National Rural Employment Guarantee Act (NREGA)

Report submitted in the partial fulfillment of the course Business, Government & Society

Submitted By: Deepak Joshi Kruthika M Praful Kularkar (1011307) (1011324) (1011341)

Shubhangi Satpute (1011357) Virendra Meena (1011374)

Table of Contents
Executive Summary .......................................................................................................................................................... 3 Overview.......................................................................................................................................................................... 4 Salient Features............................................................................................................................................................ 4 Social Impact of NREGA ................................................................................................................................................ 5 Roadmap to NREGA ......................................................................................................................................................... 6 Drafting of NREGA ........................................................................................................................................................ 6 NREGS Barriers and Evolution .......................................................................................................................................... 7 Effectiveness and Improvements...................................................................................................................................... 9 Lessons and Takeaways .................................................................................................................................................. 10 Appendix A..................................................................................................................................................................... 10 Appendix B..................................................................................................................................................................... 13

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Executive Summary
National Rural Employment Guarantee Act (NREGA), 2005 is a landmark act that has been enacted after sixty years of independence (Act notified on 2/1/2006). The need for a social security net in India had been largely unmet since Independence. There was no protection from social injustices such as poverty, unemployment and inequality for the majority rural population in India. Many Government-launched developmental programmes met with initial success but lost steam in the long run. The major reason for this being that social protection or the need to provide social security to needy citizens was considered an act of philanthropy by the Government. It is here that the NREGS, became a path-breaker as it succeeded in changing this notion by viewing social protection as a right of citizenship. The concept of guaranteed social minimum where entitlement extends beyond just cash and food transfers, and that is based on citizenship and not philanthropy, took root. The main premise for the legislation was to provide a social security and livelihood security net to rural poor especially during the non crop lean season so as to forbid them to fall below to levels of the designated poverty line. This Act provides a guarantee for a minimum of one hundred days of employment for all households in rural areas across India in manual work, if demanded. The act, and consequently the scheme is endowed with the multi facets of good governance like participatory approach, transparency, accountability, right to information, social audits etc which play a pivotal role maneuvering the operational part of the act and make it a successful public initiative in employment provisioning. The scheme has brought alterations in the existing power structures at various levels in Government officials, and empowering rural society due to its self-targeting feature. It is quite natural that a public policy of such scale is bound to have various externalities at various levels at least during first few years of its implementation across the country and same is true for NREGA. Infrastructural issues cropped up, like corruption, siphoning of funds by the BDOs and Sarpanchs, and caste discrimination. Nevertheless, the scheme continuously evolving according to the dynamic needs of the society can be considered a significant success given the tangible changes that it has effected at the grassroots level. NREGS has been slowly but surely, bringing about encouraging improvements in the area of womens empowerment and functional literacy in rural areas. The following exhibit gives a big picture view of the progress of NREGS over the years.

http://www.ipc-undp.org/pressroom/files/ipc130.pdf

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The scheme is overall an excellent case to understand the dynamics involved in conceiving and implementing a welfare scheme of such a large scale as the NREGS. The linkages that occur at various levels among different stakeholders and the importance of powerful interest groups to drive social ideas is a major take-away from this whole exercise.

Overview
National Rural Employment Guarantee Act (NREGA) is the flagship welfare programme of the UPA Government that directly touches lives of the poor and promotes inclusive growth. The Act aims at enhancing livelihood security of households in rural areas of the country by providing at least one hundred days of guaranteed wage employment in a financial year to every household whose adult members volunteer to do unskilled manual work. Notification of the National Rural Employment Guarantee Act came in September 2005 and was launched on February 2, 2006. It was renamed as Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) on October 2, 2009 as a humble tribute to the Father of the Nation. 2 It marked a paradigm shift from the previous wage employment programmes with its rights based approach that makes the Government legally accountable for providing employment to those who demand it. NREGA is the first ever law internationally, that guarantees wage employment at an unprecedented scale. The primary goal of NREGA is to create a strong social safety net for vulnerable groups by providing a fall-back employment source, when other employment sources are scarce or inadequate. It strives to strengthen the natural resource base by providing work focused on water conservation, land development and drought proofing, thus reducing migration by rural poor households in the lean period. It acts as a model of governance reform anchored on the principles of transparency and accountability by serving as growth engine for sustainable development of agricultural economy.3

