]
MGNREGA: Impact and Implications Group 4

TABLE OF CONTENTS

1.0 Executive Summary ....................................................................................................................................... 2

2.0 MGNREGA: Introduction ............................................................................................................................ 2

2.1 About the Act ................................................................................................................................................ 2

2.2 Salient features of the act .............................................................................................................................. 3

2.3 Funding ......................................................................................................................................................... 3

2.4 Organizational Structure ............................................................................................................................... 4

2.5 Implementation ............................................................................................................................................. 4

2.6 Need of the act .............................................................................................................................................. 5

2.7 Journey towards NREGA .............................................................................................................................. 5

2.8 Successful Implementation ........................................................................................................................... 6

3.0 Impact of the Act ............................................................................................................................................ 7

3.1 Sustainable Asset Creation ............................................................................................................................ 7

3.2 Issues raised during implementation ............................................................................................................. 8

3.3 Reasons for Incomplete works .................................................................................................................... 10

3.4 Impact on Employment Opportunities and Poverty Alleviation ................................................................. 11

3.5 Impact on Agricultural Productivity and Labor Migration ......................................................................... 12

4.0 Statewise Comparison ................................................................................................................................. 13

5.0 Social Audit .................................................................................................................................................. 15

6.0 Modernizing MGNREGA ........................................................................................................................... 16

6.1 Electronic fund management system (e-FMS) ............................................................................................ 16

6.2 IPPE and LIFE Programs ............................................................................................................................ 17

6.3 Geo-MGNREGA ........................................................................................................................................ 18

7.0 Challenges ..................................................................................................................................................... 18

7.1 Administrative and supervision problems ................................................................................................... 18

7.2 Worksite coordination problems ................................................................................................................. 19

7.3 Funding ....................................................................................................................................................... 19

7.4 Technological Hindrances ........................................................................................................................... 19

7.5 Discrimination and corruption .................................................................................................................... 20

7.6 Inadequate awareness and demand, Massive variation in implementation across states ............................ 20

8.0 Way Forward ................................................................................................................................................ 21

9.0 References ..................................................................................................................................................... 23

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MGNREGA: Impact and Implications Group 4

1.0 EXECUTIVE SUMMARY

The Mahatma Gandhi National Rural Employment Guarantee Act, or famously known as
MGNREGA was passed in 2005 guarantees 100 days of unskilled employment to rural
household. The salient features of the Act include issuance of job cards, wage payment within
15 days, jobs within 5 km radius of where the applicants reside and no gender bias to name a
few. The funding pattern for MGNREGA is the Centre covering entire cost of wages and
75% of the cost of materials and the state covering the remaining 25%. In this report we look
at the impact of the Scheme on Sustainable Asset Creation, poverty alleviation, employment
opportunities provided, agricultural productivity and labor migration. For most of the
parameters, the Scheme has had a positive impact in improving the lives of rural households
giving them additional sources of income by involving women to become a part of the
workforce and sustainability in terms of the works undertaken. It further compares the
implementation of MGNREGA in two states Uttar Pradesh which has had below average
performance and Tamil Nadu which has fared better than average and the reasons like higher
literacy and efficient bureaucracy attributed for the same. The report examines the measures
taken by the Government to implement the Scheme like Social Audits, Electronic Fund
Management System, Integrated Participatory Planning Exercise (IPPE) & Livelihood on Full
Employment (LIFE) and Geo-MGNREGA for Asset Creation updates. The report analyses
the challenges faced in MGNREGA implementation namely in funding, training, technology
barriers, worksite coordination problems, administrative and supervision, corruption and
discrimination. Further, it highlights the way forward for successful implementation and use
of technology for bringing about greater efficiency in funding, infrastructure, training, admin
support and monitoring and possible diversification in terms of expanding the scheme to
include skilled labor and female friendly works.

2.0 MGNREGA: INTRODUCTION

2.1 About the Act

The Mahatma Gandhi National Rural Employment Guarantee Act of 2005 was earlier named
the National Rural Employment Guarantee Act. In brief, it is a law which aims to provide
people with the right to work. It encapsulates in itself labour as well as social security
measures. By implementation MGNREGA aims at providing at the least 100 days of salaried
work in a year to every family in which the adults consent to undertaking manual labour. The
act states that labour must be provided within a distance of 5 Kilometres from the parties
house with each of them being paid the
minimum salary. It also states that if ACT & Guidelines published by GoI
work cannot be provided within 15 days 1. NREGA Act - 2005
2. NREGA Guideline - 2008
of application they are liable to receive
3. MGNREGA Guideline 2013
an unemployment allowance. The 4. MGNREGA Schedules- I & II
objective is to create productive and Revised in 2014
sustainable assets strengthening the 5. MGNREGA Master Circular 2016
livelihood resource base of rural poor.

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The act aims to proactively focus on social inclusion by focussing on the vulnerable sections
of the society and developing robust grass root democratic institutions.

2.2 Salient features of the act

Following diagram highlights the key features of the act. Some of the things to be noted are:

Figure 1.1 Salient Features of MGNREGA

Implementation: Wages have to be paid within a week or maximum 15 days, delay in
wage payment makes the worker eligible for compensation
Focus on Gender Equality: Equal wage payments for both male and female and the job
has to be within 5kms radius ensuring equal opportunities

2.3 Funding

Funding is provided by both the central and state government. Central government bears the
entire cost of wages. Cost of material is divided 75% and 25% among central and state
government respectively.

