ECOSYSTEMS, POVERTY ALLEVIATION AND CONDITIONAL TRANSFERS

EVENT REPORT

India’s Mahatma Gandhi

Guaranteed Employment
programme
Case study Module 2

Ina Porras and Nanki Kaur

Authors’ affiliations:
International Institute for Environment and Development (IIED)

Module 2 in: Guidance for Practitioners Porras, I and Asquith, N (2018) Ecosystems, poverty alleviation
and conditional transfers. International Institute for Environment and Development, London.

Evi dence from the i nternational research community s hows

tha t ca reful management of nature results i n benefits to
people’s wellbeing. Poor people especially depend more
hea vily on the quality of the ecosystems and have less access
to s ubstitutes when they a re degraded. Ma king meaningful
i mpacts i n the way ecosystems are managed requires
governments to s tep i n and s cale up, but the evi dence also
s hows that empowered communities ca n make strong calls to
ena ct a nd i mplement change at the l ocal level. Positive
i ncentives l ike payments for ecosys tem s ervices (PES) a nd
other forms of conditional tra nsfers ca n provide i mportant
s i gnals to enact this behavioural change i nto positive a ctions.
Ca refully designed, these incentives can a lso contribute to the
wel lbeing of people, especially poor a nd vulnerable groups.
New tools emerge that ca n help with s caling up a nd dealing
wi th i nevi table tra de-offs, but more efforts are needed to bring
thi s information cl oser to those making decisions. This case
s tudy a ccompanies a Guidance for Pra ctitioners that helps to
bri dge this space by: 1) ma king evidence a ccessible, bringing
the l a test evidence from research on PES i n theory a nd practice
wi th documented case studies written for practitioners; and 2)
s upporting capacity building to ‘train the tra iners’, through
tea ching modules which ca n be used to promote capacity
bui lding of practitioners.

www.iied.org 1
 ECOSYSTEMS, POVERTY ALLEVIATION AND CONDITIONAL TRANSFERS
EVENT REPORT

The world’s largest works-based social protection scheme, the Mahatma Gandhi National Rural
Employment Guarantee Act (MGNREGA) has covered all of India since 2006 and aims at enhancing
livelihood security in rural areas by providing at least 100 days of guaranteed wage employment in a
financial year to every household whose adult members volunteer to do unskilled manual work (Kaur et
al., 2017). It also provides improved productive assets and livelihood resources in rural areas,
proactively ensuring social inclusion and strengthening Panchayat Raj (local government) institutions.
The types of projects included are public works linked to natural resource management (mostly
watershed-related projects), improving conditions of assets for vulnerable sections of society, and
building common and rural infrastructure.
MGNREGA provides a key example for payments for ecosystem services (PES) to learn about
successful combinations of social and environmental objectives to achieve political support, resources
and scale. At the same time, PES experiences elsewhere can provide MGNREGA with ideas on how to
improve long-term environmental impacts on the ground.

Political support
About 60 per cent of India’s population is dependent on agriculture for their livelihoods. Decline in public
sector investments in agriculture has contributed to the reduction in agriculture productivity (Padma,
2015). Also, farming practices are primarily rain-fed and highly vulnerable to extreme weather events.
Over the last few decades, the frequency of droughts and floods in India has increased, resulting in
major income losses for farmers. High unemployment and low wages linked to low productivity combine
to bring about high poverty levels, food insecurity and rural-to-urban migration.
The landmark Act was passed by the Indian parliament with a high level of consensus in 2005. Its
primary goal is to increase rural jobs, thereby increasing rural livelihoods. A major proportion of the
resources is directed towards environmental works, whic h contributes to securing rural natural assets.
The programme has faced major criticism, suggesting that it makes agriculture less profitable.
However, studies show that the programme is significant in overcoming rural distress and improving
human resources in rural areas (Padma, 2015). This evidence is important to secure and retain political
and civil society support for the programme, which in turn helps to secure financial flows to the
programme (Ghosh, 2015; Jaitley, 2015).
MGNREGA’s political attention has also been enhanced through its convergence with various other
government schemes on livelihood development and climate change. Through this convergence it has
managed to leverage its institutional and budget strengths and gain inter-ministerial support. Some of
the programmes include the National Rural Livelihood Programme, the National Green India Mission
and the National Mission on Green Highway.

