India's Rural Employment Act offers wage employment to rural households

India’s Mahatma Gandhi National Rural Employment Guarantee Act¹ (MGNREGA, 2005 – also known as NGREGA) is the world’s largest public works programme. The Act aims to provide at least 100 days of guaranteed wage employment in a financial year to every rural household whose adult members volunteer to do unskilled manual work. It views employment as a right, legally binding the government to provide employment within 15 days of an official claim. In 2020-21, NREGA provided employment to 76 million rural Indian households, a significant proportion of which went to women and people from marginalized communities.

At inception, NREGA was a pioneering law designed with the larger vision² of not only providing rural employment, but also putting local government structures to work to improve rural livelihoods, and empower women and marginalized communities, while also building productive assets and transforming the rural landscape.³ It was part of the then-government’s efforts to redress rural poverty through the provision of rural employment and by extension, social protection.⁴ One of the goals of NREGA’s designers was to develop the political capacities of poor and marginalized people.⁵ The scheme is a demand-driven programme designed to act as an insurance mechanism against shocks such as the COVID-19 pandemic.⁶

Any person above the age of 18 and resides in rural areas is entitled to apply to work for as many days that they request, subject to a limit of 100 days per household annually. Within 15 days the applicant is provided with work. Where possible, work is provided within a radius of 5 kilometers of the applicant’s residence. If work is provided beyond 5 kilometers, travel allowances have to be paid. Workers are entitled to the statutory minimum wage applicable to agricultural laborers in a state. Workers are paid weekly, and not later than a fortnight. Payment of wages is made directly to the worker in the presence of independent persons of the community on pre-announced dates. If work is not provided within 15 days, applicants are entitled to an unemployment allowance: one third of the wage rate for the first 30 days, and one half thereafter.⁷

Cost

100 percent of the unskilled labor cost and 75 percent of the material cost of the programme is borne by the central government.⁸ The government allocated around Rs. 1 lakh crore (approximately INR 1 trillion or USD 12 billion) to the program in 2021 but has since reduced funding to 73,000 crore (approximately INR 730 billion or USD 9 billion) for 2022-23. This is considered inadequate to meet demand.⁹

Assessment

A survey¹⁰ of four states conducted at the end of 2021, found that NREGA made a significant difference during the pandemic, protecting the most vulnerable households from significant loss of income. Increased earnings from NREGA compensated for between 20 and 80 percent of income loss across the areas surveyed. Moreover, in 2020-21, MGNREGA provided employment to an unprecedented 76 million rural Indian households.¹¹ In 2019-20, it provided employment to 28 percent of rural Indian households¹² and has increasingly emerged as an invaluable employer of last resort.

NREGA has been successful in offering an alternative, stable and supplementary form of income to the most marginalized communities. It has reduced inequality for women and marginalized communities. In the southern states of Karnataka, Kerala, and Tamil Nadu, more than 80 percent of NREGA¹³ workers are female. One reason for this is the payment of equal wages between men and women. Despite the lack of any explicit targeting, more than 35 percent of NREGA workers¹⁴ in the last decade came from marginalized communities particularly Scheduled Caste (Dalit) and Scheduled Tribe (Adivasi) households.

However, assessments indicate its implementation in the last 15 years has been short of its potential as an employer of last resort. On average over the last decade, each NREGA household received only 45 days of work throughout the year. Moreover, payment is often delayed,¹⁵ though women continue to prefer NREGA work due to a range of social and economic factors. (For example, many women prefer to work closer to home due to the dangers of travel, as well as childcare responsibilities).

In addition, there has also been an undermining of NREGA¹⁶ since the National Democratic Alliance (NDA) government came to power in 2014. It has reduced NREGA coverage¹⁷ and funding (in terms of proportion of GDP) compared to its implementation during the previous United Progressive Alliance (UPA) coalition government, which enacted the legislation.

Tags

• Asia & Pacific
• Gender
• Income & Wealth
• India
• Labor
• Low-Income Groups
• Middle-Income Country
• Race & Ethnicity
• Redistribution
• Rural Areas
• Social Protection