Salient Features
The programme was unique in many aspects that helped to achieve the support of various stakeholders. Some of its salient features NREGA are: y Wholesome Package. It is an employment programme coupled with a rural upliftment scheme to create social equity, an empowerment scheme and a crucial public investment method to create durable assets. Strong Legal Framework: The State is made legally binding to satisfy the right to work and wage payment within 15 days as per this scheme. State Governments are liable to pay unemployment allowance to wage seekers if it fails to provide employment within the stipulated time. 4 Demand Driven: Resource transfer under NREGA is based on the demand unlike the other employment programmes and thus provides another critical incentive to states to leverage the act to meet employment needs of the poor.

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http://www.gktoday.in/2009/07/national-rural-employment-guarantee-act.html http://www.slideshare.net/ginosmit/nrega-national-rural-employment-guarantee-act-guidelines-eng-presentation 4 http://www.scribd.com/doc/2176739/Two-Years-of-NREGA

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y y

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Decentralized Planning: The programme strengthens decentralization and deepens the processes of democracy by giving a pivotal role to the Panchayati Raj Institutions in planning, monitoring and implementation. Women Empowerment: At least one-third of the beneficiaries shall be women who have registered under the scheme making them independent and increasing their overall awareness. Transparency and Accountability: Social audits by the Gram Sabhas, mandatory disclosure of muster rolls, public accessibility of all documents and account, regular updating of job cards infuses transparency and accountability in governance. Grievance Redressal Mechanism: The scheme lays emphasis on responsive implementation process. All accounts and records related to the scheme are available for public scrutiny.5 Information and Communication Technology (ICT): Centralization of data because of its wide scale has been resolved through web enabled Management Information System.

Social Impact of NREGA

NREGS, became a path-breaker by changing the notion of viewing social protection as a right of citizenship. The concept of guaranteed social minimum where entitlement extends beyond just cash and food transfers, and that is based on citizenship and not philanthropy, took root. Rural Empowerment: Guarantee, says the notable Economist Mahendra Dev, is the key word in NREGA. For the first time, it makes it possible for the rural people to demand that they are to be given a job, even if it is only at the floor rate of wages. The NREGA is also an outstanding example of how the RTI Act can be woven into the fabric of the delivery system and the whole legal and governance paradigm. By providing competitive but minimum wage rates with 100% compliance to all labour laws and benefits, NREGS has succeeded in eliminating 2nd tier contractors who often exploit labourers by either under-paying them or flouting labour laws and exploiting the poor.6 Impact on Women: The Act mandates 33 percent participation for women. The Scheme has till 2009, attracted participation of about 49% from women as compared to previously implemented Jawahar Rozgar Yojana that had around 20% participation of women. The highest percentage has been observed in Tamil Nadu (80%) and Rajasthan (67%). Clearly, womens empowerment, one of the auxiliary objectives of NREGA, is being met with stellar success. About 79% of the women collect their wages on their own and keep it to themselves.7 Impact on other Marginalized Groups: Self targeting in nature, the Programme has high levels of participation of marginalized groups like SC/ST (57%) till 2009. The scheme has managed to create awareness amongst remote tribal areas. This increased awareness is bound to have far-reaching effects in the long run. Impact on the social fabric of society: A major success for NREGS is the fact that it has brought down the levels of distress migration from rural to urban areas. As a result, the net standard of living has seen an increase across the social spectrum in both rural and urban areas. Financial Inclusion of the poor: Besides the legal guarantee of 100 days of work in a financial year, NREGA households are also assured of basic minimum income per day. Post-NREGA, there has been a revision of minimum wages across the country in last three years, and the national average daily wage rate has increased
5 6

http://jurisonline.in/2009/08/the-national-rural-employment-gurantee-act-nrega-2005-and-its-impact-on-economic-development 7 http://www.hinduonnet.com/fline/fl2219/stories/20050923005402200.htm http://knowledge.nrega.net/777/1/NREGA-PPT.pdf

