Researchers from the India Human Development Survey (IHDS) team of the Maryland Population Research Center at the University of Maryland and India’s National Council of Applied Economic Research (NCAER) released a report on a controversial rural poverty measure in India. Public works programs are used by many countries during recession to create jobs; the Indian experiment assessed in this could potentially inform global poverty alleviation policies.
The report assesses the Mahatama Ghandi National Rural Employment Guarantee Act (MGNREGA), which passed in India in 2005 in response to a crowding of primarily female workers into low-paying, short-term jobs, mostly agricultural jobs. The act is designed to provide 100 days of work to any rural household demanding work.
Using unique data from over 28,000 rural households surveyed before and after the implementation of the program, researchers from the National Council of Applied Economic Research and University of Maryland, examined changes in lives of rural households as well as in the rural economy in the context of changes wrought by MGNREGA.
The researchers found that India’s massive public works program reduces poverty and empowers women, but work rationing limits its impact.
“While MGNREGA is not without its critics—and has significant weaknesses—we found that the program reduced poverty in India by up to 33% for the participants, and prevented 14 million people from falling into poverty,” said Professor of Sociology Sonalde Desai, one of the study’s authors, “Global economists have much to learn both from the success of the program and from some of its challenges. There is potential here for a model that can reduce poverty across the globe and to inform policies in developed countries during recession.”
The program was especially successful for women, the study found. “The most striking impact of MGNREGA participation is on women. Increasingly, women dominate MGNREGA work. And for more than 40% of them, MGNREGA is their first opportunity to earn independent cash income. Not surprisingly, this increases their power within the household and improves their conditions, including access to health care,” Professor Desai said.
The study—“Mahatma Gandhi National Rural Employment Guarantee Act:A Catalyst for Rural Transformation” is published by India’s National Council of Applied Economic Research. Among the study’s key additional key findings:
· The poor are more likely to work in MGNREGA; among rural poor, 30% of households participate in MGNREGA compared with 21% of nonpoor. Among households in top consumption quintile, only 10% participate.
· More rural men and women are combining farm work with nonfarm labor; the proportion of men aged 15-59 working solely in agriculture fell from 41% in 2004–05 to 31% in 2011–12. For women, the decline was from 40% to 35%.
· The report shows a declining reliance on moneylenders by MGNREGA participants; whereas 48% of MGNREGA participants who had obtained loans in the previous five years borrowed from moneylenders in 2004–05, only 27% did so in 2011–12.
· Children from MGNREGA households are more likely to attain higher education levels and have improved learning outcomes than their peers from non-MGNREGA households.
· Nearly 45% of female MGNREGA workers did not earn cash income before the Act was passed. Only 9% had a bank account in 2004–5, compared to 49% in 2011–12.
· Participation in MGNREGA is hampered by its availability. The new report shows not all interested households can get the full 100 days of work. Of the 25% of participating rural households, almost 60% would like to work more days but cannot find more work. In non-participating households, 19% would have liked to participate if they could have found work.
Professor Desai recently published an op-ed about this research in The Indian Express.
Background and Overview
Since 2000, the Indian economy has experienced rapid economic growth and a sharp decline in poverty. In spite of these striking achievements, growth in employment has been far slower. More importantly, although the contribution of agriculture to the Indian economy is only 18%, agriculture continues to employ 47% of the workers. This has led to crowding of workers, particularly women workers, into poorly paying work such as collecting forest produce or working only during peak agricultural season.
Mahatma Gandhi National Rural Employment Guarantee Act of 2005 emerged in response to this growing divergence and is designed to provide 100 days of work to any rural household that demands work. MGNREGA, as this program has come to be known, incites strong passions. For activists demanding right to work, this program is seen as a panacea for rural poverty, particularly if its implementation can be improved to ensure that it reaches all sections of the rural society. Many economists are concerned about ineffectiveness of the program as well as its unintended consequences leading to labour shortages.
While releasing this report, Jugal Kishore Mohapatra, Secretary, Ministry of Rural Development, Government of India noted, “These findings clearly show that there is large unmet demand for work under this program.” He added that a paucity of funds at the level of implementations and erratic fund flows, particularly in 2014-15, had affected both demand and supply, “For the last four months, our job has been convincing everyone that the scheme is not going away and rebooting demand.”
About the Maryland Population Research Center (MPRC)
The Maryland Population Research Center, one of 23 NIH Population Centers in the United States, draws together leading scholars from diverse disciplines to support, produce and promote population-related research of the highest scientific merit. The Center fosters collaborative research projects among its 97 Faculty Associates who represent 21 academic departments across 8 university colleges.
Established in 1956, NCAER is India’s oldest and largest independent, non-profit, economic policy research institute. Six decades in the life of a nation is a long time. It is even longer in the life of an institution. But the promise of NCAER—to ask the right questions, gather good evidence, analyse it well, and share the results widely—has endured. India has achieved much, and much remains undone. As the economy has changed, so too has NCAER, to continue to help understand India’s rapid economic and social transformation. As newer and more complex economic challenges emerge, NCAER will have to do more to keep its promise. To do this well, that is NCAER’s promise renewed.