What’s ailing the MGNREGA?


Mahatma Gandhi National Rural Employment Guarantee Act or MGNREGA is a labour law and social security scheme of India that aims to insure the “right to work”. It was implemented in 2006 with the vision to enhance livelihood security by providing legitimate guarantee of wage employment for 100 days annually to every rural household of the country whose adult members volunteer to do unskilled manual work. Employment is to be provided within 15 days of application, failing to which government have to give unemployment allowances to wage-seekers. Wages must be paid within 15 days of completion of work, failing to which the worker shall be entitled to 0.05% of per day of wages earned as delay compensation. Gram Panchayats mainly implements MGNREGA.  Usually labour-intensive projects like building roads, creating infrastructure for drought relief, water harvesting, and flood control are given preferences.

Rs 60,000cr have been allocated for the MGNREGA scheme in the budget 2019-20. Last year, 2018-19, initially Rs 55000cr were allocated but a supplementary allocation of Rs 6084cr were granted at the end of 2018 as all the funds were exhausted, taking the revised amount to Rs 61,084cr.

Why it is important?

India is a country where one out of four people in rural areas live below the poverty line. MGNREGA has managed to enhance the fortunes of the rural labour market ever since it was launched in 2006. Under this scheme, job cards are given to rural households so that they can earn their minimum income. Over 12 crore job cards have been issued till date. It has used as a measure to climb out of the poverty and supplement one’s income by working during lean agriculture period.

Additionally, the scheme is inclusive of women participation as well as SC and ST individuals. About 50% jobs generated under this scheme are for women whereas 40% for SC/ST. It provides an opportunity for the women in rural areas to earn their living for the first time as well as chance at empowerment. Interestingly, it eliminates the need of borrowing money from the local money lenders. Payment is made through direct transfer into beneficiary’s account – which mandated people to open more than 10 crore new bank accounts and post office accounts.

Present scenario

MGNREGA provides livelihood opportunities for the citizens and creates minimum wage threshold for poverty stricken people. However, with such high allocation, question arises on whether the Government is getting the bang for its buck. Though government is forced to offer work under the scheme, there is no measurement of productivity or durability of the job done. While there is incentive for workers to turn out as much as is needed to earn the wage rate, there is no incentive to expedite it, or finish the task on time.

Rural workers are being discouraged from getting listed under the scheme, being denied work even after registering, and are also facing postponement in receiving their wages after completion of the work. The rationale behind these may be due to lack of funding as pointed out by activist, researchers and elected representatives.

Firstly, insufficient budget allocations over the years have intensified the conditions. Though the nominal budget has been increased in past two years due to inflation, in real the budget actually plummeted over the years. The factual budget of 2018-19 was much lesser in comparison to 2010-11.

Secondly, even this knee-high budget allocation was trimmed several times. Every State presents a labour budget (LB) to the Centre by the end of December every year through a bottom-up participatory planning approach which contains forecasted labour demand for the next fiscal year. The Centre has been using an arbitrary “Approved Labour Budget” to curtail funds requested by States (using Ne-FMS or the National Electronic Fund Management System), making this a supply-driven programme.

Ne-FMS instructions issued in 2016-17 declares that the Management Information System (MIS) “shall not allow” States to “create more employment above the limits set by Agreed to Labour Budget”. This certifies that there is no registration on work demands of the workers and to curb the work demands MIS was being used.

A Public Interest Litigation in the Supreme Court (Swaraj Abhiyan v. the Union of India) has been filed concerning violations under this scheme. This PIL forced the centre to reverse guidelines that sanctioned the use of MIS to inhibit demand for work. An Annual Master Circular (AMC) is released by the centre each year that serves as a blueprint to the programme implementation of MGNREGA. To set up an Empowered Committee (EC) has been recommended by the AMC in its recent report.

