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Fourteen million people escaped falling into poverty under the world’s largest anti-poverty programme the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). In 10 years of its existence the scheme reduced poverty by 32 per cent. Recent data also shows that more women are drawing cash incomes more children are going to school and more people are opening bank accounts.

Despite severe criticism — Prime Minister Narendra Modi called it a “living monument of your [the Congress] failure to tackle poverty in 60 years” — the Act first rolled out in 2004-05 has provided employment to more than 27 crore people in 2.5 lakh gram panchayats in 658 districts. Earlier this month two reports on the programme were released. One was an anthology of research called Sameeksha put together by the UNDP; and the other was a survey — titled ‘MGNREGA: A Catalyst for Rural Transformation’ — led by the Indian Human Development Survey (IHDS) National Council for Applied Economic Research (NCAER) and University of Maryland.

A Catalyst… is a unique study because it was first held across 26000 rural households in 1503 villages and 971 urban blocks in 2004-05 when the Act was not implemented and then again in 2011-12 with a 90 per cent “recontact rate”. This exercise took 15 months for data collection an army of 450 interviewers and 50 researchers and nearly 12000 phone calls. “If you’re ever going to look at the effect of a programme or programme participation you’d want a ‘before’ and ‘after’ picture on the same households as far as possible” says the principal author of the study Sonalde Desai.

BLink met with the IHDS survey authors Sonalde Desai Prem Vashishtha and Omkar Joshi to discuss where the scheme has worked and where it hasn’t. Excerpts from the interview:

More than half of the total rural households don’t even seek job cards. Participation numbers are also declining. Why?

Sonalde Desai (SD): We are talking of two things here. One is that you are not in the income category where you want to do manual labour like the households of schoolteachers. Or take Punjab where daily wages are anywhere between ₹250 and ₹400 people decided to not work in MGNREGA which is fine. So here things are available but the person is not interested. We are happy about that. It’s not a cause for worry. The second is where they could actually be helped by it either they don’t see much work happening or they are not aware. They don’t realise it’s their right to get work which is a problem of awareness.

I think some of the decline was just due to the central government. Rajasthan which is the poster child really shrunk down the work they were doing. Political whims do influence how much emphasis MGNREGA gets.

Omkar Joshi (OJ): But participation rates for women SCs/STs are rising. The administration itself has gone on record and stated that the perception last year was that this [scheme] will be scrapped that the ministry is not serious about it. The scheme may be working on the ground but it’s the uncertainty that affects work allocation. The ministry admitted last year that there was a sharp drop in the works allotted and number of days. But that is no longer there MGNREGA is here to stay.

Sixty per cent of the participating rural households want to work more but are unable to find work. There are gaps in wage payments and unemployment allowances. What are the gaps in work rationing?

SD: There are many ways in which work-rationing gaps arise. For example in order to get work you have to go to the gram sabha to express interest. Gram sabhas may be held only twice a year. Somewhere along the line you’re not able to register your interest. Then even if people have registered the gram panchayat has to prepare a work plan and send it to the block. It takes a long time. One of the things that Jugal Kishore Mohapatra Secretary in the Ministry of Rural Development said is that at some level you don’t always have the money when the work is needed. So money may be there for the whole year but it is not quite available when you need it.

OJ: That was one of the stories we found. For a statutory wage of X workers are getting less than that in reality. The money should be available to the gram panchayat if not then he [the pradhan] tries to arrange the money through informal sources of credit like moneylenders. He charges interest on that and passes it to workers. So the issues of timing and liquidity are very crucial for wage payments and unemployment allowances. Currently just four per cent people get unemployment allowances.

One of the major findings of the survey was that poverty has declined by about 32 per cent since MGNREGA was implemented that is an estimated 14 million people didn’t fall into poverty. How effective has the scheme been?

Prem Vashishtha (PV): We have been able to identify those households which have participated in MGNREGA so the 14 million people figure is from that. If you take away their MGNREGA income they would go below the poverty line. It is in this sense that we are saying that the scheme could prevent them from falling into poverty.