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2.4 Organizational Structure

The following diagram outlines the MGNREGA organisational structure at multiple levels.

Fig 1.2 Organizational Structure

2.5 Implementation

The first step involves adults from houses submitting their demographic details to the
Gram Panchayat (GP)
The GP then enquires with the applicants of any problems and details about the
household before they issue a jobs card. This lists the applicants name with their picture.
The applicant then approaches the gram panchayat to sign up for the work along with the
duration of the work
Once the work has been approved by the Gram Panchayat the respective people will be
assigned to it
The work is stipulated to be offered within 5kms, if it exceed 5kms then there will be a
revision in the salary provided

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MGNREGA: Impact and Implications Group 4

Fig 1.3 Implementation Process

2.6 Need of the act

A major population of the poor in rural parts of the country hinge primarily on the wages they
earn through unskilled, casual, manual labour. They are often on the verge of survival and are
susceptible to the possibility of tumbling from temporary to long-lasting poverty. Scarce
demand for labour or erratic emergencies that may be general in nature, like natural disaster
or personal like ill-health, all badly influence their employment opportunities.

The workfare programmes play a major role in the situation of poverty & unemployment, in
developed and developing nations. These programmes provide short-term employment for
unskilled manual labours on public works such as, reforestation, soil conservation, irrigation,
infrastructure and construction of roads. These programmes provide transfer of income to
deprived households during tough times and also enable smoothing of consumption,
especially during floppy agricultural seasons or years. The programmes will also be helpful in
preventing worsening of poverty in countries which has high unemployment rates. The assets
created by these programmes have the prospective of generating further employment benefits
as infrastructure is developed.

In a nutshell, workfare programmes aims at providing wage employment opportunities by

creating employment on demand and thus extend a security of life to the society and
concurrently create assets to alleviate poverty and aim at the development of the rural areas.

2.7 Journey towards NREGA

The below mentioned various experimentations of workfare programmes in the past few
decades have taught some good lessons to the government like financial management, the
planning for outcomes, labour-intensive works, integrated rural development, rural economic
development, holistic development and better coordination with the states and landless
households. All the learning had been put into action by the government and it did show a
great improvement in the implementation of new plans. The government started involving
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local people through Panchayat Raj Institutions (PRIs) thereby decreasing the bureaucratic
nature of functioning. The central government reinforced the role of PRIs in the state
government at the district and village panchayat level as the implementing authority.

2.8 Successful Implementation

i) Awareness:
Apart from reinforcing root level implementing authority the government did concentrate on
various awareness programs to ensure success of the initiative. Information Education and
communication activities using electronic media, print, press advertisements, workshops,
outdoor through The Directorate of Advertising and Visual Publicity (DAVP) and
interpersonal communication through Directorate of Field Publicity (DFP) and Song and
drama division (S&DD) have been taken up.
ii) Reviews:
Periodic reviews play a vital role in ensuring a smooth functioning of the programme. The
government did not fail to conduct reviews for the NREGA scheme. The various reviews
followed by central and state government are as follows:

Quarterly Performance Review Committee (PRC) meetings

State specific reviews
Independent monitoring and verification by National level monitors and eminent
citizens
Visit by members of Central employment guarantee council
Setting up of State and district level vigilance and monitoring committees
Monitoring of the progress by Area Officers sent by Ministry

iii) Complaints Management:

The complaints received are forwarded to the respective state governments for taking
appropriate action as per law since the implementation is carried out by them according to the
act. For serious complaints, the Ministry appoints National Level Monitors (NLMs) to inspect

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the complaints. Based on the reports of the NLMs, the respective State Governments take
corrective action. A district level ombudsman has been set up in all states to have an effective
and speedy grievance redressal mechanism. The ministry was prompt in setting up of national
level helpline and instructed all the States to open their own helplines.

3.0 IMPACT OF THE ACT

3.1 Sustainable Asset Creation

Apart from providing temporary employment during poor slack agricultural period, one of the
objectives of the National Rural Employment Guarantee Act is to develop sustainable and
durable assets using unemployed labour. The objective is to strengthen the means of
livelihood for the rural population and reduce their dependence on agriculture. These
sustainable assets will hedge the rural farmers against the climactic uncertainty due to
insufficient rainfall, poor soil fertility and insufficient water availability. The objective is to
identify and develop assets that will address the public works needs of the villages. It was
envisioned that the unskilled labour with proper technical assistance, design inputs and
supervision will fulfil the basic infrastructure gap; problem of rural connectivity to markets,
poor irrigation channels, water storage facilities, primary schools, toilets etc.

