Can MGNREGA be a tool for post-COVID-19 rural recovery

Agriculture is the least-affected sector of the economy. It is poised to gain and lead economy’s revival process

By Shilp Verma
Published: Thursday 09 July 2020

‘Year of COVID-19’— this is how 2020 is probably going to be remembered. It has been more than six months that the novel coronavirus disease has been dominating public discourse, news cycles, internet searches and even geopolitics.

As on July 8, 2020, India had more than 0.7 million cases. It was among the top three world economies worst hit by the pandemic.

The Union government in March announced a country-wide lockdown to contain the spread in March. The wisdom and effectiveness of the lockdown will be long debated and discussed, but there’s little doubt that the economy will need to be pulled back on track through a combination of public and private initiatives.

The Union government announced Rs 20 lakh-crore recovery package to revive the economy; one small component of this was allocated for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) as well.

Data on reported cases has shown that so far, COVID-19 is largely an urban phenomenon. The districts that are home to India’s largest 25 cities account for less than 10 per cent of the country’s population, but more than 60 per cent of the total confirmed cases.

This means that other than temporary disruptions in market access and some resultant price volatility; India’s agrarian economy has been somewhat COVID-19-immune.

In any case, agriculture is arguably the least-affected sector of the economy; seen as the only ‘bright spot’ in an otherwise dismal economy, poised to gain and likely to lead the economy’s revival process.

The bumper Rabi harvest is a good sign, but the one aspect of agriculture that might be adversely affected is the farm-labour economy.

There has been large-scale reverse migration of workers from urban and rural work destinations. This will, at least in the short run, add workers to the rural workforce.

In the short run, wages are likely to remain sticky and we will witness a significant increase in demand for MGNREGA work, especially in source areas which are invariably the poorest. If implemented well, MGNREGA can play an important role in making sure that workers find work and contribute to improving agriculture sector’s outlook.

MGNREGA interacts with local labour markets in four different ways.

Type I: Misfit Where local wage rates are higher than MGNREGA wages, field studies found MGNREGA to be a misfitwith little or no community interest and action. This was often found in peri-urban and industrial districts where labour had easy access to better paying work. Agriculture is either highly mechanised or relies heavily on migrant labor.
Type II: Insignificant When MGNREGA wages were higher than local wages, but the scale and scope of MGNREGA implementation is small vis-à-vis the size of the local labor economy, MGNREGA becomes insignificant. This is usually seen where the local administration and/or local PRIs are unable to effectively generate demand for MGNREGA work, despite favourable conditions.
Type III: Potentially Significant In this case as well, MGNREGA offers higher wages than local wages and this creates a demand for MGNREGA work. However, despite strong demand pull, bottlenecks in the district / block administration or inability or local PRIs prevents effective MGNREGA execution which is characterised by corruption, poor quality of assets and delays.
Type IV: Significant When MGNREGA wages are higher than local wages, local administration is proactive and village leaders use MGNREGA to demonstrate their abilities and build political capital, MGNREGA has significant and positive impact on wage rates and work conditions; and leads to the creation of durable assets that – in the long run – can contribute to crowding out the demand for MGNREGA.

Source: Verma and Shah (2018)



In type-I areas, reverse migration might lead to labour shortages and farming systems are likely to either respond by increasing mechanisation or shifting to less labour-intensive cropping systems. Some indication of this is evident from the rapid recovery in tractor sales.

On the other hand, in type-IV areas, where MGNREGA is already having a significant impact on rural wages and livelihoods, its role is likely to expand with larger demand for MGNREGA work and assets.

Type-II and III areas represent the geography where strengthening MGNREGA implementation is needed to deliver work opportunities close to home and create durable and effective public assets.

By offering work at government-prescribed minimum wages, a crucial feature of MGNREGA work is that it is self-targeting. However, the same does not hold true at the village or district level.

MGNREGA relies heavily on the ability of village panchayats and local block and district administration to work seamlessly and execute annual labour budgeting and asset planning. Often, in places where MGNREGA is needed the most, both village panchayats and local administration tend to be weaker.

Studies have shown the poorer states also tend to have greater unmet demand for MGNREGA work. For the scheme to work for people who need it most, we must work to change this.

MGNREGA has now been in play for more than a decade; it is perhaps a good time to take stock of how it has transformed rural labour markets and agrarian systems.

Much of the performance tracking at the district level relies on output indicators — number of workers, person days of work generated, quantum of assets completed, wages paid and so on.

It might be useful to also look at some outcome indicators and to better understand inter-state and inter-district differences in performance.

It is widely documented as two-thirds of MGNREGA assets are water assets, which should ideally contribute to improved local water-security and resilience. Has that happened? What skills do village panchayats need to effectively undertake labour budgeting and asset planning?

If the demand for MGNREGA work in a district keeps increasing every year, what causes it and is that desirable?

Addressing some of these questions can help improve implementation in areas where demand for the work exists but remains unfulfilled either because the demand is not properly articulated or because administrative bottlenecks limit its effectiveness.

MGNREGA has another important role, which becomes particularly crucial in in COVID-19 times. By adopting best practices, it acts as a beacon for establishing the terms of engagement for hiring labour in rural areas.

It must, therefore, introduce steps to ensure safe conditions for workers — temperature checks, masks, hand washing facilities, minimum distancing, ensuring proper hydration and so on. Doing so will set the benchmark for safe practices.

Finally, the effectiveness of MGNREGA as a tool for post-COVID rural recovery will depend on three things: Whether local administration is equipped to implement it as a demand-driven programme; whether village panchayats are well-equipped to take advantage of it; and whether useful assets are created that boost local agrarian economy.

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