MGNREGA: The Need to Go Beyond Ideologies

Rebutting Arvind Pangariya and Jagdish Bhagwati’s views on why MGNREGA should be limited and eventually phased out are the arguments that say the welfare scheme has the potential to save the life and dignity of the poor, and that efficiency is not the only criterion that should guide state policies.

I f it were not for the reputation of these economists, and for the fact that the opinions of these economists seem to find a lot of traction with the new government, there would have been no need to give too much credence to the arguments presented. With all humility I must say, I found most of the reasoning quite simplistic. The economists just did not seem serious or rigorous enough when arguing for the scrapping of one of the world’s largest social security-net programmes in a country that hosts a majority of the desperately poor people.

The crowning argument that makes for the centrepiece of the short article “Rural inefficiency act: Despite protests about diluting NREGA, the PM is right to confine it to 200 poorest districts” by Arvind Panagriya and Jagdish Bhagwati is that the MGNREGA is fundamentally flawed; it is inefficient, thus the need for the absolute repeal of the Act. For the authors, the confinement of MGNREGA to 200 districts with a higher material-labour ratio is also only a political compromise. Their central argument runs thus:

“To appreciate fully how inefficient NREGA is at transferring income to the poor, consider the following. Existing data show that on average 30 per cent of NREGA expenditure is incurred on material and 70 per cent on wages. Assuming the daily NREGA wage to be Rs 130, this requires an expenditure of Rs 186 to employ one worker per day. “But not all Rs 130 in wages amount to transfer. When accepting NREGA employment, the worker forgoes the opportunity to work elsewhere. Even assuming the daily market wage to be a low Rs 80, the net transfer under NREGA is only Rs 50. So we spend a solid Rs 186 to transfer a mere Rs 50.”