The table below summarises various works undertaken in the year 2017 classified under
various categories (website) [19]:
PUBLIC WORKS RELATING TO NATURAL RESOURCES MANAGEMENT
1 Water Conservation
2 Watershed management
3 Irrigation
4 Traditional water bodies
5 Afforestation
6 Land development
INDIVIDUAL ASSETS FOR VULNERABLESECTIONS (ONLY FOR HOUSEHOLDS)
7 Improving productivity of lands
8 Improving livelihoods through development of fallow/waste lands
9 Construction of house
10 Promotion of livestock
11 Promotion of fisheries
COMMON INFRASTRUCTURE FOR NRLM COMPLIANT SELF HELP GROUPS
12 Agriculture productivity
13 Common work-sheds for livelihood activities of self-help groups
RURAL INFRASTUCTURE

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14 Rural sanitation, Road connectivity/Internal roads/Streets

15 Play fields
16 Disaster preparedness/Restoration
17 Construction of building
18 Food Grain storage structures
19 Production of building material required for construction
20 Maintenance

3.2 Issues raised during implementation

There have been contradicting views about assets created under MGNREGA. Various studies
(N. Bassi and D. M. Kumar, 2010) [20], (Shah, 2008) [21] have raised the issue of limited utility
of the works completed under the MNREGA programme. It has been alleged that since
MNREGA is an employment guarantee scheme, most of the works undertaken are labour
intensive. The material expenditure on the projects is limited.

Poor quality of materials, unavailability of design and technical staff, use of archaic machines
and tools, delay in funds, and stagnation of projects deliver works which are of low quality,
non-sustainable and of limited use. With poor productivity, durability and utility, output of
NREGA remain as works and do not transition into assets.

MNGREGA sameeksha reports breaks down the total project cost into wage and material cost
to assess the claim that poor quality assets are due to an upper cap on material expenditure.
Only few of the states spent more than 35 percent of the cost on the material expenditure.
Most states do not even use the available limit successfully.

Some scholars argue that MNREGA works can be durable and have identified factors
responsible for successful development. A study by Verma and Shah (Verma, 2012) [22]
assessed water works developed across four states Bihar, Gujarat, Kerala and Rajasthan. They
identified the best performing water assets for the research. They noted 117 out of 143 assets
(which consisted of Wells, Canals, Ponds, dams etc.) provided more than 100% return on
Investment in the first year itself. The benefits obtained were more than the cost incurred in
creating the assets.
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Following three metrics has been identified in the sameeksha report to evaluate the quality,
sustainability and productivity of the assets developed under the MGNREGA act:

Cost Recovery/Return on Investment (ROI)

Beneficiary Perception based surveys
Quality and Soundness of technical design

i) Return on Investment (ROI)

RoI is a debatable measure for social programs, but used majorly for comparison purposes. In
the study conducted by Verma and Shah, best performing water assets provided an ROI of
over 100% in the first year itself. Although there is significant variation observed across
states. In Gujarat where the cost was recovered in a year, in Madhya Pradesh it took around 5
years to recover the basic asset cost. This observed variation can be attributed to multiple
factors such as difference in policy framework, and difference in implementation. There is
geographical variation across different asset types due to different terrain, water level,
climactic conditions etc.

ii) Beneficiary Perception

A lot of impact by the assets created under MGNREGA is about the perception of the
beneficiaries which is the rural population. Multiple studies have been conducted across
different states to assess the impact the act has created.

A study done by Sambodhi [23] (Sambodhi, 2012-2013) Research and communications Ltd.
surveyed six states Andhra Pradesh, Uttar Pradesh, Chhattisgarh, Madhya Pradesh, Odisha
and Rajasthan asking individual beneficiaries in rural households (Sample size: 2381
households) about the impact the employment guarantee scheme has created. It has been
reported that assets created under MNREGA improved the quality of lands, allowed the
farmers to move to dual and multi-cropping, creating multiple sources for their livelihoods
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and supporting some extra income. They increased the crop productivity by around 615%
and reduce the diesel expenditure by replacing costly tube wells with alternative sources of
water. They have supported the marginal farmers by allowing them to provide additional
irrigation to their paddy crops. Additionally, they decreased the cost of cultivation for the
farmers.

Another study conducted by Narayanan (Narayanan, 2014) [24] looked over 4100 works and
4800 beneficiaries over 100 villages in 20 districts in Maharashtra. 75% of the respondents
felt that the works created were related to agriculture. 92% of the respondents found the
works created to be useful. The conclusion from the report was that the works done and assets
created were supportive of small and marginal farmers and related well to agriculture.

iii) Quality and Soundness of technical design

Multiple studies have been conducted to assess the technical quality of the assets created
under the MGNREGA scheme. Studies reported lack of technical support staff at the gram
panchayat level. A study conducted by A. Singh and R. Modi [25] (Modi, 2010) noted the
variation in the number of works supervised by a technical assistant. In Dungarpur, Rajasthan
a TA was responsible for supervision of three to four gram panchayats, while in Tonks,
Rajasthan a GP would supervise 10-12 project works. This unavailability of technical support
and lack of proper technical inputs in design and work identification affects the quality of
assets developed under the scheme.

Variation is also observed across the asset type: Water works, Roads, Dams etc. Generally,
the assets related to Water i.e. Canals, Dams, Wells, Lakes have been assessed to be durable
and capable of meeting their sustainable life and the design standards. However, assets such
as roads have been observed to have low durability. This could be because of non-usage of
heavy machinery such as road rollers etc. during construction.

3.3 Reasons for Incomplete works

Works undertaken under MGNREGA are left incomplete because of the both systematic and
unsystematic variation at multiple levels. From the state specific policy direction, to the
commitment of the state level officials, to the decision taken at the block level, to the
Panchayati Raj Institutions, to the final households there is variation created at every level.
There are both supply side constraints and demand side limitations.