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from Rs. 75 to Rs 80 in FY08-09. Higher incomes are expected to raise household savings, accelerating economic diversification and household investments in human capital.8 Impact on Agriculture & Rural Economy: Evidence through independent studies indicates enhancement of agricultural productivity (through water harvesting, check dams, ground water recharging, moisture content improvement, and micro-irrigation), stemming of distress migration, increased access to markets and services through rural connectivity works, supplementing household incomes. The completion of the various development schemes has increased the fertility of agricultural lands and increased the water table too helping farmers who are now comparatively less dependent on the monsoons. Functional Literacy Development: The Government of India United Nations Development Programme (GoIUNDP) launched a project Support to Operationalization of the NREGA, the Ministry of Rural Development and UNDP are working towards improving functional literacy of the target population through various schemes such as films to train stakeholders. This programme is currently running functional literacy interventions in 13 villages.9 This has met with significant success especially among women who are now able to comprehend the entries on the entries on their job cards and bank books and be better informed.

Roadmap to NREGA
The need to evolve a mechanism to supplement existing livelihood sources in rural areas was recognized early during Development Planning in India. Short term wage employment programmes were started as pilot projects in early 60s and were translated into a full-fledged wage-employment programme in 1977 in the form of Food for Work Programme (FWP). Impetus for the NREGA came from two sources. The first comprised social movements such as the Right to Food that had been agitating for ending hunger by providing employment guarantees to the poor. The second and most direct influence came from the threedecade-long track record of the Employment Guarantee Scheme (EGS) in Maharashtra.10 EGS in Mahrashtra originated as relief programmes in the wake of a severe drought in the early 1970s. The EGS inspired a number of programmes, starting with the National Rural Employment Programme in the 1980s and ending with the Sampoorna Grameen Rozgar Yojana, which, along with the National Food for Work Programme was merged to launch Employment Guarantee Programme under NREGA.

Drafting of NREGA
During 2004 elections, Congress included guaranteed employment as one of the programmes in their election manifesto called common minimum programme. After the elections, the bill for guaranteed employment was drafted by National Advisory Council (NAC) consisting of members like Jean Dreze, a Belgian born economist, at the Delhi School of Economics and Aruna Roy, Magsaysay award-winning social activist, who were main proponents of the act. However, when bill passed hands to the Planning Commission there was major opposition for the guaranteed employment clause, arguing that it would make implementation of the programme too costly and would increase the fiscal deficit subsequently. Also, most of the Congress ministers had reservations about the clause. This led to omission of the guaranteed employment clause from the bill and the modified bill was introduced in Parliament on 21st December 2004.
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http://nrega.nic.in/Call_Paper.pdf

The HINDU Business Line Friday September 3, 2010, Subsistence with Guarantee by Rahul Banerjee 10 www.empowerpoor.org/.../Status%20of%20NREGA%20in%20PACS%20states.pdf

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Exclusion of the clause resulted in vehement protest from activists and proponents of the act. Jean Dreze, Aruna Roy, NGO members and other activists tried to persuade government by various measures like holding a signature campaign or gathering support from BJP and left parties. Meeting with senior congress leaders they tried to justify the need for demand driven employment. The persuasion by activists for more than two months resulted in reintroduction of the bill in Parliament in August 2005. After much of debate, the consensus was reached. NREGA would retain the guaranteed employment for 100 days and not a complete year as was proposed initially. Also, the programme was restricted to rural India only, neglecting urban poor. The bill was passed on 23rd August 2005 and after the Presidents approval it was enacted in February 2006. The scheme was first introduced in 200 of the most backward districts of the Country under phase I. It was implemented in an additional 130 districts in Phase II 2007-2008. The Scheme was further extended to the remaining 274 rural districts of India from April 1, 2008 in Phase III.11