Sustainable financing
MGNREGA is primarily funded by the national budget with a smaller percentage funded through state
budgets. The funds are allocated under an Act which came into force in 2006 and therefore has a
strong legal backing. According to this Act, wage payments need to be made within 15 days of work
completion.
Central government covers the full cost of the unskilled wages, and 75 per cent of the costs for
materials, skilled/semi-skilled workers and administrative expenses. State governments cover the
remaining 25 per cent of the costs and share some of the administrative costs.
Between 2016 and 2017 the government allocated Rs 38,500 crore (about US$5.67 billion 1) for
MGNREGA activities and created State Employment Guarantee Funds (SEGFs) to ensure long-term
funding for the programme.
In light of the last few years’ growing fiscal deficit and changing political priorities in India, there were
issues arising from low budgetary allocations which led to delays in wage payments and infrastructure

1
Exchange rate used of 1 Indian Rupee = 0.015 USD.

www.iied.org 2
 ECOSYSTEMS, POVERTY ALLEVIATION AND CONDITIONAL TRANSFERS
EVENT REPORT

construction. However, under pressure from civil society and following issuance of Supreme Court
directives, the government allocated a sufficient budget for the programme.

Institutional set-up
The key characteristics of this programme are:
• employment for all rural households (one member per household) who are willing to work (100
days/year)
• free registration, with a job guaranteed within 15 days of application
• fixed minimum wage, with weekly payments
• at least a third of employees must be women.
Implementing this programme in a country with over 833 million people living in rural areas requires a
massive effort. The Ministry of Rural Development (MoRD) is responsible for ensuring the adequate
and timely delivery of resources and funds to the states and for reviewing, monitoring and evaluating
the use of these resources. It has also developed a management information system that provides real -
time information on the implementation on of MGNREGA at each level.

Figure 1. MGNREGA institutional set-up

Notes: Raj means 'rule' and panchayat means 'assembly' (ayat) of five (panch). This traditional form of local government is u sually
led by w ise and respected elders chosen and accepted by the local community. Modern ‘gram panchayats' are village councils, the
formalised local self -governance system in India. The Gram Sabha is the meeting of all adults w ho live in the area covered by the
Panchayat. Source: MGNREGA Division, 2017.

The state governments distribute the funds to the local implementation bodies at district, block and
village panchayat levels, and provide the necessary technical and administrative support. The Central
Employment Guarantee Council (CEGC) and the State Employment Guarantee Councils (SEGC) are
the two key technical agencies that advise the MoRD and the state governments respectively and are
also responsible for monitoring and evaluation. At the state level, project planning is carried out by
village panchayats and civil society organisations including women’s self-help groups (SHGs),
approved by engineers at block and district levels. The district administration releases funds to the
panchayats/SHGs for wage payments and material expenditure. Final implementation varies

www.iied.org 3
 ECOSYSTEMS, POVERTY ALLEVIATION AND CONDITIONAL TRANSFERS
EVENT REPORT

considerably at the state level. States that have introduced pro-poor targeting, for example, by how they
apply rationing, have showed a significant improvement in pro-poor participation (Liu and Barret, 2013).
The MoRD is also collaborating with the UK Department for Development (DFID) and the German
Development Agency (GIZ) to enhance the livelihood and environmental benefits from the infrastructure
projects and make both the infrastructure and the communities benefiting from it more climate-resilient.

