NREGA National Rural Employment

Guarantee Act

Group 3Seema Devi(235)Nitin Bighane(224)Somya Anand(191)Vaibhav Baweja(210)

Introduction

Wage Employment Programs1980’s

• National Rural Employment

Programme (NREP) launched to

use unemployed and

underemployed workers to build

community assets 

• Rural Landless Employment

Guarantee (RLEG) launched to

provide 100 days of guaranteed

employment to 1 member from

each rural, landless household 

• Jawahar Rozgar Yojana

launched, combining NREP and

RLEG

1990’s

• Employment Assurance Scheme

(EAS) launched to provide

employment during the lean

agricultural season

• Jawahar Gram Samridhi Yojana

(JGSY) launched; dedicated to

development of demand driven

rural Infrastructure

2000’s

• Sampoorna Gramin Rozgar

Yojana (SGRY)launched,

merging EAS and JGSY

• Food for Work Programme

(NFFWP) launched to generate

additional supplementary wage

employment and create assets

• National Rural Employment

Guarantee Scheme (NREGS)

launched to provide 100 days

of guaranteed employment to

one member from each rural

household and create

community assets

NREGA - Overview

Salient Features

• Employment to all those who are willing to work (100 days)• Employment will be provided by the Gram Panchayat (local self governing body) • within 15 days of work application, failing which unemployment allowance will be paid• At least 1/3rd of the employees must be women• Fixed minimum wage rate and no upper limit• Weekly disbursement of wages and delays not beyond a fortnight

Expectations from NREGA

AuxiliaryRegenerate

natural resource base

of rural livelihood for sustainable development

Process OutcomesStrengthen grass root processes of

democracy Infuse

transparency and accountabilityin governance

State and Local Government

State Rural Employment Guarantee Scheme

(REGS)

25 per cent of the cost of material and wages for semi-skilled/ skilled

workers

Unemployment allowance if the state is unable to provide

employment within 15 days

Administrative expenses of the State Employment Guarantee

Council

Other Institutions

Central Employment Guarantee Council (CEGC)Rural

Employment Guarantee Scheme (REGS)District Programme Co-coordinator (DPC)

Gram Sabha (GS)

District Panchayats

Programme Officer (PO)

Intermediate Panchayat (IP)

Others

State Employment Guarantee Council(SEGC)Gram Panchayat (GP)

Ministry of Rural Development

State Government

District Panchayats

Perfect labour market

Perfect labour market without a friction, The equilibrium wage would be established at a wage

where the total supply of labour from the poor household is equal to the total demand for labour from the rich

household.The total supply of labour from poor household would be

n(L – l*) . Total demand for labour for the rich households would be

m(c* - L). Supply = Demand

Imperfect labour market

• For rich the utility function is standard as more income makes them better off. This is due to the fact that rich household has access to banking sector both for credit and parking their savings. They will have better standard of living with other household accessories where additional income would create additional opportunities for deriving more utility.

• For the poor the above opportunities are very limited and additional income may not always involve productive spending leading to higher utility for them. In most cases, their children either do not go to school or go to free government schools. The poor typically also do not save in the Bank. The scope for spending on goods and services other than the basic ones is very limited for the rural poor and hence the marginal utility of income after a level will be negligible in the short run.

Absence of NREGA

Given labour days available with the family, they would have two options 1. the case of labour surplus economy. In the prevailing wage there would be excess supply of labour.

Poor will send their labour to rich, excess will remain unemployed.2. No Labour Surplus: So there are two possibilities:

I. Income below the target for the Poor: the poor household supply the entire surplus labour and get w(L – lp). Their total income is f (k, lp) + w(L – lp). They will supply the entire surplus labour to the rich household at the prevailing wage provided that earnings are less than their target income

II. Income at the target for the Poor: If the opposite happens i.e., f (k, lp) + w(L – lp) >T, the poor household would not supply the entire surplus labour to the rich household. They will work for say ls labour days for the rich household such that earnings are equal to target income

Absence of NREGA

• For II possibility the poor household reaches their target income by their own cultivation and selling a portion of their surplus labour in the market.

• Given that the household has reached the target income, any increase in wage would bring down the total employment of labour of the poor household

• Thus there is a substitution between the employment in own cultivation and market supply to rich household.

