MGNREGA Musings: Part I (Rajasthan)

Recently I found myself involved in a conversation about wealth transfer and social security in India. In response to a casual remark by a friend who bemoaned what he considered the excessive taxation of the Indian middle class and the subsequent transfer of wealth to the poor, I couldn’t help but state what I thought was obvious to me from my work experience. That the majority of Indians tend to have an astonishingly poor level of social and financial security.

The conversation revolved around MGNREGA – the Indian government’s flagship welfare scheme that is legally mandated to provide 100 days of work for every citizen that demands it. Despite its aversion to the design and philosophy behind the scheme, the Modi government has found itself repeatedly falling back on and boosting MGNREGA to alleviate the perennial rural livelihood problem. In fact, the scheme has seen yearly budgetary growth despite PM Modi mocking the scheme and some early attempts to downsize the program.

My friend, an urban upper middle class citizen, seems to have wholly bought into the government’s ad blitzkrieg that talks about the level of support the government provides to the farmers and rural citizens. I couldn’t help but respond with my own personal observation regarding MGNREGA from the states of Rajasthan and Uttarakhand and, to some extent, Jharkhand and Haryana.

The Rajasthan Experience

This is to remind you that MGNREGA provides budget at the panchayat level where any project that improves rural life or infrastructure can be undertaken and at least 60% of any sanctioned budget be spent on labour. Rajasthan in 2015 was my first glimpse of the way incentives can converge so splendidly at the panchayat level. The local panchayat had passed a project to build a playground by levelling a patch of land. The project would offer employment to many of the residents over a number of days. What eventually transpired was that the patch of land was levelled by a JCB tractor overnight instead of by the residents. The residents who were supposed to work on the land got paid half of what they would have in return for absolutely nothing. The savings were split, I assume, between the JCB owner, the government officials, and the panchayat leaders.

This was a win-win for everyone. The playground got built. The residents got money for doing nothing and, in fact, they instead commuted daily to Udaipur, the nearest city to work and earn something meaningful. The government officials got more than their usual share of cut from such projects. The JCB owner and driver saw some earnings. The panchayat leaders, I am sure, got their share too. The government officials higher up would have been pleased with the photographs of a flattened patch of land and paperwork showing high work utilization. I couldn’t think of anyone who was grossly wronged in this situation.

It was here in Rajasthan that I first saw the need and the impact of a program like MGNREGA on rural India. There were some hallmarks of the program that stood out to me that are worth elaborating.

Corruption

MGNREGA in the early years saw unimaginable leakages at every level. Without DBT, GIS tagging, photographs, and other checks that were brought into place, projects often only remained on paper with funds being funnelled to officials and elected representatives. There were stories of people becoming lakhpatis overnight after the launch of the scheme. This has improved over the recent years by a great extent.

Incentives

The incentives, as we see in the playground example above, aligned in such a manner that corruption becomes inevitable. Though I’d argue that the example above—though illegal—was acceptable given the final outcome. After a few years working with the government, one’s benchmark for corruption and immorality adjusts with the circumstances.

One way to look at MGNREGA is that it’s a massive transfer of wealth from the urban centres that produce the bulk of the tax revenues to the rural economy that has been left behind by under-investment and negligence by successive governments. This transfer of wealth provides incomes to a range of rural workers—from the legitimate rural workers to the under-the-table payments to a broad swath of rural networks including the babu-sarpanch nexus.

Wages

The wages provided for labourers under the scheme are vastly lesser than market wages in the state. Labourers in Udaipur could earn over 300 rupees per day while the MGNREGA daily wage then was around 180. There has been plenty of anecdotal evidence as to how the advent of the scheme provided a wage floor to rural labourers, thereby increasing even the urban wages across the country. In fact, the proponents of the scheme claim this to be its biggest achievement—to provide the poorest of Indians with an effective minimum wage.

However, the fact that the scheme wage did not keep up with inflation or the market wage meant that this gap kept increasing and the efficacy of its minimum wage–like characteristics decreased over time. The current government has been accused of intentionally suppressing the MGNREGA wages as a means of reducing the scheme’s popularity and uptake. Regardless of their intentions, the minuscule increase in the scheme’s wages has indeed led to the slow erosion of the scheme’s popularity.

Unemployment Benefit

MGNREGA also mandates that those who are not provided employment under the scheme or who do not receive their demanded number of days of work be provided with unemployment benefits. The fact of the matter is almost no one ever gets this benefit. The government officials usually only accept the demands from the villagers that they know they can fulfill. This supply and demand situation is dictated by every state and panchayat’s budget.

The current government has definitely tried to improve the performance of the program in some aspects, but this has largely been overshadowed by the under-investment and neglect they’ve afforded the scheme in comparison to other pet schemes of the ruling regime—the LPG scheme, Kisan Nidhi Yojana, etc. However, the fact that MGNREGA endures despite 7 years of opposition rule points to the broad rural support enjoyed by the scheme, making it politically untouchable. The reasons for this entrenched, though slowly waning, rural support are many, and I’ll elaborate on some of these reasons in the next article.