SD: Participant households would have been poorer by 25-32 per cent depending on the method if MGNREGA was not there. We have used two different assumptions. The first is when we assume that MGNREGA workers are drawn from a cadre of under-employed people. So MGNREGA work is not replacing something else it is adding income. A certain percentage of it would be devoted to consumption; the poorest would use 90 per cent. We subtract that expenditure from what they are actually making and say that their expenditure has increased. That difference gives us about 32 per cent reduction in poverty rate.

The second method is you take households which are similar in background — education land ownership etc and you see the poverty decline. The poverty decline is a secular decline because of economic growth. For participating households and non-participating households of similar characteristics we see that MGNREGA households have a sharper poverty decline. The difference between their neighbour’s poverty decline and their own poverty decline that difference gives you the additional MGNREGA edge which is about 25 per cent.

The report also talks about poverty and vulnerability. What is the difference and why is vulnerability a better measure?

SD: Vulnerability is very interesting. The country started out [post Independence] with a 50 per cent poverty rate which has gone down to 21 per cent. So there’s been an overall decline. When poverty rates were high you were born in circumstances that kept you poor. As poverty falls factors of birth become less important and factors of life — drought illness widowhood — become more important.

And what you have to recognise is that these are people who have a potential vulnerability to fall into poverty. Right now it’s fine they have been pushed up the poverty line because of growth but they are only one illness away from falling back into poverty. That becomes very difficult to identify a priori. You can’t give people a BPL card three years in advance.

Poverty is no longer a static factor. Forty per cent of the households that currently work in MGNREGA were not poor in our survey seven years ago. We called them transient poor. If we think of poverty as a dynamic phenomenon then our safety net programmes can’t rely on our ability to identify the poor. MGNREGA is a scheme that is not targeted at people holding a BPL card but rather at people who are potentially poor.

According to the survey wages have improved so has financial inclusion. Formal credit is also on the rise. However these indicators have improved for non-MGNREGA households as well. To what extent is MGNREGA responsible?

SD: There is a general improvement as far as financial inclusion is concerned. What MGNREGA seems to have done is hastened it for participants. It led to bank accounts so individuals don’t have to rely on moneylenders. Overall improvement is happening. That is why we have carefully called it a ‘catalyst’.

One of the success stories of MGNREGA has been the participation of women. How much credit does the scheme deserve for this?

SD: Here I would give MGNREGA a causal role. Forty five per cent of participating women were not in wage employment in the previous round 24 per cent worked on their farms 21 per cent were not working at all. For these women MGNREGA might very well be the first cash income opportunity.

In 2004-05 only nine per cent women had bank accounts now 49 per cent have them 93 per cent women now seek health services. Despite increase in participation the report says that women still barely make one out of four decisions that indicate empowerment — whether to buy an expensive item how many children to have what to do when children fall ill and whom the child should marry.

SD: Are we saying that Indian rural women have become super-empowered? No. Actually in a sea of disempowerment these are marginal improvements. But in the feminist advocacy for equal wages this is one example where it just happened!

Looking at administrative data there is an exogenous change in wages and employment impact. The question now is if the employment has any other positive impact on their households. We see some indications of it but as sceptical empiricists we will have to wait and see.

The survey reports improvement in children’s education. On the other hand ASER has reported a decline in learning levels over the last decade…

SD: Enrolment has been rising across the country but it is also bringing in a lot of first-generation learners. This has had an impact on ASER’s report. We see reading and writing skills declining marginally.

That is the big story with which we have no complaints. However we were surprised to see kids from MGNREGA households were doing better. With first-generation learners learning levels ought to drop even for MGNREGA kids. But this is where we see a slight improvement.

At first we thought it might be because the parents now have money they are able to give their kids books tuitions. The route for improvements we thought was higher expenditure. But we don’t see that. MGNREGA families are spending more on their children but non-MGNREGA families are spending even more. What is really happening is that MGNREGA children are spending more time in school-related activities — more hours in school on homework. Part of it is declining child labour [marginal improvement] but part of it is because households are now able to substitute certain services which children were forced to provide with the MGNREGA income. So now you can buy fuel wood rather than get children to gather it.
 

AHMEDABAD India — India’s prime minister appealed for calm Wednesday after a rally that drew half a million members of a powerful clan resulted in a night of rioting that left three dead and dozens of buses and police stations torched.

