MGNREGA trumps cash handouts, loan waivers; one-stop solution for jobs, poverty, consumption crisis

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Published: June 4, 2019 11:45:47 AM

The MGNREGA job guarantee scheme could tackle the weakening demand and rural unemployment says a developmental economist.

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While major political parties relied on offering sops including cash transfers, farm loan waivers and minimum income schemes in the run-up to the 2019 Lok Sabha elections, it is MGNREGA which could do a better job in handling issues at hand. The MGNREGA job guarantee scheme could tackle the weakening demand and rural unemployment says a developmental economist. “Before contemplating new rural programmes, the government must expand MGNREGA,” Shonar Lala, a former World Bank economist, wrote in The Indian Express.

One of the major issues with Rahul Gandhi’s NYAY scheme was the identification of the poor. However, with the workfare programmes such as MGNREGA, the problem is eliminated to an extent as the poor will identify themselves and enrol for the work, thus not only making the selection procedure easier but also reducing the identification costs. “The ability of a programme to parsimoniously target the ultra poor without elaborate means testing is critical for its long-term success, particularly when fiscal resources are scarce,” Shonar Lala wrote.

NREGA also works because of its “self-targeting mechanism”; only poorer and disadvantaged seek employment through NREGA. However, NREGA is not a panacea to all the problems as not everyone receives it. In 2009-10, half of the rural households applied for jobs under NREGA but only a quarter of them got it, according to a report by Liu and Barrett in 2016, Shonar Lala wrote.

Impact so far

NREGA was touted to alleviate the poverty of the poorest households of India. So, has it held up to the expectations? Three studies have shown modest increases in household per capita consumption and expenditures and greater benefits for marginalised groups after the launch of NREGA. “A study by Klonner and Oldiges in 2014 find that Scheduled Caste and Scheduled Tribe recipients increased their monthly per capita expenditure by 37% in the lean season of 2008, cutting poverty by almost half,” Shonar Lala wrote.

Further, state-level studies show that the program has benefited most disadvantaged largely, especially in states such as Andhra Pradesh and Bihar. NREGA has not just improved the prosperity level but has also targeted unemployment to some extent. According to some research, NREGA provides employment after an adverse rainfall shock, enables workers to smoothen their consumption with variations in rainfall, and reduces risk during the lean season, Shonar Lala wrote. Hence, the government can look into the expansion of NREGA at a time when it becomes pertinent to tackle rural unemployment, pre-monsoon and weakening consumption.

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