Moreover, revisions of wage and material rates raise the actual cost beyond the approved
estimates. A survey needs to be conducted to re-estimate the cost. The survey has to go
through multiple levels and these delays the project. Works which have been chosen without
the consideration of local needs doesnt resonate with the needs of the local population and
have more probability to be left incomplete. A proactive local government with a
participatory planning approach is needed to address the delay in incomplete works.
Construction of low quality assets should be dis-incentivised in the first place. Supply side
constraints related to fund flow and technical support should be addressed for quality asset
development.

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Systematic Variation Efficiency, capacity and

the commitment of Decisions taken at
State specific Block level;
the administration at the supply side constraints
Policy direction state level

Decisions at the level of

GP households: demand
GP functionaries
work but have no say
capacity and commitment
of PRI in the planning of the
works
officials

Fig 3.1 Reasons for Incomplete works

3.4 Impact on Employment Opportunities and Poverty Alleviation

Historically, the unemployment rate in India has been around 7.3% [8] from 1983 till 2013.
However, recently it has decreased to 5% [9], majorly due to government initiatives like Make
in India, NREGA to name a few. Focusing on NREGA, during FY 2016-17, 55.05 million
households demanded employment and 54.86 million households were offered employment
under the scheme [10].

According to a 2016 World Bank Report [1], approximately 18% of Indias population, i.e.
224 million out of 1.26 billion people live below the poverty line, which as per international
standards is defined as living below $1.90 a day. When NREGA was passed in 2005, almost
27.5% [2], i.e. 302 million people out of 1.1 billion were living below the poverty line. This
indicates ~10% reduction in poverty in a decade and NREGA has been a leading contributor
for the same as per several research reports. During FY 2012-13, the amount spent on worker
wages was approximately INR 271534 [3] million (~68.5% of the total expenditure) whereas
in FY 2016-17, the spending on worker wages was INR 3663194 million (~68.5% of the total
expenditure). During the last 5 years, we see that the amount allocated to worker wages has
been on an increasing trajectory and the allocation towards has increased by 6.2% YoY.
To judge the impact on poverty eradication, we need to look at indicators such as household
income and monthly per capita expenditure. Rural household income has almost quadrupled
post implementation due to increased participation of women working for income generation
non-household activities. Agricultural wages have seen an average growth of 20.2% and non-
agricultural wages have increased by 16.7% [7]. This has resulted in less borrowing from high
interest bearing sources like moneylenders. The NREGA model provides employment
opportunity within a 5 km radius of where the participants reside. This has significantly
reduced the transportation expenditure and thus increased household savings.
Monthly per capita expenditure also has seen an upward trend among households benefitted
from the scheme. According to a National Sample Survey Organization report [5], in 2005,
53% of the total income was spent on food in rural India whereas as per a 2016 ICE 360o
Survey [6], food expenditure has reduced to 48% of the total income. The per capita

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consumption on food has gone up by INR 25.8, i.e. 9.6% and significant reduction in the
number of meals foregone per week. There has been an increase in non-food consumables by
INR 11.17, i.e. 23% [7]. We can conclude that despite rising food consumption, the overall
expenditure on food as percentage of total income has gone down which indicates that overall
income has increased in greater proportion. This has been proved by rising expenditure in
non-food consumables, thus improving the standard of living.

A Sameeksha study points out an interesting positive impact of childrens performance in

school. Using data from 198 villages across Andhra Pradesh, research showed that children in
districts where NREGA was implemented in the early phase outperformed children in
districts where the scheme was implemented in the late phase by a margin of 40% when it
came to test scores of reading, mathematics, vocabulary and grammar [7]. Moreover,
household adults being engaged in NREGA reduces child labour and fosters greater education
and schooling.

Apart from the above economic indicators, there has been steady decline of emotional stress
among participating households. Data shows that there has been 12% reduction in mental
diseases like depression [7]. This is due to job guarantee and less worry about meeting basic
expenses on food and healthcare.

3.5 Impact on Agricultural Productivity and Labor Migration

The share of agriculture in Indias GDP was 19% [11] in FY 2004-05 and has been 16% in FY
2015-16 [12]. Even though the share of agriculture is declining, it still employs more than 58%
of rural households [12]. It is important to see whether NREGA has any contribution towards
the percentage reduction or it can be attributed to other factors like shifting of the economy
towards the service sector.

Research indicates that wells constructed under NREGA have resulted in higher cropping
intensity and productivity along with cost savings on cultivation [13]. Improved agricultural
productivity can also be attributed to the fact that the scheme permits works such as
irrigation, well construction, horticulture, etc. to be done on private lands of small and
marginalized farmers. The assets created due to this initiative have resulted in increased
agricultural productivity giving sustained sources of income for farmers. In fact, labour force
who were previously dependent on NREGA for their sustenance have now returned to
agriculture. NREGA has resulted in water creation which has increased the availability of
water for irrigation and hence has resulted in enhanced land productivity.
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The impact of NREGA on agricultural workforce has been a matter of debate. However, it
has been found out that it provides higher employment during agricultural lean season as seen
in the table below which shows the work demand for FY 2016-17.

