It hasn't helped alleviate poverty, so why have it?
Given that the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is now a decade old, and there have been repeated allegations of it being a breeding ground for corruption, a thorough review of it is called for. Though Nitin Gadkari’s plan to limit the scheme to the poorest districts and to change the amount reserved for labour payments did not go down well when he was the rural development minister, the important issue is whether the scheme has delivered. All evidence suggests it has not though the government has spent R2.32 lakh crore on it between FY07 and FY14—R1.64 lakh crore on wages and R0.68 lakh crore on materials. Though the wage rate has gone up from R65 per day in FY07 to R132 in FY14, given the guarantee was just for 100 days, this cannot lift a family of 5 out of poverty—this gives each person R7.2 per day against the Rangarajan poverty line of R27 per day. To make things worse, just 4% of job seekers have got the mandatory 100 days of work—the average in 2014 was 46 person-days per household. According to even the MGNREGA division figures, the number of person-days of jobs created has been falling, from 284 crore in FY10 to 218 in FY14.
In which case, whether MGNREGA is a breeding ground for corruption or not, it is clearly not helping reduce poverty and the government would do better to spend the money elsewhere. While a McKinsey study last year had pointed to the fact that 75% of those lifted out of poverty over the last few years had got out because they had got new jobs, not dole, a study by Ashok Gulati, Shenggen Fan and Sukhadeo Thorat found that while every million rupees spent on fertiliser subsidies reduced the number of poor by 24, the reduction was 335 for investments in building roads and 323 for agricultural R&D. In other words, were the money spent on MGNREGA to be spent on building rural roads, India’s poverty numbers would have shrunk dramatically. In which case, there is a strong case for finance minister Arun Jaitley to scrap MGNREGA and merge it with other government subsidies that are to be delivered to the poor through direct benefit transfer (DBT) scheme. As DBT transfer would be Aadhaar-linked, the possibilities of leakages and corruption will also be weeded out because of the biometric identification. This will also save the NDA government from any criticism of scrapping a pro-poor scheme.