Is this Gov­ern­ment Starv­ing MGNREGA to Death by a Thou­sand Bud­getary Cuts?

The Economic Times - - Breaking Ideas - Veena S Kulka­rni & Raghav Gaiha More com­ments on eco­nomic­times.com

If ne­glected, mild hunger turns into star­va­tion and a slow death. Low ‘ex­cess’ de­mand for the Ma­hatma Gandhi Na­tional Ru­ral Em­ploy­ment Guar­an­tee Act (MGNREGA) has be­come mas­sive in re­cent years. That is, the num­ber of house­holds that sought work or reg­is­tered for it ex­ceeded the num­ber that worked un­der this scheme.

Al­though not a pre­cise mea­sure of ex­cess de­mand, it is a quick but in­tu­itive ap­prox­i­ma­tion.

In­deed, com­par­i­son of fund­ing for MGNREGA and its per­for­mance dur­ing 2013-15 re­veal a slow ‘kill’. De­spite a strong as­ser­tion by fi­nance min­is­ter Arun Jait­ley to the con­trary, the bud­getary out­lay for 2016-17 in real terms is much lower than the amount spent in 2015-16, and way be­low the peak in 2010-11. If un­paid wages are de­ducted from the bud­getary out­lay, the prospects of MGNREGA in re­liev­ing agrar­ian dis­tress in drought-rav­aged states seem much grim­mer.

Pro­por­tion of house­holds par­tic­i­pat­ing in MGNREGA plum­meted from 32.5% in 2012-13 to 11.80% in 2014-15, a re­duc­tion of about 64%. All states recorded sharp re­duc­tions re­gard­less of whether they were the best-per­form­ing states (Tamil Nadu, Arunachal Pradesh and Ch­hat­tis­garh) or the worst (Pun­jab and Haryana), with par­tic­i­pa­tion rates be­low 5%. As a re­sult, ex­cess de­mand for MGNREGA shot up.

While 12 of the 22 states an­a­lysed here had ex­cess de­mand in 2012-13, all states had ex­cess de­mand in 2014-15. Worse, sev­eral states that had a few hun­dred house­holds who sought but didn’t get work in 201213, re­ported an ex­cess of a few lakhs or more who didn’t get work in 201415. In Kar­nataka, for ex­am­ple, there was an ex­cess of about 330 house­holds who sought but didn’t get work in 2012-13, which surged to over eight lakh house­holds in 2014-15.

In sharp con­trast, the pro­por­tion of house­holds par­tic­i­pat­ing in MGNREGA for 100 days in a year rose mod­er­ately. The av­er­age moved up from 8.9% to 13.7%. How­ever, while a few states (Ker­ala, Jammu & Kash­mir, Ut­tar Pradesh, Ma­ha­rash­tra and Kar­nataka) im­proved their pe- Devi Prasad

Ide­ally, MGNREGA is sup­posed to gen­er­ate em­ploy­ment that is pro­duc­tive and is rev­enue earner, in which case the rev­enue should off­set the ex­pen­di­ture to a large ex­tent. If that is not so, the scheme works as only a dole out and, hence, is un­vi­able.

B R V Shanbhag rfor­mance, some (Andhra Pradesh, Bi­har and Tamil Nadu) de­te­ri­o­rated, and oth­ers (Pun­jab and Gu­jarat) stag­nated at low lev­els.

A wor­ry­ing fea­ture of MGNREGA is ram­pant de­lay in pay­ment of wages. Data from the In­dia Hu­man Devel­op­ment Sur­vey (IHDS) 2011-12 show that about 32% of the par­tic­i­pat­ing house­holds had to wait for a month or longer to get paid. Whether Aad­haar-based elec­tronic trans­fer of wages is more prompt and much less prone to cor­rup­tion is not self-ev­i­dent. All that seems to have changed is the for­mat of pay­ment, but with­out much change in the cast of char­ac­ters.

How are some of th­ese out­comes af­fected by cuts in MGNREGA ex­pen­di­ture, and hikes in wages is an­a­lysed us­ing data for 2012-13 and 2014-15 (sup­ple­mented by data for other years).

A10% cut in MGNREGA ex­pen­di­ture is as­so­ci­ated with an 8.2% re­duc­tion in the num­ber of par­tic­i­pat­ing house­holds. Given the ex­pen­di­ture, a 10% higher MGNREGA wage rate is as­so­ci­ated with a 27% re­duc­tion in the num­ber of par­tic­i­pat­ing house­holds.

For a given ex­pen­di­ture, in­stead of ben­e­fit­ing the poor, po­lit­i­cally mo­ti­vated — but ill-in­formed — hikes in MGNREGA wage rates are more likely to ‘ra­tion’ them out. That such ra­tioning is in­com­pat­i­ble with a ‘de­mand-driven’ MGNREGA doesn’t re­quire elab­o­ra­tion.

Ex­am­in­ing the huge rise in ex­cess de­mand, we find that a 10% cut in MGNREGA ex­pen­di­ture is as­so­ci­ated with a 10.7% higher ex­cess de­mand, as work op­por­tu­ni­ties shrink. A10% higher wage rate, on the other hand, is as­so­ci­ated with a 35.5% higher ex­cess de­mand, as a sub­stan­tially larger num­ber of house­holds seek work un­der this scheme. Spi­ralling of ex­cess de­mand is, thus, at­trib­ut­able to both ex­pen­di­ture cuts and hikes in MGNREGA wage rates, es­pe­cially the lat­ter.

Not just par­tic­i­pa­tion, but also the du­ra­tion of par­tic­i­pa­tion mat­ters. So, we an­a­lysed vari­a­tion in the num­ber of house­holds that worked 100 days in a year. The num­ber was higher in states with higher ex­pen­di­ture and higher MGNREGA wage rates. In fact, the lat­ter ef­fect is con­sid­er­ably larger than the for­mer. Fall­ing back on our ear­lier research, many of those who worked for 100 days weren’t the poor­est, as they got ‘crowded out’ by the bet­teroff. Eas­ier ac­cess to in­for­ma­tion and bet­ter net­work­ing are key.

In sum, even at the risk of ex­ag­ger­a­tion, MGNREGA seems doomed with bud­getary cut­backs and fre­quent wage hikes.

Kulka­rni is as­so­ciate pro­fes­sor of so­ci­ol­ogy, Arkansas State Univer­sity, US, and Gaiha is for­mer pro­fes­sor of public pol­icy, Univer­sity of Delhi

I know what you all’re do­ing, Jait­ley-ji

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