4.0 STATEWISE COMPARISON

Several studies have pointed out that there is correlation between the success of MGNREGA
implementation with factors such as the socio-economic peculiarities of the state, the political
climate and the organizational capacity of the state governments. Several factors such as
number of days worked, wages paid, number of female beneficiaries, number of workers
getting 100 days of employment etc. have been included to define success quantitatively.

An interesting and statistically relevant inference was the literacy rate in the state especially
higher female literacy having a high positive correlation with the success of MGNREGA
Implementation. Pointing out other factors in the order of decreasing correlation are muster
roll verification which had a high correlation coefficient with MGNREGA success and in
states where social audits had taken place had a weaker correlation with MGNREGA success.
Also, research suggests that there was no conclusive correlation of MGNREGA success with
multidimensional poverty index and net domestic product. The table below verifies the same
thing. [14]

Table: Correlation and p- values for various factors

For example, it has been found that correlation of success with muster rolls is 0.5369 with p-
value of 0.0039. (p value of less than 0.01 means that there is a significant relationship
between the two factors).

Tamilnadu vs Uttar Pradesh

We will now compare two contrasting states namely Tamil Nadu, which has performed above
average when it comes to MGNREGA implementation with Uttar Pradesh which has had a
below average performance.

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Fig 4.1 Comparison of performance: Tamilnadu vs Uttar Pradesh

As seen in the graph, Tamil Nadu has performed better in most of the parameters as compared
to Uttar Pradesh like the improvement in terms of number of person days generated as
compared to the previous year and average days of employment per household. When it came
to % of household which completed 100 days of employment and convergence with other
government schemes like Pradhan Mantri Gram Sadak Yojana (PMGSY), Tamil Nadu had
achievement of below 10% but Uttar Pradesh had a more dismal performance with close to
zero percent achievement. When it came to work completion rate, both the states had similar
performance. For % of SC/ST Household provided employment with respect to registered
SC/ST households, Tamil Nadu had close to 80% achievement and Uttar Pradesh had close to
30% indicating that Tamil Nadu had more than double the accomplishment of what Uttar
Pradesh had. The only dimension in which Uttar Pradesh performed better was payment of
wages within 15 days.

Variety of reasons can be attributed for Tamil Nadus better performance:

1. The overall literacy rate in Tamil Nadu is 80.33% with female literacy rate being 73.86%.
In Uttar Pradesh, the overall literacy rate is 69.72% and female literacy rate is 59.26%. As
pointed above, literacy rate especially female literacy rate has a very high correlation with the
success of MGNREGA implementation.

2. In Tamil Nadu there is more of a top down approach when it comes to dedication of funds
and MGNREGA work allocation. This is beneficial because there is more capacity and
resource availability at the State level than at the district or Gram Panchayat level. This
results in effective planning and fund allocation. In Uttar Pradesh, there is resource constraint
in terms of money and capacity which results in wasteful planning.

3. In Tamil Nadu, the efficient bureaucracy leads to lesser leakage and better implementation.

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4. Tamil Nadu has been observed to have a more dedicated workforce as compared to Uttar
Pradesh resulting in better monitoring techniques and more frequent muster roll verification.

5. Gram Panchayat presidents in Tamil Nadu are not from upper castes whereas in Uttar
Pradesh due to wide spread caste politics, Gram Panchayat presidents are generally from
upper caste. Thus, Gram Panchayat presidents in Tamil Nadu make sure that MGNREGA
works are implemented so that they garner a favorable opinion among the voters and secure
future votes.

5.0 SOCIAL AUDIT

Social audit is a verification process to see whether the beneficiaries are realizing the
intended benefits of the scheme. It is a jointly conducted by the Government and the people.
Section 17 [15] of the Act mandates social audit of the Gram Panchayat once in every six
months by an outside party. The audits should see participation from the village members to
make sure that jobs under the scheme are being performed in a fair and timely manner.
Previously, socially excluded groups werent a part of the NREGA Planning process and
there were findings that except in 2-3 states, wage payments for rest of the states were not
done within the stipulated 15-day period [16]. Conventional social audits just audited the
financial accounts of the Scheme without looking at qualitative factors and inclusion of the
excluded communities. Thus, Poorest Area Civil Society (PACS) suggested that social audits
should go beyond financial indicators as financial indicators are like factual performance
indicators, whereas social audits should help figure out whether the wages are paid on time, if
the provisions of the scheme have been carried out without any discrimination whatsoever
and how much of the asset created or the work carried out has benefitted the community as a
whole. This is done via a 5-day process as described below:

Day 1 & 2: Verification happens in these 2 days in terms of: The actual work done under the
scheme and cross checking it with the yearly plan and work records, Document verification of
job cards, work demands, work allocation and wage payment tracking, Interviews with
participants to understand the working conditions and the difficulties they face
Day 3: Presentation of the results collected in the first 2 days in front of the Gram Sabha
Day 4: Final Report preparation post discussion
Day 5: Presentation of Final Report in front of Jansunwai, which is a public hearing of the
Panchayat attended by relevant Government officials and deciding on the future plan of
action.
Looking at the progress so far, only Karnataka and Meghalaya have carried out social audits
in all districts under the NREGA Scheme [17]. As per a Comptroller and Auditor General
Report [18], social audits were not carried out in 8 states like Assam, Bihar, Uttar Pradesh,
Punjab to name a few. In 14 states, there was a resource crunch to conduct social audits. The
Government had planned to cover 2.35 lakhs Gram Panchayats for social audit in 25 states
during 2014-15 but they only covered 1.21 Gram Panchayats (51 per cent). Another issue
with social audits was regarding the qualification of auditors. They were not provided with
sufficient training for carrying out audits effectively and making the results of the audit less
accurate.
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Fig 5.1 Social Audit process flow