Systems and tools for effective implementation

The enormous challenge to deliver the programme at ground level requires an equally effective
implementing body. Some of the key components of the programme are described below.
• Legislation: the programme is based on legislation that provides a rights-based framework for
livelihood, social security and economic improvements for India.
• Targeting: MGNREGA is a demand-driven programme that covers the whole of rural India.
Targeted beneficiaries are the rural poor who do not have secure livelihood opportunities outside of
the monsoon season. The focus is on economically disadvantaged communities who are either
landless or rely primarily on natural resource-based livelihoods such as agriculture and forestry. To
more effectively target communities, the Indian government has recently launched the Intensive
Participatory Planning Exercise, a national initiative aiming to identify the poorest and most
vulnerable communities in the country.
• Registration takes place at household level: adult members eligible for employment are issued a
job card which is presented when applying for work. Employment is in theory guaranteed within 15
days of application and within 5 km of the village (10 per cent extra is paid if further away), although
in cases of limited resources, some may be denied jobs. There is a focus on providing work for
women, scheduled caste members, tribes and other vulnerable groups (MGNREGA Division, 2017).
• Type of environmental works allowed: the programme supports approximately 140 types of
works 2, which the different states adapt to suit their local needs. They include plantations,
playgrounds, rural connectivity in hilly sites, small and large water conservation and water harvesting
works, or individual beneficiary work. There is an interest in ensuring that 60 per cent of the work is
aimed at improving the agrarian sector and related activities.
• Payments: cash payments are based on the labour provided to build the appropriate form of
infrastructure. The projects are planned at the village level depending on the needs of
disadvantaged communities and households. The MoRD has developed a list of 140 permissible
works to be funded under MGNREGA. The majority of projects are related to soil and water
conservation, as well as agriculture to support rural household livelihood security. Payments are
made weekly or fortnightly, through banks or post office beneficiary accounts. (Government of India,
2014). Despite the social protection through wage payments provided to a large segment of the
population, there is still a huge and untapped potential in productive benefits from infrastructure
projects built under MGNREGA.
• Conditionality: wages are paid upon satisfactory completion of the job consistent with project
design. The work done is evaluated by trained technical experts and approved by government -
appointed engineers. The National and State Employment Guarantee Councils, which also i nclude
members of civil society, regularly monitor and evaluate the MGNREGA implementation process to
ensure that the workers are paid on time and treated according to their rights under the Act.
• Monitoring and evaluation: the CEGCs and SEGCs monitor and evaluate the implementation of
MGNREGA. Performance is measured by looking at how many job cards are issued, how many
households are provided with employment, how many households completed 100 days of work, the
category of households employed, the type of works undertaken (and whether completed or not),
and the amount of expenditure. A notable limitation is a lack of an output-based monitoring strategy
or monitoring of the long-term quality of the investments (MGNREGA Division, 2017)
• Information systems: there is concern about the lack of ICT infrastructure at the different levels.
Poor maintenance of records affects programme management, monitoring and delays in wage

2
http://www.nrega.ap.gov.in/Nregs/WorksList.jsp.

www.iied.org 4
 ECOSYSTEMS, POVERTY ALLEVIATION AND CONDITIONAL TRANSFERS
EVENT REPORT

payments. To tackle these issues and facilitate impact assessment, the MRNRENA division is
designing a comprehensive management information system (MIS), which aims to include geo-
tagging and geo-referencing of all MGNREGA assets, that works as an online portal with real-time
reports and records for over 600,000 lakh villages, work and payment details of 130 million
households and 280 million workers per year. In addition, the MoRD has developed a strong
management information system for the programme to regularly monitor resource use and capacity
gaps. The ministry has also initiated social audits to ensure the realisation of anticipated programme
features such as the inclusion of vulnerable groups in the planning process and the derivation of
livelihood benefits from the infrastructure projects.

Ability to demonstrate impact

The programme has been implemented in stages since its introduction in 2006. It was introduced
initially in 200 districts, extended to 130 more districts in 2007–2008 and now covers all rural districts
(Government of India, 2014). Actual implementation is carried out by local governments. According to
MGNREGA Division (2017) some of the main limitations have been linked to unrealistic and ineffective
planning at the local levels. Impact studies also tend to be local, with little information on impact
assessment at national level. Some of the main local results are described below.

Table 1. Summary impacts of MGNREGA, 2017

Indicator Value
Central release funds Rs 36,645 crore
US$5.9 billion
Total expenditure Rs 1,666 crore
US$7 billion
Total wage expenditure Rs 30,843 crore
US$4.9 billion
Number of households getting jobs 48.2 million
Average number of person/days per household in a year 49
Women participation rate 55 per cent
Average wage 154 Rs/day
US$2.5/day
Average cost per person 211 Rs/pp/day
US$3.4 /pp/day

Source: (MGNREGA Division, 2017).