Another violation of the Act was the lack of payment of wages on time. After analysing transactions of FY16-17 and 17-18, a study on wage payment delays has focused attention on how the Centre has completely discharged itself of any responsibility of postponement in the release of wages. It was found that only 21% of payments in FY16-17 and 32% in FY17-18 were made on time. In response the Ministry of Finance said that the principal reasons behind the delays in payments were unavailability of funds, infrastructural bottlenecks and lack of administrative compliance.

Thirdly, stagnating wages under MGNREGA. The major cause behind this was delinking of MGNREGA wage rates from the Minimum Wages Act (MWA) of 1948. MGNREGA wages are a less remunerative option for the marginalised, being lesser than the minimum agricultural wages in most of the States. As primary beneficiaries of the Act, Dalits, Adivasis and women could be the most affected ones and pushed to choose more hazardous and vulnerable employment opportunities.

A Comparison

Rural distress is the central to the ongoing debate on rising unemployment. Being an election year and fearing an upheaval in the voting share due to the proposed ‘Minimum Income Guarantee’ scheme of the opposition party, the government announced the Pradhan Mantra Kisan Samman Nidhi (PM-KISAN) during the interim budget. The PM-KISAN promised ‘vulnerable landholding families having less than 2 hectares of land, direct income support of Rs. 6000 per year’. Both the PM-KISAN and the ‘Minimum Income Guarantee’ scheme of the opposition neglected the MGREGA which would have been ideal to address the rural employment distress since it is a guaranteed employment scheme.

The PM-KISAN promises of cash transfer of Rs. 6000 per year to the poor farming families with landholdings of less than 2 hectares. Compare this with the states with the lowest MGNREGA daily wage say Jharkhand. If 2 members of a family in Jharkhand work for 30 days they earn a sum of about Rs. 10000. In other states say Haryana, 2 members of a family working for 30 days can earn around Rs. 16000. Jharkhand has the lowest daily wage and Haryana has the highest. Families working under the MGNREGA easily earn more than what the PM-KISAN is offering or any other income support programme throughout the country.

Further the landless families and the women agriculturists who do not have any land under their name would not benefit from the PM-KISAN. The Socio Economic and Caste Census 2011 reported that the landless famers and manual laborers to be around 40% of the rural households.  Here again one can infer that MGNREGA being a universal scheme would have been a prudent option than PM-KISAN which is just an income transfer scheme.

The success of PM-KISAN would depend on reliable land records and rural banking infrastructure. In addition to this cash transfer schemes face the issues of exclusion or beneficiaries being left out and rampant corruption that exist when huge amounts are involved that is to be transferred to large number of beneficiaries.

Rather than moving hastily the government should have strengthened the MGNREGA and added more to the budgetary allocation to remove the frozen payments. MGNREGA is an employment generation scheme that conforms to the participatory principles of democracy through community works. The MGNREGA has a legislative backing unlike the cash transfer schemes which conforms to Right to Life and more importantly to Right to work. Strengthening MGNREGA would definitely have multiplier effects on the economy.


Paying wages promptly is essential to the rights-based realisation of minimum guaranteed income under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

Under the former arrangement of a revolving fund, implementing organization at every level had their own accounts and licensed signatories for making payments.

To strengthen decentralised development system by local institution, this was a devolutionary fund transfer arrangement.

A triple but correlated adversity is being faced by MGNREGA – rampant payment delays, lack of sufficient funds and abysmal wage rates.

This reflects a legal crisis created by the centre as well as a moral one where is for subsistence and not for a living wage. Moreover, all these problems become the reason for work not starting on time, delay in payments of wages and even reluctance on the part of field functionaries to accept demand applications.

Clearly, several challenges still lie ahead if the MGNREGA has to serve the purpose it was designed to fulfil: To provide a short-term employment alternative to rural households during the lean agricultural season and avoid not just distress migration but also the debilitating impacts on educational and nutritional outcomes that accompany it. Data suggests that the states worst affected by drought are still not benefiting adequately from the MGNREGA. Clearly, the Centre and concerned states have a long way to go in not only creating awareness but also instituting effective grievance redressal mechanisms.



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