6.0 MODERNIZING MGNREGA

To gain further insight into the implementation of MGNREGA and schemes under it, we
reached out to Dr. Manoj Patadia, who is currently the deputy commissioner of
MGNREGA for the state of Gujarat. Mr. Manoj gave us information about various schemes
that the government is undertaking to improve and modernize the MGNREGA programme to
enhance its efficacy and mitigate certain systemic problems in the implementation, thus
paving the way for reliable delivery of benefits to the rural population. Some of these
measures are listed below.

6.1 Electronic fund management system (e -FMS)

In the old manual system of wage disbursal, local bodies are involved in the fund distribution,
and the entire process of money reaching the beneficiary account takes up to two weeks from
the date of muster roll verification. Under e-FMS, this will be brought down to two days.

Fig 6.1 Funding: Old system

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MGNREGA: Impact and Implications Group 4

The electronic fund management system is a measure put into place by the government for
automating, streamlining and preventing leakages in the MGNREGA wage distribution
system. Started in 2013 as a pilot project under the collaboration of NIC (National Informatics
Centre) and MoRD (Ministry of Rural Development), it was made mandatory by the
government in 2016. It is a watertight system designed to safeguard against any diversion of
funds, and at the same time, ensure the speedy disbursal of funds, and prevent administrative
delays. Timely wage disbursal forms the crux of demand based employment and is at the heart
of an effective MGNREGA.

The e-FMS system is based on the concept of digital signatures, and once the FTO (fund
transfer order) is generated by the GP/panchayat, it is routed through MGNREGA and PFMS
(Public Finance Management System) servers for verification and database updating. The
PFMS then co-ordinates with the accredited bank and sponsor bank to eventually have the
money sent into the beneficiary account directly. The transactions are processed under NPCI
(National Payments Council of India) guidelines only. All of this is centrally managed by an
enterprise software MIS (Management Information System), titled NREGASoft.

Fig 6.2 e-FMS: New system

6.2 IPPE and LIFE Programs

The IPPE (Integrated Participatory Planning Exercise) under the NREGA is an effort by the
government to strengthen the rural governance backbone in the country. The objective of this
initiative is to have the villagers of the respective villages involved in determining which
should be the various works that need to be taken up under NREGA in order to serve the
interests of the village in the best possible manner. This is to ensure that priorities of all
segments in the rural society, especially the vulnerable sections, are kept in mind while
designing rural assets to generate solutions for farm-based, livestock based and other aspects
of rural livelihood.

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The LIFE (Livelihood on Full Employment) is an initiative by the government that is aimed at
skill up gradation in rural areas. Under this scheme, there are provisions for the up gradation of
skills of one member of all the households that are dependent on MGNREGA for their
livelihood. This is being done to ensure that households can take part in the creation of assets
of higher quality, as well as become self-reliant with time.

6.3 Geo-MGNREGA

The GEO-MGNREGA is a scheme undertaken by the government, in collaboration with ISRO

(Indian Space Research Organization), in order to provide for the geographical tagging of
assets created under NREGA, by the use of satellite communications. This is aimed to ensure a
central and seamless tracking and measurement of work being done and completed under
NREGA, and also provides to update the features of the asset being created, apart from its
geographical co-ordinates. The entire scheme is packaged as an app-based service that is
significantly user friendly, and helps to track progress smoothly and efficiently, allowing for
better targeting of resources under NREGA.

Fig 6.3 Geo-MNREGA Satellite images of Assets

7.0 CHALLENGES

7.1 Administrative and supervision problems

Most village panchayats, barring those in the state of Karnataka, and to some extent, West
Bengal, have little or no experience in planning and implementing large scale programmes.
This lack of administrative capacity has been repeatedly highlighted by the CAG. The annual
Action Plans are initially prepared at the Gram Panchayat level. These are then reviewed by
the respective Block Panchayats and then approved by the respective District Panchayats.
One of the most pressing administrative issues include preparing and prompt submission of
these action plans. Other issues include preparation, proper verification and issue of muster
rolls, selection and implementation of inter-panchayat works resulting in asset creation, fund
allocation and staff availability. The various officials responsible for MGNREGA include
Block Programme Officers, Block Development Officers, Joint Block Development Officers,
Village Extension Officers, Engineers and Overseers and there is considerable lack of

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coordination in several instances, thus affecting the pace and quality of work undertaken and
output generated in terms of asset creation as well as employment

7.2 Worksite coordination problems

The major issue involved with worksite coordination is the proper inspection of worksite and
the availability of facilities for doing the same. Apart from this, there are regular problems
with deficiency of technically skilled manpower at the block and gram panchayat level, which
has led to incorrect management of worksites and remediation of irregularities. There are also
difficulties in effective monitoring and measurement of works, as well as maintenance of
records regarding the same.

