Is repurposing MGNREGA the right way forward?

MGNREGA is not the best instrument to help MSMEs in urban and rural areas. Mixing up its objectives can only lead to chaos with no value addition

Newspaper reports suggest that a Group of Ministers (GoM) on employment, whose report is not yet available in the public domain, has made draft recommendations including some on MGNREGA. Their suggestions include merging MGNREGA with skill development programmes and using its funds to provide a wage subsidy for small and medium-size enterprises (SMEs) in urban areas as well. Further, work in factories and construction sites may also be treated as employment under MGNREGA.

The COVID-19 pandemic and its impact on the economy, especially on migrant workers and MSMEs, could well be guiding such recommendations. A thorough understanding is required of these recommendations as the proposed changes are likely to radically restructure MGNREGA. This is even more so given the finance minister’s announcement of an additional Rs 40,000 crore for MGNREGA in the current fiscal, taking the total allocation above Rs 1 lakh crore.

There can be no debate on the need for support to MSMEs, as also the need to create gainful employment for those who may want to work in them. But is the MGNREGA the best instrument to achieve this or should this be done through another route? The MGNREGA was enacted because of the realisation that the spectacular economic growth achieved after economic liberalisation had left out many people from its sweep, particularly in the rural areas. The share of workers in agriculture has been much higher than its share in national income for many decades, indicating that more and more people in the sector are under-employed. This is most underlined in the tribal drylands of central India, a region with low irrigation and high dependence on rain-fed agriculture, where the phenomenon of landed labour — of households migrating to participate in the labour market despite owning agricultural land — is most glaring.

The MGNREGA was enacted to offer lean-season employment households that were seeking it and to create basic infrastructure to put livelihoods and agriculture on a sound footing in these areas. The Act has by and large succeeded in meeting its core objective of providing employment. While the objective of creating quality infrastructure has not been realised to its full potential, it is nevertheless true that the MGNREGA has been helpful to small and marginal farmers and rain-fed farmers like no other government programme. It has created water storage structures like earthen dams and ponds; soil and water conservation measures; tree cover, drinking water wells and roads for the community. All these works have added to farm productivity and the income of some of the poorest farmers and have created pathways out of poverty for them. Many studies have established the utility of the assets created for farmers.

There are many examples of such work across the country, particularly when government and civil society have joined hands. These are precisely the kind of small investments that are needed in the lands of small and marginal tribal farmers in central India, which will reverse their dependence on distress sale of their own labour. This will turn these geographies from passive recipients of doles to active contributors to growth. And this is precisely the kind of investment which will be totally lost to the areas which are in dire need of it if the scheme is even partially converted into a wage subsidy for MSMEs, that too in urban areas.

The general perception about MGNREGA being a dole for “digging pits and filling them up” — that is, largely unskilled earthen or “kaccha” work — has contributed to periodic suggestions for converting it into a skilling programme or to create more “pukka” infrastructure from it. The reality, however, is that the MGNREGA works require immense skill to plan and implement and also represent a huge convergence between scientific methods and traditional people’s knowledge. It is also important to recognise that the MGNREGA at its best stipulates that the planner, the labourer and the user of the infrastructure are the same people, which assures both location-specific relevance and quality.

Given the coronavirus pandemic and the pressure on livelihoods, and the spectre of return migration from cities to villages, a higher allocation as announced by the finance minister is a welcome move. However, it is our considered view that it should be used to create work and assets in rural areas for rural people. To cover return migrants, more job cards could be issued — as is already being done in many states.

There is strong evidence to suggest that the average person-days and the demand for work recorded by the MGNREGA nationally in the best of times is less than the actual demand for such work. This is because state capacities, especially in very poor areas, inhibit the absorption of more MGNREGA funds and effectively end up rationing demand for work. Wouldn’t tying wage subsidies to MSMEs with MGNREGA then take us further away from fulfilling this unfulfilled demand and also deny these areas infrastructure they badly need? If anything, the pandemic underlines the need to deepen these capacities, not only for the MGNREGA and livelihoods, but also in other sectors such as health and nutrition. Also, would not tying up MGNREGA funds for wage subsidies to the private sector in urban areas open up severe problems of measurability and corruption?

For employment in urban areas it would be better to consider the option of creating an urban employment guarantee, even though it does open up many issues of how it will be implemented. For protection of MSMEs, apart from the economic packages already announced by the government, it would be better to put money in the hands of the people through cash transfers to stimulate demand. Given the fact that the pandemic has put many livelihoods on the brink, there is need to focus on direct cash and benefit transfers for the most vulnerable for a few months at least. For the protection of migrant workers, we will need to think of registration of such workers in cities and providing basic health benefits, along with worksite facilities and social security such as “one nation one ration card”. Restructuring MGNREGA might dilute its basic purpose and may not serve the MSMEs either.

This brings us to another suggestion of creating MSMEs in rural areas run by gram panchayats and providing wage subsidies to them through the MGNREGA. A laudable objective but entrusting this work to panchayats is neither fair nor feasible. We have hardly invested in the capacities of panchayats for them to carry out their governance functions properly. To expect them to run enterprises is a tall ask and one which is programmed to fail, and for which they will be blamed. Further, why should wage subsidies for such enterprises come from the MGNREGA?

In any public policy design we need to acknowledge that as the purpose and type of support changes so does the implementation architecture. Mixing up objectives can only lead to chaos with no value addition.

Kulkarni is with the National Consortium of Civil Society Organisations on MGNREGA. Ambasta is CEO of Bharat Rural Livelihoods Foundation