• It is possible that the market supply may be backward bending given that the overall choice of labour supply to own cultivation and market supply is diminishing in response to wage increase.

• There are possibilities of multiple equilibriums in the labour market.

Impact of NREGA

• The impact of NREGA depends on the relative magnitude of NREGA work and the amount of surplus labour in the economy.

• If the amount of NREGA work is below the surplus labour available in each poor household then there would be no impact of NREGA work on the employment decision for their own cultivation and the decision to supply labour for the rich households.

• NREGA work, the level of outputs in both rich and poor households remain the same & EGA work would increase the income of the poor households.

• If amount of NREGA works available is more than the surplus labour available in each poor household then there would be some change in the employment decision of the poor households and the analysis is similar to what is given below for any economy with or without surplus labour. This additional demand from NREGA work would reduce the supply of labour to the rich households.

Continued.. Impact of NREGA

Possibilities:I. The poor household would not even undertake the full amount of NREGA work allotted to them. So

they may not even work for x labour days and would choose the amount of work z < x. labour market would vanish. Agricultural production in poor households would be less, and also the production in the rich household would be less, leading to an overall adverse production effect

II. The poor household would choose l for its own cultivation as they equal target income. So they would not supply any labour to the rich household but only employ the labour for self cultivation and do the full amount of NREGA work and hence reach their target income. Here alsothe labour market vanishes altogether

III. the poor would still like to supply some labour to the rich households at the prevailing wage. Now poor will either supply totally to the rich for lesser than target income or will balance to reach targeted income.

A poor household would supply less labour to the market than could be hired by the rich household. As a result there will be adverse production effect. Given that the NREGA wage is higher than the prevailing market wage, the poor household would always prefer to work for the NREGA scheme.

The origins of the NREGA lie in the drought relief programs of the 19th century which helped provide purchasing power to agricultural workers in drought stricken areas.

A Food-for-Work scheme would then solve both problems of selection and transfer of purchasing power to the needy

The problem today is much different. The shortage is no longer localized and therefore a mere transfer of purchasing power would not lead to a solution

Impact of NEREGA: Example

That is the short-term objective of NREGA: to create daily wage employment. On the long-term objective of productive assets creation, each district under NREGA is creating around 2000-4000 village assets a year. This is double of what has been created under EAS and the SGRY earlier. Around a million assets have been created in the last two years, a large number of them being water conservation works.

District Agro-ecological Zone

State

Siddhi Central Highlands

Madhya Pradesh

Nuapada Eastern Highlands

Orrisa

Analysis of these two districts will be used to assess the potential of the NREGA in providing food and livelihood security

NuapadaSiddhi

Siddhi

Characteristics

Dominantly hilly and has a significant forest cover at

about 40% of the total area of the district

Level of rural poverty, at 64.6%.

Drought Prone Area

Problem of managing water resources properly that forms

the basis of the scarcity of water in the area

Poor irrigation facilities

Lack of opportunity for the poor to access under ground

water sources

Large scale migration during the winter months of December till February or early March. The laborers come back during March-April for the harvest season of rabi crop and to prepare for the monsoons.

NEREGA Impact• The district reports a high number of water conservation

works, out of which road connectivity tops the list of works undertaken.

• Sidhi is known to be the district that has provided the maximum number of jobs within Madhya Pradesh. In fact, it has generated the maximum number of person days among all districts in MP

• on average, each household received around 55.17 days of employment since the beginning of the scheme. The figure from Siddhi is still much lower than the stipulated 100 days per household but more than twice that of Nuapada.

• the participation of the people in preparation of the annual plan Involving gram sabha in preparation. This is a very important step towards ensuring that the assets created under NREGA are suited to local needs and everyone in the village understands about the nature and reason for the works being taken up

Problem with NEREGA: • Panchayats are asking for more road construction works where average wages are higher than wages given under water related works.• Bad planning for the water conservation structures and a lack of maintenance are putting a large number of the assets created into disuse• Despite the large availability of work in Sidhi migration has not ceased completely. One probable explanations for this would be that that

educated individuals do not want to work under NREGA and would rather migrate in search for better opportunities.

With NREGA works concentrated in January and February as well as summer months, people now have the option to stay within the village instead of migrating outside looking for work.