7.3 Funding

Before the current fiscal year, the government had not increased the allocation for
MGNREGA by much for the last three years. With wages rising continually, this meant that
actual employment created has been decreasing. The actual corpus spent for MGNREGA in
2014-15 was 32,977 crore. This went up to 36,967 crore the next fiscal year. The amount
allocated to MGNREGA for the current year is 48000 crore. However, the scheme continues
to face a massive shortage in funds, as 22 out of 34 states have negative balances currently.
This has resulted in the acute problem of wage delays, with 54% of the wage payments
delayed currently. In 2014-15, only 28% of the payments were made on time to workers. This
has affected the faith in the promise of employment guarantee and also hampered the ability
of MGNREGA to truly serve as a demand based programme.

7.4 Technological Hindrances

There have been hurdles created by the introduction of technology based security schemes in
MGNREGA. Some of these include the requirements for Aadhar numbers, which was being
implemented in violation of the Supreme Court orders. The MoRD (Ministry of Rural
Development) had issued a notification on January 3 that set a March 31 deadline for
everyone seeking work under MGNREGA to get Aadhaar-enrolled, in an effort to eliminate
the huge number of fake beneficiaries under the scheme, causing corruption and fund leakage.
But it is estimated to cause considerable exclusionary effects at the ground level for the
poorest and most vulnerable sections of the society. However, the government has insisted
that it is open to extending this deadline should states request it.

Apart from that, there have been other issues, such as the insistence on work applications, and
the use of E-muster rolls. However, it is expected that the slowdown created by this is
transitory in nature as the maintenance of records moves from paper form to digital means
over time, thus increasing transparency.

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7.5 Discrimination and corruption

A commendable feature of MGNREGA is that it pays men and women the same wage,
something that was unheard of in rural India. However, there have been cases of
discrimination against women and members of backward classes in several parts of the
country. There is a significant variation in the percentage of women enrolled in the scheme,
with Kerala and Andhra Pradesh showing a high percentage of women workers registered,
and other states not so much. This has been due to women being seen unfit for manual labour
with the same level of rigour as men. Apart from this, in several regions, powerful social
sections, with the help of corrupt local governments, get a large number of job cards, thus
excluding specific sections of society from the benefits of this programme.

7.6 Inadequate awareness and demand, Massive variation in implementation

across states

The centre has allowed for the number of days to be expanded to 150 from 100 in drought
affected areas. Any household, in these areas, who complete 100 days of work, can demand
more employment. However, the ground reality is that under the MGNREGA programme, the
vast majority of households are not provided even the basic minimum of 100 days. Thus, this
might eventually result in just being a symbolic action. In 2015-16, only three per cent
households received the earmarked 100 of employment; and, in the previous year, the figure
was again a critically low ten percent.

On an average, in 2015-16, MGNREGA offered 48.8 days out of the stipulated 100 days of
employment. Even this low figure was an improvement compared to several previous years.
In 2014-15, the national average was only 40 days, whereas in the previous two fiscal years
the average was close to 46 days.

Apart from this, it has been observed that there is wide variation between states. Many states
were far below the national average. For example, Uttar Pradesh provided a mere 33 days of
employment on average in the last year. Also, it has come to the light of MoRD that the
number of active households are far less than the total actual number of households registered
under NREGA. This goes on to show the lack of work opportunities and demand as far
NREGA is concerned on a national scale.

Another issue of importance is that the states havent been able to spend the entire amount
allocated to them for NREGA. This can also be a reason for the low national average days of
employment that we observe. According to statistics, no state has been able to utilize the
budget allotted for NREGA completely. This is the result of improper targeting and poor idea
conception, leading to regular rates of 30 to 50 percent of funds being unused. The daily wage
provided to labourers under NREGA lies between Rs 150 - Rs 175 a day. The wages vary
across states and are aligned regularly as per the Consumer Price Index for Agricultural
Labour. Only the state of Kerala performs remarkably well, as it spent 95 percent of the
amount allotted in the last fiscal year. However, still the average days of employment
provided was 48 days only. This indicates that there is the requirement for higher allocation
in some regions.
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MGNREGA: Impact and Implications Group 4

8.0 WAY FORWARD

Smoothen Cost Re-estimation Process: It has been observed that in several instances,
due to the long term nature of the works undertaken under MGNREGA, costs of raw
materials fluctuate during the work completion stage. This necessitates a cost re-
estimation survey, which is currently a tedious process, and hinders the pace of work
undertaken. Measures need to be implemented in order to smoothen the cost re-
estimation survey.
Increased monitoring and transparency: NREGA has tried to achieve high standards
of transparency by leveraging technology for wage payments, number of job cards
issued, work allocation and asset creation updates. It has gone to the extent of publishing
all relevant data in the public domain to ensure greater accountability. The state wise
progress on various parameters is also tracked and published regularly. The relative
performance of states and districts is published on a yearly basis. This needs to continue
and other aspects of NREGA, including long term planning of assets and funding details
should be put out in the public domain too.

