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Resource centre on India's rural distress
 
 

Is MGNREGS the answer to the rural slowdown? -Sneha Alexander & Nikita Kwatra

-Livemint.com

MGNREGS could alleviate rural distress but, in its current form, its overall impact on the rural economy is limited in scope

With rural distress deepening across India and private consumption growing anaemically, calls for ramping up the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), are growing louder ahead of the upcoming budget. Proponents of MGNREGS believe that it may be the only ammunition in the government’s arsenal to fight rural poverty. Critics, though, have labelled the scheme as leaky, wasteful and simply ineffective.

Data on key metrics such as wages, inflation, and consumption suggests that the truth lies somewhere in the middle. While MGNREGS can provide income security to its beneficiaries, its overall impact on the rural economy will be limited unless it is implemented with greater resources and greater care.

The wage impact

One of the immediate effects of MGNREGS should be on wages. In theory, MGNREGS should boost wages by directly providing paid employment to rural households and by providing greater competition for rural wage-earning activities. There is some evidence that this has happened but the extent has been fairly modest. For instance, one 2015 study estimated that the introduction of MGNREGS was associated with a 4.7% increase in rural private sector wages.

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