Due to the alternate livelihood option provided by the NREGA, the dependence of the local communities on forest products had reduced

Prior to the NREGA, sources for irrigation were very few only one crop was sown in Rabi. Post NREGA, with the construction of ponds and tanks as well as wells on SC, ST land irrigation facilities have shown a marked improvement

Some parts of Kusmi block that are forested have actually become water surplus with the water harvesting structures repaired and construction of new ones

213 crores spent between 2006-08

Nuapada

Opportunities

• The availability of such a large amount of

resources presents a massive opportunity for

the creation of productive assets such as water

conservation structures. As the problem in

Nuapada is not one of less rainfall but irregular

rainfall, creation of proper water conservation

structures through the NREGA would have

immense potential to boost agriculture and rural

livelihoods.

• All this has forced several families in Nuapada,

especially in rural areas, to migrate to urban

areas in search of employment opportunities.

• In such a situation, an act like the NREGA has

the potential to transform the face of the rural

economy.

Impact of NEREGA in Nuapada

• Households received an average of 23.3 days of NREGA work over the entire period and the average daily wage received by respondents who

worked under NREGA in Nuapada is Rs. 59.8. This is less than the minimum wage assured by the state of Orissa at Rs. 67.

• Further, as already mentioned, Nuapada had a predominantly large number of workers working on rural connectivity projects.

• Most of the people were involved in one of three kinds of work, road connectivity works, water conservation and harvesting and renovation

of traditional water bodies. Surprisingly, despite the local communities’ extreme need for water conservation, water harvesting and drought

protection works, such works apparently received only second preference.

• Due to the remuneration being easily calculable in road works the implementing agencies preferred these over water conservation

• The performance of the district in terms of providing support facilities was again poor. The most common support facility provided was

drinking water

• Given the low percentage of work provided in the

district it is no surprise that the rates of migration have

not come down at all.

• At best, a small proportion of the population has

deferred their migration to work for a few days under

NREGA

• Availability of fuel wood and/or fodder had increased somewhat due to the NREGA works undertaken

• Crop Diversification impacting sustainability and livelihood opportunities of the rural population in an agriculture dominated region

• Increased Water Availability

21.77 crores was spent between 2006-2008

Achievements

Participation of women in NREGA

Continue….

Public works done by local peoples

Reduced corruption

Increased urgency

Importance given to natural resource management and environment protection

Setup of Labour Banks

Develop skills of the workers

Panchayats to teach Panchayats

Short Comings

Minimal participation from SC’s and ST’s

One of the lowest

Problems

“At a relatively small cost (currently 0.3 per cent of India’s GDP), about 50 million households are getting some employment at NREGA worksites every year.” The 0.3 per cent of the GDP of a country like India is by no means a small amount and it begs the question if any fund at all should be used to generate what the letter describes as “some employment.” NREGA belittles the worth of the worker by doling out cash for unproductive labor. It also discourages skill development which alone can lead to long-term employability of the rural poor.

In a country like India, where poverty and unemployment patterns are very diverse, one single national employment program is unlikely to succeed. For instance, a state like Kerala, where the unofficial minimum daily wage for an unskilled labourer hovers around Rs 500, attracts thousands of workers from the eastern states like Odisha, West Bengal and Bihar and also the north eastern States. The NREGA in Kerala is almost entirely limited to unskilled women as the wages are too low to attract men. To some extent, this is also true of other states. What is more, these women are mostly employed for clearing the grass from the verge of city roads or wild vegetation from the suburbs and villages. Come to think of it, in a green state like Kerala, such NREGA jobs can be perennial and wasteful as the vegetation and grass grow back after a couple of weeks. These types of activities do not result in asset creation, which was among the objectives of NREGA

Way Ahead

Monitor the programme effectively

Village level resource planning and development

Other development programs like Bharat Nirman should sync with NREGA

From quantitative employment generation to sustainable development through asset building

Representatives

Proper election and training

More power to Panchayat Raj

References

[1]. UNDERSTANDING NREGA: A SIMPLE THEORY AND SOME FACTS, Diganta Mukherjee, Uday Bhanu Sinha; Working Paper No. 196; Centre for Development Economics Department of Economics, Delhi School of Economics

[2]. An Assessment of the Performance of The National Rural Employment Guarantee Programme in Terms of its Potential for Creation of Natural Wealth in India’s Villages, Centre for Science and Environment Report Prepared for the Ministry of Rural Development Government of India, September 2008

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