Theory of change: The programme provides guaranteed employment during the lean agricultural
season and primarily funds infrastructure projects such as irrigation and water conservation structures
that support agricultural activities. Therefore, through wages and productive infrastructure, MGNREGA
directly tackles livelihood security issues for a major section of the population. It has thus grabbed high
political attention especially at the sub-national level, ultimately influencing national policy and securing
significant budget allocations for the scheme.
Social impact: The world’s largest works-based social protection programme provides jobs to almost
50 million households every year — equivalent to nearly 25 per cent of India’s total rural households.
The programme has increased rural average wages across the country from Rs 65 per person per day
when it began to Rs 154 per person per day in 2017 (Government of India, 2014). It has also been
successful in strengthening the institutional capacity of panchayats and village institutions, in terms of
raising their awareness about their rights and their capacity to manage various rural development
schemes (Shah, 2016).
Studies to assess impacts of the programme (cited in Padma, 2015) observe a positive impact on
livelihood security of rural people and recognise the programme’s potential to bring social changes in
rural India. The increase in income is reflected in increased consumption expenditure, mainly on food,
clothing, education and health. The stable access to jobs helps the poor withstand economic shocks

www.iied.org 5
 ECOSYSTEMS, POVERTY ALLEVIATION AND CONDITIONAL TRANSFERS
EVENT REPORT

and inflation. The additional purchasing power has further multiplier effects across rural economies
(Babu and Rao, 2010; Pani and Lyer, 2011). Works taken up in individual land shows an increase of 15
per cent in cultivated areas, and an increase in food security from six months to nine months in a year.
With nearly 1 million rural-household bank accounts opened and approximately 80 per cent of
MGNREGA payments made through this route, the programme’s financial inclusion is significant. By
2013 nearly 90.3 million bank accounts have been opened under the programme, bringing the poor into
the organised financial sector and in some cases providing them with better access to credit
(Government of India, 2014; Shah, 2016). Currently, the programme is aiming to convert bank
accounts to Aadhaar-based payment accounts 3 (Aadhaar Based Payments Bridge System – ABPS),
with efforts to universalise them within the framework of the Supreme Court (Bhakta, 2017; MGNREGA
Division, 2017).
Gender and vulnerable groups: According to Padma (2015), women’s share of work in the
programme is higher than their share in the casual wage labour market. They are more likely to engage
in paid work through the programme and earn cash income when otherwise they would have remained
at home or unemployed. While there may be variations on sites, the programme has been found to
reduce the traditional wage discrimination in public works. There is concern about inadequate coverage
of people with disabilities and women in some states (Government of India, 2014).
Reaching the poor: A study of national and state-level data from 27 states (Liu and Barret, 2013)
looked at the type of participant households. They concluded that most of these households are poor —
demonstrating that, while heterogeneity exists, the programme does effectively have a pro-poor angle.
The study also found that at the national level there is a bias towards middle class rather than poor
households, due to the way rationing patterns are implemented. For example, while better-off
households are actively rationed out of the programme, the poorest households are also highly likely to
be denied employment, which suggests that rationing practices are not pro-poor but rather pro-middle
class. Finally, according to Liu and Barret (2013), self-selection means that the programme is not as
effective in reaching poor female-headed households, yet female participation rates at the national level
have ranged between 40 and 51 per cent since the programme’s introduction.
Environmental impacts: MGNREGA public works investments in soil and water conservation include
water harvesting, small-scale irrigation, water supply schemes, afforestation, rural infrastructure
development and social services. Almost 53 per cent of the works are linked to soil and water
conservation.
Several studies have looked at the impact of these works. For example, a study in Karnataka by Tiwari
et al. (2011) suggests that the programme provided “multiple environmental services and reduced
vulnerability, apart from providing employment and income to rural communities”. The main impacts
included better groundwater recharge, water percolation, more water storage in tanks, increased soil
fertility, reclamation of degraded lands and carbon sequestration.
The improvement in the resource base had positive impacts on agriculture; for example, through
increased crop and livestock production. A study by the Institute for Human Development of 1000
randomly selected dug wells showed 70–80 per cent completion, and high levels of use, especially to
grow vegetables and domestic and husbandry use. From these figures, the study suggests a 6 per cent
social return rate in real terms (Dreze, 2015).
While the flagship ideals of the programme are recognised, some studies highlight the implementation
limitations on the ground, including excessive bureaucracy and corruption, especially in remote and
marginal areas (Banerjee and Saha, 2010).
One challenge affecting programme implementation has been lack of technical capacity at the local
level, which has led to delays in payments and project completion, as well as a low quality of work and
non-creation of durable and quality assets (MGNREGA Division, 2017). There are concerns about the
inadequate number of engineers, while the technical experts deployed are not suffici ently trained.

