Has the NREGS reached the rural poor?

By Shylashri Shankar and Raghav Gahia
Seminar, 28 April 2014


John Stuart Mill characterized the poverty alleviation problem as how to give the greatest amount of needful help, with the smallest encouragement to undue reliance on it. India has a long history of direct and targeted interventions to fight poverty through workfare schemes, subsidized food, farm-input and credit subsidies. More recently, and following the logic of Mills’ dictum, the Indian government wanted to ensure that rural households achieved a minimum income level cost-effectively, but without encouraging them to become dependent on public support. About 37% of Indians are poor; most are rural dwellers and earn their livelihood from agriculture (Tendulkar Report, 2009).

In November 2005, the Indian government embarked on an ambitious workfare scheme, the National Rural Employment Guarantee Scheme (NREGS), which guarantees hundred days of employment in unskilled manual labour at a minimum wage to every rural household each year. Some of its features include a time-bound employment guarantee and wage payment within 15 days (otherwise the government is penalized), prohibition of the use of contractors and machinery (to enhance direct benefits of the programme to the participants), facilities to be provided on the worksite, a 60:40 wage and materials cost ratio, and a mandatory 33 per cent participation for women. The scheme devolves considerable powers in planning and allocating resources to the local village councils (panchayats) and through social audits allows the community to monitor the progress. It also lists permissible works in the scheme such a s drought proofing, desalination of tanks and flood control. To minimize corruption, the scheme separates the agencies – banks and post offices – that pay from the ones that implement. During its initial years of operation, the NREGS involved an outlay of Rs 13,000 crore (for 330 districts); today that figure is Rs 40,000 crore.