Here’s why MGNREGA could potentially save the rural economy

The pandemic has not only resulted in the loss of human life, but has also had an impact on the source of livelihood for many people. It has triggered a gradual but persistent erosion of employment opportunities, especially in the unorganized sector of our economy. And with the shutdown of several urban production centers, reverse migration to villages has become a trend. This has increased the dependence of a considerable population on the limited number of non-farm jobs available in these villages.

Policymakers have once again turned to India’s rural employment guarantee program MGNREGA. Supporters of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) believe that expanding the scope of work in this framework will increase the purchasing power of the rural poor, which in turn will help the economy to grow. to sort out. What interests them is whether this can give a boost to the hard-hit rural economy.

According to an April report from Indian Economy Monitoring Center (CMIE), among employees, the share of unemployment was higher in rural areas. This suggests a significant impact on small and medium industries in villages, contributing to India’s non-farm economy. And since this non-agricultural economy contributes almost 60% on overall rural income, an impact that simply cannot be ignored.

MGNREGA – The rural employment guarantee program

Mahatma Gandhi’s National Rural Employment Guarantee Act (MGNREGA) was introduced in the country in three phases. The first phase was launched in 200 rural districts on February 2, 2006. Simply put: Under this program, a household can obtain a work card issued by the local Gram Panchayat, listing all adult household members eligible for the program. job. Each household is entitled to 100 working days per fiscal year.

A person in such a household can request in writing any work of his choice. This work will be provided to them within 15 days of the request and their workplace will be located less than 5 km from their village. If their place of work is more than 5 km away, they will be entitled to travel expenses. Workers are assigned to specific projects that involve unskilled manual labor with limited use of machinery.

Importance in the rural economy

Despite widespread criticism in public discourse, academic opinion of MGNREGA has almost always been favorable. Studies suggest that by employing the unemployed, MGNREGA reduced poverty and distress migration. A National Council for Applied Economic Research (NCAER) The study said that MGNREGA “reduced overall poverty by up to 32% and prevented 14 million people from falling into poverty”. It increased the daily wage rate of workers from INR 182 to 202, according to a study by MicroSave Consulting.

Not only the unemployed, the program has also benefited employees. A report from the United Nations Development Program showed that MGNREGA provided poorer households with a safety net, increasing their standard of living, as cited by mint.

But perhaps the biggest beneficiaries of the program have been the lower castes and women. The central government imposes a minimum of one third of women’s participation in MGNREGA. But according to data for fiscal year 2020-2021, women accounted for 53% of those employed under the scheme.

In addition, the device is implemented by the local panchayats, which must have at least 50% women. The participation of women in both the program and its implementing body has resulted in a significant increase in the participation of women.

Significance during the pandemic

A 2014 study of University of Heidelberg found that MGNREGA reduced poverty by almost 50% during the agricultural lean season. An agricultural lean season in a developing country is the time interval between planting crops and harvesting them for the uninitiated. During this period, job prospects are scarce, incomes decline, food stocks become scarce, and low-income families regularly skip meals.

Consequently, the consumption power (and therefore the purchasing power) of these families evolves erratically, negatively impacting the rural economy. However, since the introduction of MGNREGA, these low-income families fare much better during lean agricultural periods. The program also helps to mitigate seasonal peaks in consumption patterns and purchasing power of these families, thereby stabilizing the economy. This feature of MGNREGA has kept the purchasing power of the rural poor afloat during the pandemic.

Within 50 days between April 1 and May 20 of last year, 3.5 million workers applied for jobs under this scheme. In comparison, only 1.5 million people applied for MGNREGA jobs in 2019-2020. Responding to higher demand, the government offered more employment opportunities. Except in April (when closures restricted work), the number of person-days in 2020 was much higher than in 2019. In May, official data showed only 15% of households receiving work. By September, that figure had risen to 53%.

Capacities built with MGNREGA

As the nature of the work, the scale of the work and the capacities of the stakeholders under the MGNREGAs are diverse; separate training modules are designed for different target groups. For example, according to a Press Information Office (PIB) January 2018 press release, 6,367 local young people were trained to become barefoot technicians. This training was provided mainly to address the lack of availability of technical resources at the Gram Panchayat level. During the same period, 47,000 women self-help group members were trained over four days to conduct social audits at the Gram Panchayat level.

A study by the Institute of Economic Growth (IEG) of MGNREGA beneficiaries in 21 states found that it helped intensify and diversify crops, increasing the incomes of rural households. 76% of the households surveyed declared that the quality of the assets under MGNREGA was very good or good. It also reported an 11% increase in gross annual income per household (HH) over two consecutive fiscal years, 2015-16 and 2016-17.

Performance by state on MGNREGA

According to official data for fiscal year 2020-21, more than 11 million people in 7.5 million households have benefited from the program. Almost 6 lakhs of them were disabled people. West Bengal generated the most jobs (1 18 27 575), followed by Uttar Pradesh (1 16 59 011) and Rajasthan (1 10 97 990). The lowest job creation was observed in Dadra and Nagar Haveli and Daman and Diu (0), followed by Lakshadweep (75) and Goa (4,365).

Three of the largest migrant source states, Bihar, Jharkhand and Odisha, saw job creation of nearly 97 lakhs during this period, up from 93 lakhs last year. It is also important to note here that the Union government increased MGNREGA’s budget allocation from Rs. 61,500 crore to almost 1 lakh crore after the stimulus package to fight the pandemic was declared the last year.

Can urban areas have MGNREGA?

When businesses were gradually opening up after June 1 of last year, another CMIE report found that rural unemployment was in a much better position than its urban counterpart. Layoffs and pay cuts were rife. As a result, most of these urban unemployed have had to take on odd jobs. This amplified the problem of informality and reversed any growth that had been achieved so far. Government-sponsored relief measures could help a significant portion of rural and urban populations. Yet he failed to identify the urban informal workforce that was affected. It was the opportunity to present an urban replica of MGNREGA.

In an article published by mint last year, Nitya Chutani (former assistant professor of economics at Delhi University) raised an interesting point. Chutani proposed a hypothetical scheme that states would take more capital spending, have a greater multiplier effect, and create more public goods like roads and bridges. Most interestingly, Chutani felt that the government had already started rolling out programs in this direction.

For example, Pradhan Mantri Kaushal Vikas Yojana (PMKVY), for its next phase, had agreed to focus on digitization, entrepreneurship and the creation of databases based on skills mapping. The artificial intelligence (AI) -based Atmanirbhar Skilled Employee Employer Mapping (ASEEM) portal – yet another government program – can also serve as an urban employment guarantee program in difficult times. The scholar further suggested that the government could develop a wage subsidy for formally employed people so that people’s consumption demand stays afloat.

Also read: In Rajasthan, people get vaccinated against COVID at MNREGA sites

About Keneth T. Graves

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