Protesters from the influential Patel or Patidar community had gathered Tuesday to demand inclusion in government programs for the disadvantaged but the demonstration erupted into mob violence that evening and into Wednesday morning as agitators threw stones battled police and set a state minister’s home ablaze.

On Wednesday the skirmishes continued and curfews remained in effect in various trouble spots throughout Gujarat the home state of Indian Prime Minister Narendra Modi.

“Violence will not benefit anyone” Modi said in a video message. “The only way forward is to have a peaceful dialogue.”

The violence was sparked Tuesday when police briefly detained the movement’s charismatic young leader 22-year-old Hardik Patel. Disruptions ensued around the state.

[A prosperous clan in India rallies for government aid sparking violence]

“Our movement is nonviolent” Patel told the television channel NDTV on Wednesday. “We have not triggered any violence.” He promised that his campaign would “intensify” in the coming days.

Members of his clan historically have been politically powerful landowners businessmen and diamond polishers in India and they been a driving force in the country’s diaspora. More than 40 percent of motels in the United States are owned by Indians for example many with the last name Patel.

But long-held resentment of what the Patels see as the government’s preferential treatment of the underprivileged twinned with economic woes came to a boil this summer in a series of rallies and protests.

“We are angry. We are frustrated. We want the system changed” said Ankit Patel 25 who said he was passed over for admission to a master’s program at a state university in favor of three classmates from tribal communities who had lower marks.

Hardik Patel rocketed to prominence in recent weeks when he appeared at dozens of rallies throughout the state asking that Patels be included in a system — known as reservation — that provides quotas for seats in state universities and for government jobs. The baby-faced activist has been hailed as a hero by his followers who have spread photos of him posing with guns on social media.

“He has shaken Gujarat in the last 50 days” said Manoj Patel 29 the owner of a textile-export firm who attended Tuesday’s rally.

At the rally hundreds of thousands gathered in an exhibition ground at a university in the state’s commercial capital to cheer as Hardik Patel stood in the heat and spoke before long rows of mostly young men in white Gandhi caps. Patel vowed that they would “snatch” their protections from the government if they had to called for a general strike and said he would stay at the venue on a hunger strike until his concerns were heard.

Reservation frustration

Since its independence from Britain in 1947 India has sought to protect its Dalit and tribal communities by reserving special seats in universities as well as some government jobs.

Those set-asides were later expanded to include some socially disadvantaged castes a designation called “Other Backward Classes” according to Sonalde Desai an expert on caste and a professor of sociology at the University of Maryland. Modi who rose from humble origins as the son of a tea seller to become prime minister is from a caste that falls into this category.

In contrast the Patel clan counts among its ranks numerous politicians including Vallabhbhai Patel one of the revered founders of the country. On Tuesday his image was everywhere — on masks on T-shirts — in Gujarat.

[India’s wealthy are finally letting go of an old socialist perk]

Such a background will make the Patel demand for inclusion into the OBC category a difficult sell analysts say although some Patels argue that the caste-based system should be scrapped altogether in favor of distribution of government assistance by economic need. Gujarat’s chief minister Anandiben Patel has said that expanding the state’s existing quota system would violate a Supreme Court ruling on the matter.

“These are very very politically powerful extremely well-off people” said newspaper columnist Aakar Patel whose family lives in the Gujarati city of Surat India’s diamond-polishing center. “It is incredible to me that they should even be making this demand.”

Some analysts wonder how Hardik Patel’s Patidar Anamat Andolan Samiti movement coalesced so rapidly this summer. Social scientist and author Achyut Yagnik suggested that many of the state’s youths have a “sense of deprivation” and feel left out of progress in Gujarat the home state of Modi who rode to national victory last year showcasing his state’s economic success.

“He hasn’t done anything for us. We start sweating at the mention of his name” said one protester Keyur Patel 25. In the past the Patels have been strong supporters of Modi and his political party.

Gujarat like the rest of India has high numbers of unemployed young workers. The state government said in November that 900000 “educated but unemployed youths” including 30000 with postgraduate degrees had registered with various state employment exchanges between 2011 and 2014.

Yet many at the rally on Tuesday voiced typical middle-class concerns over salaries the cost of student tuition and the desire for better more stable jobs.

“We need a reservation for university admissions” said Kalavatiben Patel 43 a homemaker in Ahmedabad. “Our children get good marks good percentages and they don’t get admissions. It would be a level playing field.”