NREGS Barriers and Evolution

Since its inception, massive public funding has been pumped into NREGS. As on 31 March 2010, the Ministry of Finance has released INR 784 billion under NREGS, and if the 2010-11 budget is included, the figure jumps to INR 1.185 trillion, making it the worlds largest social welfare scheme. Because of its large scale and uncertainty, opponents criticized it for unnecessarily increasing the fiscal deficit of the country. The idea of NREGA itself has been accused of being just an income redistribution rather than creator of any durable rural infrastructure. Even the roadmap for NREGS implementation hasnt been an unqualified success. During its initial phase, it had to face opposition from the class of rural contractors since the whole scheme bans the contractors in the process. Social issues such as illiteracy, caste based discrimination, resistance from elites in villages and gender inequality acted as hindrances, crippling the execution of the programme in the early
phase. Over the last four years, implementation trends do not seem to vindicate the basic objectives of the act. There

has been lack of technical and administrative workforces to monitor, execute and evaluate the work done as part of the scheme. According to a survey 34% of staff didnt get proper training. Demand for basic amenities like safe drinking water, first aid box and shades for workers have not been fulfilled at various places. Distribution of job cards has not been up to the mark; percentage of issued job cards varies across the states. Also denial of registration to single-women headed households, physically challenged individuals and discrimination based upon caste has been noticed in some states. Initially wage payments were based on schedule of rates (SOR) which valued the work done by the individual based on standards set during contractor era. This didnt provide those true wages for their work. Like any other government based scheme corruption has led to its deterioration. Job cards have been snatched from the poor people and given to the elite in the villages. At many instances work sanctioned as part of the scheme has been of personal interest to the head of the villages. Sometimes less motivated people give half of their wages to the job evaluators and get away with the work. Delay in wage payments is another big issue that hampers its effectiveness. According to a recent survey, payments were never delayed in 42.78%

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http://www.gktoday.in/2009/07/national-rural-employment-guarantee-act.html

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of the 1000 surveyed villages, sometimes delayed in 45.52% of the villages and always delayed in 3.39% villages.12 Principles, such as accountability of Panchayati Raj Institutions, stakeholder participation and social audits are inherent in the NREGA architecture to overcome these issues, but they are yet to be effectively put into place. However, with time the whole scheme has been evolving and the Ministry of Rural Development has taken some prominent steps to overcome some of these barriers that came across as a barrier to its effective implementation. Building Capacity to implement a demand driven scheme: Training sessions have been held with the officials of the line departments to ensure clarity about the execution of the work under NREGA. Interactive sessions have been organized to remove their doubts and to bring transparency in the execution of works. Thus far, 6.2 lakh PRI functionaries and 4.82 lakh vigilance and monitoring committees have been trained (up to July'08).13 The Central Government is also providing technical support in key areas of communication, work planning, IT, social audits and fund management at all levels of implementation to the state governments. Wage payment using banks and post offices: Government has attempted to make the process of wage payment more transparent through use of banks and post offices. Every person as part of the scheme has to open a bank account in the nearest government sanctioned branch. This ensures two things; first it separates the implementing agency from the payment agency; second, only people listed on muster rolls are entitled for payments. Biometric ATMs are the next step taken by the government which will again help in alleviating problem related to wage payments. Use of technology to increase accountability: The Large scale of operation of NREGS makes it difficult to maintain the data on paper. Hence the government has implemented MIS to centralize the data so that the effectiveness of the programme can be gauged in a better way. MIS places all critical parameters such as shelf of projects, sanctioned works, wage payments, number of days of employment provided and works under execution online for easy public access. Data engineered software has been designed for cross verification of records and generation of alerts to support proactive response by management. Smartcards/hand held devices has been provided to people, which carries all the information of the workers and captures all the transactions like registration, demand of work, allotment of work, payment through branchless banking, etc. Overcoming logistics issues with audits: Logistic plans have been prepared to ensure regular checking of works in the villages by the officials. Initially gram Panchayats and line departments used to execute the estimation of the works on CSR basis and money was being released without any appraisal. Hence, a technical wing headed by executive engineers was formed; which checks all the estimates prepared by the Gram Panchayats and line departments under NREGA guidelines and ensure its execution properly. In 2009-10, 260 National Level Monitors and Area Officers have undertaken field visits to each of the 330 Phase I and Phase II districts at least once to monitor and evaluate the work.

