Improving Social Safety Nets: An Evaluation of India's MGNREGS Program

In 2006, the Indian government launched the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). This program guarantees rural households both the legal right to employment for up to 100 days per year and a minimum agricultural wage set at the state level. Since its launch in 2006, MGNREGS has become the largest public works project in the world, but questions remain about the program’s true effectiveness. In particular, critics have highlighted the program’s high costs, inefficiencies, and potential for corruption.

A new IFPRI brief reviews recent evaluations of MGNREGS’ targeting, implementation, and impacts. Using nationally representative National Sample Survey data from 2009-2010 and 2011-2010, as well as a three-round household survey dataset in Andhra Pradesh (a state that has experienced relative success in MGNREGS implementation), the brief provides an overview of the program’s implementation and targeting and a more in-depth look at state-level impacts on welfare and household labor supply. The brief identified several major findings. First, the MGNREGS program appears to target and benefit the rural poor relatively effectively at the national level. Poorer households and scheduled tribe or scheduled caste households tend to self-select into the program at higher rates than other, more well-off households. At the state level, however, program success and effectiveness vary widely. Of the 27 states covered in the study, about half experienced high rates of regressive administrative rationing – essentially the administrative distribution of program jobs to households outside the target poor population. Second, MGNREGS has managed to include women, including women and mothers of young children, relatively successfully. Women participate in MGNREGS employment at higher rates than in similar jobs in the private labor market, and women’s wages within MGNREGS are comparable to men’s. However, again, this success varies more widely at the state level, as well as within sub-populations of women. Traditional norms and values in some states tend to prevent women from working outside the home or working in certain jobs. Third, implementation problems at the state level appear to have led to a decline in demand for MGNREGS employment in recent years. These problems include failure to provide jobs to which applicants have a legal right under the program (administrative rationing) and delays in payments. Such failures lead to what is called the “discouraged worker effect,” making poor workers less likely to seek employment under MGNREGS because of distrust in the program itself. This finding contradicts beliefs that declining demand is due to declining need for the program’s safety net. The remaining findings of the brief speak specifically to Andhra Pradesh’s MGNREGS experience. The authors found that the program has significantly improved the welfare of poor, scheduled caste and tribes, and casual laborer households that participate. The state has also seen significant positive spillover effects from the program. Specifically, even households that don’t participate in the program see higher consumption expenditures and nutritional intake. In Andhra Pradesh, participation in the MGNREGS program leads to higher total household labor supply, with particularly strong impacts on women’s labor. Participation can also sometimes crowd out use of private employment during the main agricultural seasons. Finally, the state’s top-down approach to MGNREGS implementation appears to be more successful in limiting corruption in terms of how program funds are distributed. The brief finds that MGNREGS fund allocation in Andhra Pradesh happens as intended, with the needs of potential beneficiaries driving funding decisions. Overall, the authors find that the MGNREGS program has shown success as a social safety net aimed at reducing poverty. However, the brief also identifies several policy recommendations to further improve the program at both the state and the national level. Going forward, MGNREGS implementation should prioritize reducing unmet demand among target populations and ensuring timely payments. To be most effective in improving household welfare, the timing of MGNREGS employment should occur during the agricultural lean seasons, when other work opportunities are less abundant. The program’s targeting can be improved by identifying under-served and vulnerable populations and including strategies to ensure these populations’ equitable inclusion in employment opportunities. To accomplish this, policymakers at the national level should study the experiences of states like Andhra Pradesh, which have seen higher levels of success in target poor populations, and apply those lessons to less successful states. Monitoring and evaluating program performance at the state and national levels will also be essential in helping policymakers understand shifts in demand for MGNREGS labor and scale up the program in times of economic crisis.