She said her daughter Shraddha 25 was not accepted into a government college so the family paid for her to go to a private university. She’s now attending Northeastern University in Boston on a scholarship.

But Pradeep Patel 56 a farmer social worker and organizer said it was a mistake to think of all Patels as affluent and not in need of government help.

“Many of us have had to sell land in distress and open grocery stores and paan [betel leaf and tobacco] shops” he said. “Not everyone is a businessman. That is just a myth. There is a Gujarati saying ‘All Patels are happy.’ That’s just a saying. It’s not the truth.”

Dr Sonalde Desai quoted in this article is a Senior Fellow at NCAER.

Indian Human Development Survey (IHDS) is a collaborative research programme between researchers from NCAER and the University of Maryland

Published in: The Washington Post August 26 2015

Key Highlights

NCAER’s annual model predicts that GDP growth rate (GDP market prices at 2011–12 prices) will grow at 7.5 per cent for 2015–16

• In the agricultural sector performance of monsoon rainfall has been extremely satisfactory in the month of June however during the month of July there was a slowdown in rainfall activity. Notwithstanding this the deviation from actual rainfall from the normal during the first half of the monsoon season is barely 3.1% (deviation based on rainfall indices computed on the basis of un-irrigated area under foodgrains as weights). As a result the sown area under all Kharif crops is up by 5% as compared to the corresponding period of last year led by an increase in area under cereals pulses and oilseeds. The outlook for the second phase of monsoon season however remains mixed due to differences in forecasts made by the official and private forecasting agencies and much will depend on how monsoon rainfall progresses going forward.
   
• Index of Industrial Production (IIP) registered 3.2% year-on-year growth in the first quarter of 2015–16 maintaining its growth momentum from the fourth quarter of the last fiscal at 3.3%. It was lower than the 4.5% growth in 2014-15:Q1.  However looking at deseasonalised quarterly data IIP registered 2.1% quarter-on-quarter growth in 2014-15:Q1.  It grew negatively in the next two quarters before reviving growth in the fourth quarter at 2.0%. It continued to grow at 2.0% in the first quarter of the current fiscal. These indicate that India is growing but not at higher rates than last year.
   
• The lead indicators of the services sector also indicate trends similar to the last quarter of the previous fiscal year whether it is tourist arrivals revenue earning goods traffic by railways cargo handled at major ports new telephone connections and growth in aggregate deposits. Though domestic air passenger traffic shows double digit year-on-year growth (19.5%) in 2015–16:Q1.
   
• Merchandise exports and imports have continued to fall in double digits although the degree may be tapering marginally. Services trade also demonstrates relatively slower growth. Software service exports is the only bright spot. Even the FII flows which showed vigorous growth in 2014–15 have considerably slowed down in 2015–16:Q1.
   
• Inflation rates show a distinctive downward trend driven by fall in global commodity prices and weak demand. Satisfactory rainfall in the first half of the monsoon season has also kept food prices low except for pulses. However as reported the RBI Inflationary expectations have edged towards double digits in June 2015.  Further there is an upward movement in the change in the rate of inflation in the first quarter which if not addressed can potentially affect inflation through higher expectations. 
   
• Thus key policy rates were left unchanged amidst higher household inflationary expectations slower pace of domestic economic recovery and uncertainties in the global markets.
   
• On the fiscal sector revenue receipts have increased in the first quarter of the current fiscal buoyed by increases in indirect taxation.  Capital account plan expenditure has risen in the first quarter of the current fiscal signalling that the government is on track in tackling the infrastructure deficit in the country. Fiscal deficit as a percent of GDP has already reached approximately 50 per cent of its budget estimates similar to last fiscal.
   

In sum satisfactory rainfall in the first half of the south-west monsoon season if sustained may help revive rural demand.  Lower inflation due to lower commodity prices and lower food inflation may spur demand. The indicators from the first quarter suggest that agriculture industry and services are continuing to grow at same or almost similar rates as was the case in the fourth quarter of the previous fiscal.  The turbulences in the world economy though add elements uncertainty to the growth path of the Indian economy.  Overall India is predicted to achieve a marginally higher rate of growth of 7.5% than last year (7.3%).  
 