3
“Aadhaar” refers to non-commercial, grassroots-level development in India. The Aadhaar Based Payments Bridge System uses
an Aadhaar number and biometrics for authentication and is designed for the “non-smartphone savvy” user, i.e. those not
comfortable using cards or mobile w allets, helping to push for digital payments instead of cash transactions. It is designed for
direct benefit transfers and subsidy payments from the government, and complements other types of Aadhaar enabled payments
for the business (Bhakta, 2017).

www.iied.org 6
 ECOSYSTEMS, POVERTY ALLEVIATION AND CONDITIONAL TRANSFERS
EVENT REPORT

In addition, elite capture has been affecting the planning process at the village level. In response to
these issues, the government has taken a number of initiatives ; for example, social audits and training
workshops to strengthen technical capacity at the local level (Shah, 2016). This also includes engaging
4000 ‘barefoot technicians’ on the ground in 2017–18.

Lessons
Key lessons from the programme:
• the legal backing of the scheme has ensured political attention and adequate budgetary allocation
since its inception
• strong participation of local institutions in the programme design
• direct payment to bank accounts of beneficiaries reduces leakages and supports financial inclusion
for poorer sectors of the economy
• ICT infrastructure plays an important role in improving programme implementation
• the investments provide climate-resilient and livelihood-linked assets in addition to wage guarantee
for the poor
• more effort need to go into output-based monitoring (rather than only ‘jobs-done’ approach) and to
securing the long-term quality of these environmental investments.
Overall, the programme has very clear, targeted and popular objectives: to directly tackle
unemployment (thereby increasing livelihood security and reducing rural migration) and to promote
sustainable development through improving rural assets, livelihoods and restoring the environment.
Process outcomes of the programme include strengthening grassroot s democratic processes and
improving transparency and accountability in governance.

www.iied.org 7
 ECOSYSTEMS, POVERTY ALLEVIATION AND CONDITIONAL TRANSFERS
EVENT REPORT

References
Babu, VS and Rao, KH (2010) Impact of MGNREGS on Scheduled Castes and Scheduled Tribes:
Studies conducted in 8 states. National Institute of Rural Development, Hyderabad.
Banerjee, K and Saha, P (2010) The NREGA, the Maoists and the developmental woes of the Indian
State. Economic and Political Weekly. 55.
Bhakta, P, (2017) How the Aadhaar-based payment modes work. The Economic Times, Delhi.
Dreze, J, (2015) The digging-holes myth, Opinion. The Indian Express.
Ghosh, J, (2015) India's rural employment programme is dying a death of funding cuts, Employment.
The Guardian, London.
Government of India (2014) Report to the people: Mahatma Gandhi National Rural Employment
Guarantee Act, 2005. Ministry of Rural Development, Department of Rural Development , New Delhi.
Jaitley, A (2015) Budget 2015: MGNREGA gets more funds from Narendra Modi government . The
Economic Times, New Delhi.
Kaur, N, Steele P, Barnwal, A (2017) The Mahatma Gandhi Rural Employment Guarantee Act
(MGREGA), India -Country study summary. In: Porras, I et al (eds), Conditional transfers, poverty and
ecosystems: National Programmes Highlights series. International Institue of Environment and
Development, London.
Liu, Y and Barret, C (2013) Guaranteed Employment and the Poor, The Mahatma Gandhi National
Rural Employment Guarantee Scheme, Project note 01. IFPRI, Washington D.C.
MGNREGA Division (2017) Mahatma Gandhi National Rural Employment Guarantee Act 2005:
Performance, initiatives and strategies (FY15-15 & FY16-17). Ministry of Rural Development,
Government of India, Delhi.
Padma, K (2015) MGNREGA and rural distress in India. International Journal of Humanities and Social
Science Invention. 4, 67-76.
Pani, N and Lyer, C (2011) Evaluation of the Impact of Processes in Mahatma Gandhi National Rural
Employment Guarantee scheme in Karnataka Bangalore National Institute of Advanced Studies.
Shah, M (2016) Should India do away with the MGNREGA? The Indian Journal of Labour Economics.
59, 125-153.
Tiwari, R, Somashekhar, HI, Parama, VRR, Murthy, IK, Mohan Kumar, MS, Mohan Kumar, BK, Parate,
H, Varma, M, Malaviya, S, Rao, AS, Sengupta, A, Kattumuri, R, Ravindranath, NH (2011) MGNREGA
for environmental service enhancement and vulnerability reduction: rapid appraisal in Chitradurga
district, Karnataka. Economic and Political Weekly. 46, 39-47.

www.iied.org 8