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Is NREGS significantly reducing poverty?

Debraj Bhattacharya

Updated: July 8, 2015, 9:57 PM IST
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If you go to a district in India to see what kind of rural development work is going on there, you will see a gigantic government machinery from the Gram Panchayat level to the district level busy implementing the Mahatma Gandhi National Rural Employment Scheme. This is by far the most important rural development scheme that has been in operation since 2006. World Bank has recently said that it is the world’s largest public works programme. The scheme, following from the Rural Employment Guarantee Act, is India’s answer to the problem of endemic rural unemployment. At the same time recently there have been reports by UN and World Bank which shows that India has the highest number of food insecure people in the world. This raises the question – has MGNREGS actually managed to significantly reduce poverty, especially in the poorest states? My answer is no. Let me try to explain.

Table 1 shows data from official website of MGNREGS. The data presented for each of the poor states in columns 2,3,6 and 7 are taken from the official data. In column 4,5, 8 and 9 I have shown the results of some simple arithmetic based on the official data. I have tried to understand in each state how many days of work a poor household got, what the wage rate was and therefore what was the income per year and per month. This I have calculated for two financial years – 2014-15 and 2013-14 to get a trend.

Table 1: Household Income from MGNREGS in select states for 2014-15 and 2013-14

StateAvg. No days of employment 2014-15Wage RateIncome per HH pr yrAvg. income per HH per monthAvg. No days of employment 2013-14Wage RateIncome per HH per yrAvg. Income per HH per month
Bihar34.09165.745650.07470.8341.88152.646392.56532.71
Uttar Pradesh33.52155.545213.7434.4735.11141.614971.92414.32
Chhattisgarh31.8150.194776.0439851.71142.987393.49616.12
Jharkhand40.81157.966446.34537.1938.3137.975284.25440.35
Madhya Pradesh42.03149.136249.47520.7842.27139.035876.79489.73


If we take Bihar as an example, we can see in column 2 that the poor households who got work received work for 34.09 days in 2014-15 at 165.74 per day. This means that the household which got work earned Rs 5650.07 in that year from MGNREGS which translates to Rs 470.83 as an average per month. The corresponding figure for 2013-14 is Rs 532.71 per month. Similarly one can see in columns 5 and 9 the data for Uttar Pradesh, Chhattisgarh, Jharkhand and Madhya Pradesh.

One can see that in these states suffering from chronic poverty the maximum a Household has earned per month is Rs 616.12 (Chhattisgarh, 2013-14). Generally, the income is around Rs 500 per month on an average.

For a very poor family, there is no doubt that even Rs 500 helps. It is better than nothing. However the question that we need to ask now is whether it is worth the enormously complicated implementation strategy and whether this can really reduce poverty. I am not even considering aspects like delay in payment or corruption.
Recently during field work in two districts of West Bengal (whose data is also available in the official website) I got a glimpse of what is perhaps happening on the ground. The main earner of the family is migrating to places which are able to give a much higher wage. MGNREGs is providing some work to a secondary earner – brother, wife etc. So it is not stopping migration and in fact without migration these families would be in dire straits and the roughly 500 rupees will not help much.

Indeed a much better strategy will be to transfer funds worth Rs 10,000 per year to job card holder for a period of 5 years and help them to get out of the grip of poverty by providing them seeds and other inputs, linking banks with Self Help Groups, etc. The amount of time that is spent to implement MGNREGS is simply not worth the end results. It will be much better to go for direct cash transfer to needy families. This will reduce corruption as well. At least one can do a pilot project in a few districts to see what happens.

As far as asset creation is concerned, it will be best to allow Gram Panchayats to use 14th Finance Commission funds to create whatever assets they want to without giving them any restrictions in terms of wage/material ratio. For example if a GP thinks that they want to build a ICDS centre they can under the untied fund available from 14th Finance Commission funds.
First Published: July 8, 2015, 9:57 PM IST