About NCAER

NCAER the National Council of Applied Economic Research is India’s oldest and largest independent economic think-tank set up in 1956 at the behest of Prime Minister Jawaharlal Nehru to inform policy choices for both the public and private sectors.  Over nearly six decades NCAER has served the nation well with its rich offering of applied policy research unique data sets evaluations and policy inputs to central and state governments corporate India the media and informed citizens. It is one of a few independent think-tanks world-wide that combines rigorous economic analysis and policy outreach with data collection capabilities particularly for large-scale household surveys. NCAER is currently led by its Director-General Dr Shekhar Shah and governed by an independent Governing Body chaired by Mr Nandan M. Nilekani.
 

NEW DELHI: Economic think-tank NCAER has projected the country’s economic growth at 7.5 per cent in the current fiscal.

“NCAER’s annual model predicts that GDP growth rate (GDP market prices at 2011-12 prices) will grow at 7.5 per cent for 2015-16” it said in a release today.

It said satisfactory rainfall in the first half of the south-west monsoon season may help revive rural demand.

“Lower inflation because of lower commodity prices and lower food inflation may spur demand.

“The indicators from the first quarter indicates that agriculture industry and services are continuing to grow at same or similar rates as last quarter” National Council of Applied Economic Research (NCAER) said.

It said the turbulences in the world economy adds uncertainty to the Indian economy.

“Overall India is predicted to achieve a marginally higher rate of growth of 7.5 per cent than last year at 7.3 per cent” the think tank said.
 

The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) reduced poverty by up to a third and gave a large number of women their first opportunity to earn cash income a new research has found.

Officials from the Ministry of Rural Development (MoRD) and the National Council of Applied Economic Research (NCAER) released a new report Wednesday evening which used data from two rounds of the India Human Development Survey (IHDS) – 2004-5 and 2011-12. The survey was conducted by the NCAER and University of Maryland involving over 26000 rural households across the country.

Comparisons between the two survey rounds found that the programme reduced poverty overall by up to 32 per cent and prevented 14 million people from falling into poverty. “Economic growth contributed to overall poverty reduction during this period but we found that the MGNREGS also played a significant role” Sonalde Desai principal author of the study said.

The numbers show that the MGNREGS is likely to have had a much smaller impact on the rural job market and on rural wages than is commonly believed. At an all-India level the average days worked under the MGNREGS is less than four pointing to the relatively small impact of the scheme to the overall rural job market. “On the surface MGNREGS has virtually no impact on rural employment patterns since it fails to add to the number of days that individuals work. But it seems to attract individuals who were previously employed in less productive work thereby raising their incomes” the report notes. Overall while the period of 2004-5 to 2011-12 saw a sharp rise in rural wages MGNREGS plays only a modest role in wage increases the report notes. The United Nations Development Programme on Wednesday also released a review of recent research studies on the MGNREGS which found similarly and found that the scheme’s uptake is far greater in the lean season that in the peak agricultural season.

The part of the rural job market that the MGNREGS did seem to have a more significant impact on was for female work. About 45% of female MGNREGS workers were either not working or worked only on a family farm in 2004–05 indicating that the MGNREGS “may well be the first opportunity many women have to earn cash income”. As a result there was a substantial increase in women’s control over resources — including cash in hand and the likelihood of having a bank account — and improvement in women’s ability to make independent decisions about their health the report found.

Children from MGNREGS households were likely to obtain higher levels of educational attainment than their non-MGNREGS peers the report found and were less likely to be working.

While financial inclusion rose in general during this period and reliance of moneylenders declined the effect was much greater for MGNREGS households as was the decrease in the overall interest paid by the household. Simultaneously accessing of formal credit grew.

What holds the MGNREGS back is “work rationing” — the inability of all interested households to get 100 days of work — as a result of mismanagement or pressures and affects the poorest the most the report finds.

“These findings clearly show that there is a large unmet demand for MGNREGS work” Jugal Kishore Mohapatra secretary Ministry of Rural Development said adding that a paucity of funds at the level of implementations and erratic fund flows particularly in 2014-15 had affected both demand and supply. “For the last four months our job has been convincing everyone that the scheme is not going away and rebooting demand” Mr. Mohapatra said.