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http://64.74.118.102/2010/01/28213720/Survey-shows-most-villages-are.html India Year Book 2010, Government of India Pub. Page no.848-850

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Recently a committee of 6 members was created by the Prime Minister to fill the loopholes in the existing Act and study the various aspects affecting the execution of the programme. A senior official of the Ministry said that the government is doing this to create a framework for NMNREGA-2.

Effectiveness and Improvements

NREGA as an innovation has played a critical role in providing a measure of inclusive growth which is important for sustainable development. It not just a scheme to provide people with monetary benefits but it has given them a right to work, to re-establish the dignity of labour, to ensure their economic & democratic rights and entitlements, to create labour intensive infrastructure and assets, and to build the human resource base of our country. It has energised, mobilised, empowered, and delivered to Indias poorest and most marginalised rural people. Its biggest role as a creator of social security net for the marginalized rural people has been fruitful to an extent. It has acted as an entry point for their active participation in Gram sabhas and other institutions of local governance and has helped them raise their social status. It has also led to formation of worker unions in villages, thus helping in increase of our social capital. It has enhanced purchasing power among workers, increasing their overall standard of living. It is too early to see drastic transformation but its potential to do so is undoubtable. It has opened up a unique legal space for the poor, with a consequent, legally-mandated obligation on the administration to deliver. Like RTI, it holds bureaucracy directly accountable for their inconsistencies. Expenditure done on the work and workers has to be put on the website. At some places Janata information Systems (JIS) has been created and walls of government buildings have been painted with the details of the ongoing projects. Wage payments through NREGA have initiated the biggest financial inclusion drive, with the requirement that all wage payments be made through banks and post offices. More than 5.7 crore savings bank accounts have been opened in rural areas with banks and post offices under NREGS.14 It also assures an adequate, realistic provision for administrative expenses, at around 6 % of total costs. It helps panchayats become properly resourced so that there is no excuse for the failure to carry out all transparency measures and put an effective grievance redressal mechanism in place. When it comes to rural development, NREGA has been able to create a difference because of its magnitude and scope of execution. According to Jean Dreze, one of the visionaries of NREGA, the technical standards of the work involved in NREGA are low but still it has been productive. They can improve the technical standards by providing better scientific support, for instance, by developing creative blueprints for labour-intensive work. Because of NREGA, farmers have come back to the land they long abandoned in an atmosphere of renewed hope and have spurred their investment in land. Thus, the Act has led to an economic development to a marked extent. Improvements can be made by expanding the scope of the work done under NREGA. Educated unemployed people can be appointed as worksite supervisors, technical assistants, record keepers, social auditors, etc. There is a strong and immediate need to formulate rules which include guaranteeing grievance redressal in seven days, social audit twice a year, and mandatory transparency and proactive disclosure of work and wage payments Worksites for NREGA can also be used for improving the Healthcare, child nutrition care in villages which remains a severe problem for the country. Local NGOs should be made an active part of
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http://www.financialexpress.com/news/bank-account-must-no-cash-payment-for-nrega-wage/416726/

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the program as they might have a better understanding of the needs of the people and can help in implementing NREGA by overcoming its existing barriers. Due recognition should be given to groups who have done well various projects under NREGS which will help improve the human development index of India. In order to optimize the multiplier effects of NREGA, the Ministry has set up a Task Force to look at the possibility of convergence of programmes like National Horticulture Mission, Rashtriya Krishi vikas Yojana, Bharat Nirman and Watershed Development with NREGA. These convergence efforts will add value to NREGA, works and aid in creating durable efforts and also enable planned public investments in rural areas. The success of the NREGA, however, will depend on peoples realization of the Act as a right. Effective levels of awareness and sustained public pressure are crucial to ensure that the implementation problems are addressed and the objectives are met.