However, apart from this, the government needs to create a composite success indicator in
order to facilitate cross-state comparisons and quick public understanding. Also, better
measures of performance, such as ratio of work days demanded to the work days provided
can be measured and made public.
Enhanced Governance Structure, Recognition and Awareness: NREGA has always
been under the criticism of policy makers due to its flawed and corrupt governance
structure. However, in recent years, substantial efforts have been taken by the government
to improve the situation. Among them, the most effective has been the approach of
recognizing the best compliant State/Union Territory and rewarding them with special
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MGNREGA: Impact and Implications Group 4

recognition. This initiative has gained appreciation lately and has been expanded across the
governance layer. It not only recognizes the compliances to the governance and fair wage
pay-outs but also other activities such as improvement initiatives, coverage of target
population, maintaining information dashboards at respective level, etc. The positive
impacts of the initiative are also being noticed on other aspects such as efficient resource
utilization of both conventional & non-conventional resources as people are getting
educated and showing greater responsibility towards them. Many parts of the country still
require corrective actions in order to attain the minimum level of compliance to create a
conducive atmosphere to garner motivation via the awards initiative.
Training and Admin Support : Administrative capacity is a key feature of successful
implementation of MGNREGA. Funds have been made available for wages and materials,
but not for enhancing administrative capacity, which shows the highest correlation with
the success of this program. Further a set of compliance related measures linked to certain
standard operating procedures (SOPs) need to be developed in order to ensure that work
delivery can be standardized and further monitored in a better way. Strict rules would
along with appropriate training of officials will be required for the updated governance
structure arising due to inclusion of SOPs and other such processes & system.
Use of IT and Technology : Going further IT can be seen as the foremost partner to
rescue the current crisis. Digitalization of the processes to the maximum extent possible
would help in a big way to counter the nuances & flaws of NREGA. One such step that is
close to execution is the linking of Aadhaar number to bank accounts of NREGA
beneficiaries and this has been supported by the government in accordance with its policy
of financial inclusion.

MGNREGA is the largest social welfare program in the world. To successfully implement it,
the co-ordination of the several government organizations and schemes in a smooth manner is
necessary. It is imperative for the Government to explore opportunities where synergies from
different policies can be utilized to either tackle issues or create more effective policies and
help them deliver the value to the society. Inspite of all its shortcomings, MGNREGA has
managed to deliver reasonably well in line with its vision of rural development and asset
creation, and rightly continues to be the cornerstone of the Indian governments social
welfare programs.

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MGNREGA: Impact and Implications Group 4

9.0 REFERENCES

[1] http://www.newindianexpress.com/business/2016/oct/11/224-mn-indians-live-below-poverty-line-
wb-1526883.html

[2] http://www.planningcommission.gov.in/news/prmar07.pdf

[3] http://164.100.129.6/netnrega/Citizen_html/nationalfinst1.aspx?lflag=eng&fin_year=2012-
2013&source=national&labels=labels&Digest=5txNJ/k7Jb27C4Y6eQVo6g

[4] http://164.100.129.6/netnrega/Citizen_html/financialstatement.aspx?lflag=eng&fin_year=2016-
2017&source=national&labels=labels&Digest=DaNMcKCT4HZjxosanIifuQ

[5] http://mospi.nic.in/sites/default/files/publication_reports/505_final.pdf

[6] http://www.livemint.com/Consumer/O0I6Mgk5VqBsrprjtDslOO/How-India-spends.html

[7] http://nrega.nic.in/Circular_Archive/archive/MGNREGA_SAMEEKSHA.pdf

[8] http://www.tradingeconomics.com/india/unemployment-rate

[9] https://www.cmie.com/

[10] http://164.100.129.6/netnrega/citizen_html/demregister.aspx?lflag=eng&fin_year=2016-
2017&source=national&labels=labels&Digest=DaNMcKCT4HZjxosanIifuQ

[11] http://agcensus.dacnet.nic.in/

[12] http://www.ibef.org/industry/agriculture-india.aspx

[13]http://www.indiawaterportal.org/sites/indiawaterportal.org/files/evaluation_of_nrega_wells_in_jh
arkhand_aggarwal_gupta_kumar_epw_2012.pdf

[14]http://www.indiaenvironmentportal.org.in/files/file/MGNREGA%20Implementation%20A%20Cr
oss-State%20Comparison.pdf

[15] http://www.pacsindia.org/projects/mgnrega-employment-rights/social-audits-and-asset-maps

[16] http://www.ndtv.com/opinion/nice-to-see-nrega-trending-but-urgent-fixes-needed-1655627

[17] http://timesofindia.indiatimes.com/city/jaipur/raj-spends-more-fund-than-allocated-under-
nrega/articleshow/57227915.cms

[18] http://www.financialexpress.com/economy/mgnrega-no-annual-social-audit-in-majority-of-states-
finds-cag/245759/

[19] website, N. (n.d.). nrega.nic.in.

[20] N. Bassi and D. M. Kumar. (2010). NREGA and Rural Water Management in India: Improving
Welfare Effects.

[21] Shah, M. (2008). Manual Labour and Growth, Economic and Political Weekly,.

[22] Verma, S. (2012). MG-NREGA Assets and Rural Water Security.

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MGNREGA: Impact and Implications Group 4

[23] Sambodhi. (2012-2013). Impact Assessment of assets Created on Individual Land under
Mahatma Gandhi National Rural Employment Guarantee Act.
[24] Narayanan, S. (2014). MGNREGA works and their impacts.
[25] Modi, A. S. (2010). Effectiveness and Ownership of Assets created under NREGS in Rajasthan.
MTS report.

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