The National Rural Employment Guarantee Act (NREGA), a law passed in India in 2005 by the Congress Party that guarantees 100 days of paid labor to every adult member of rural households, has been the subject of enormous attention. It has been lauded for its initiative and criticized as another inefficient welfare program. Recent analysis, including a widely published AP article a few days ago, is shining a positive light on the legislation. It seems that NREGA, while expensive and imperfect, has been effective in reducing poverty across a wide swath of rural India, and has changed numerous lives for the better. As the program continues, civil society and government can do a great deal to improve its efficiency and impact.
The article that brought newfound attention on NREGA was an AP article published a few days ago entitled “One Indian Village Wins Freedom with Job Program” by Ravi Nessman. The article describes the wretched conditions in which the residents of the small town of Pipari, a small town 180 kilometers north of Lucknow, lived in before the job program:
For as long as anyone can remember, the people of Pipari have lived as virtual slaves.
The wealthy, upper-caste landlord forced them to work his fields for almost nothing, gave them loans at impossible interest rates, controlled their access to government welfare and held the police in his pocket.
They were dalits, the lowest caste, with houses made of cattle dung, clothing in tatters and barely enough food for a meal and a half a day. They were trapped below the bottom, serfs in an age-old system of exploitation that few in rural India dared question.
The “world’s largest social welfare program” helped them change their reality. The article describes how the residents demanded work under the new law in 2006, but local officials did not register them for work out of fear it would undermine their power. However, the local residents were emboldened by the law, and spent months fiercely protesting until they received their entitled work and pay.
The program has had a chain effect, allowing rural workers to use their earnings for savings instead of taking loans from the usurious landlord, and forcing the landlord to double wages to compete with the new workfare. They are able to send children to school and put food on the table, and the article ends on an inspiring note:
The men don’t pedal rickshaws in Kanpoor anymore, but stay home with their families and their fields. The women are earning money of their own for the first time. The villagers are even discussing taking on the next most powerful person in the area, the man who runs the government food shop, whom they accuse of stealing their subsidized sugar ration.
As for Shukla (the landlord), they still defer to him, but rebel in small ways. When he tells them to do work for him, they do what is convenient and ignore the rest, they said. And they have stopped touching his feet, giving him a little salute instead.
“He still acts like a king, but we don’t consider him a king anymore,” said Harpal Gautam, 37. “His rights and our rights are equal.”
The story paints a nice picture of NREGA, but is the story an anomaly or reflective of the program’s overall success? General consensus from various media and scholarly examinations seems to determine that the program has problems that need to be fixed, but, on the whole, has been surprisingly successful, especially considering the low expectations for most Indian government social welfare programs.The Financial Express has some facts about the program:
The average wage paid under NREGA has increased from Rs 75 in 2007-08 to Rs 90 in 2009-10 up to February 2010
Per household earning has increased from Rs 2,795 in 2006-07 to Rs 3,150 in 2007-08 and to Rs 4,060 (per month) in 2008-09
2.10 crore households were provided employment under the Act in 2006-07; 3.39 crore in 2007-08; 4.51 crore in 2008-09 and 4.79 crore have been provided employment during 2009-10 (up to February 2010) (A crore = 10 million)
Participation by women has been 40 per cent in 2006-07; 43 per cent in 2007-08; 48 per cent in 2008-09 and 2009-10 (up to February 2010)
An article from the Economist in November 2009 (gated), notes how the expansion of the Act to every rural district in 2008 impressively boosted demand during the financial crisis. “Once dismissed as a reckless fiscal sop, the scheme is now lauded as a timely fiscal stimulus. Because it must accommodate anyone who demands work, it can expand naturally as the need arises.” The article also praises the act for its ability to raise incomes through setting wages at the minimum wage or above. However, it does aptly comment that “In the country’s worst-run districts, India’s villagers will only enjoy the right to work when India’s apathetic bureaucrats forfeit their right not to.”
And despite the clear success of the program, implementation has been uneven. An Economist piece about Bihar (gated) from earlier this year recounts an example of apathy and corruption:
In Jamua village in the district of Araria, an NGO called Jan Jagaran Abhiyan found that 1,710 job cards had been issued, which should entitle villagers to over 17m rupees in wages, if they had worked the full 100 days allowed. But the village had claimed less than 5% of the amount available. Of that, 43% was pilfered, by reporting ghost workers and forging bills for materials. The mystery is perhaps not the 43% that was embezzled, but the millions in central-government funds that were left on the table by a local administrative machinery too apathetic even to steal with much conviction.
The AP article discusses this concern, remarking how many social welfare programs in India rarely reach the poor after wielding their way through chains of bureaucratic corruption. NREGA has worked hard to get around such obstacles by encouraging rural workers to get personal bank accounts so that they could get paid directly, instead of through corrupt intermediaries, and mandating that all paperwork be taken care of at job sites to get around opportunistic middlemen. As an added bonus, the drive to encourage rural workers to get bank accounts has expanded formal finance to a new swath of the population for the first time.
In the short and medium term, there are a variety of policy papers that suggest how to further improve the implementation of NREGA. The suggestions center on the idea of increasing awareness of the law, its benefits, and its logistics to rural populations. The papers also note how nongovernmental institutions, such as NREGA Watch, are essential for corruption monitoring and awareness. NREGA has demonstrated that if people know about their right to work, and how to gain access to the right, they will certainly seize the opportunity to do so.
Five years after NREGA became law, a program that employs 50 million people, raises wages, expands the reach of formal finance, and empowers entire cross-sections of the community rightly deserves praise. The program is expensive, and not perfectly implemented by developed world standards, but has been a surprising force against poverty. Going forward, the government should continue to expand and improve the program, but should aim towards a long-term outcome where these jobs will be replaced with higher-paying private sector jobs, and this can only be done through creating conditions favorable for widespread investment and growth.