Lessons and Takeaways

This study of NREGS has illustrated to us, as to how great social ideas can be successfully incorporated into

Public Policy if they find the right support. The idea of Employment Guarantee as a means of social safety was a combined brainchild of visionaries such as Jean Dreze, Aruna Roy and Madhav Chavan. Their ideas were met at the right time by the UPA which promised guaranteed employment in its Election Manifesto. This confluence of ideas led to formation of a powerful interest group with common goals. Any Organizational programme has to grow with the five Rs namely, Risk, Renewal, Regulation, Relationships and Reputation15. NREGS has continuously evolved since NREGA to NREGS and now MNREGS. It is continuously adapting to dynamic societal needs and externalities. This constant refining is the reason for the schemes significant success, which has come in for great appreciation from many frontiers. Another major takeaway has been the huge scale of the programme and the huge number of stakeholders involved at various stages. Though this programme did not meet with any major opposition from a policy perspective, its implementation was riddled with quite a number of barriers. The best practices from various programmes have been incorporated to address the concerns of certain sections and even in the current period of time, MNREGS is constantly evolving. Thus, the power of collaborative policy making to build social capital and the need to have a powerful interest group at the drivers seat is well understood.

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Stanford Social Innovation Review, Summer 2007

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Appendix A
600 500 400 Funds by States 300 200 100 0 2006-07 2007-08 2008-09 2009-10 Central Release (In Rs Billion)

A.1 Budget Allocation for NREGA from 2006-10

Work Details -2009-10

Water conservation 20% Irrigation Facilities 6% Rural Connectivity 7% Other Land Activities Development 1% 6%

Remaining Work 60%

A.2 Work differentiation under NREGA 2009-10

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2006-07 2007-08 2008-09 2009-10 Others Women STs SCs

A.3 Inclusion of marginal groups in NREGS from 2006-10

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A.4 State-wise complaints against NREGA16

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Appendix B
References: 1. http://www.gktoday.in/2009/07/national-rural-employment-guarantee-act.html 2. http://www.slideshare.net/ginosmit/nrega-national-rural-employment-guarantee-act-guidelines-engpresentation 3. http://www.scribd.com/doc/2176739/Two-Years-of-NREGA 4. http://jurisonline.in/2009/08/the-national-rural-employment-gurantee-act-nrega-2005-and-its-impact-oneconomic-development 5. http://www.hinduonnet.com/fline/fl2219/stories/20050923005402200.htm 6. http://knowledge.nrega.net/777/1/NREGA-PPT.pdf 7. http://nrega.nic.in/Call_Paper.pdf 8. The HINDU Business Line Friday September 3, 2010, Subsistence with Guarantee by Rahul Banerjee 9. www.empowerpoor.org/.../Status%20of%20NREGA%20in%20PACS%20states.pdf 10. http://www.gktoday.in/2009/07/national-rural-employment-guarantee-act.html 11. Stanford Social Innovation Review, Summer 2007 12. http://hoshiarpur.nic.in/Transparency_in_NREGS.htm 13. http://www.mainstreamweekly.net/article1256.html 14. http://ibnlive.in.com/news/nrega-money-scam-hits-andhra-pradesh/128634-3.html 15. http://infochangeindia.org/201002048150/Poverty/News/Lapses-in-NREGA-implementation-admitted-onanniversary-day.html 16. http://www.financialexpress.com/news/bank-account-must-no-cash-payment-for-nrega-wage/416726/ 17. http://www.scribd.com/doc/2176739/Two-Years-of-NREGA 18. http://www.scribd.com/doc/3043853/NREGA-BANK-PAYMENTS 19. India Year Book- 2010, Government of India Publications

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