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Resource centre on India's rural distress
 
 

MNREGS hinders micro enterprises in villages, says ISB study

-The Economic Times
 
High agricultural wages due to the success of government's flagship employment guarantee programme has hindered the development of micro enterprises in the hinterlands, says a research paper by Indian School of Business (ISB).

The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) has facilitated poverty alleviation in rural areas, it has discouraged village-level entrepreneurial ventures, the study has concluded. MGNREGA entitles 100 days of employment in a year to unskilled rural labour.

Workers are entitled to at least Rs 100 per day for work under the scheme. The research has concluded that while the scheme has effective short-term impact on poverty, it needs major restructuring to yield long term benefits. The restructuring includes using the scheme to further skill development while strictly adhering to seasonal pattern of labour demand.

"The scheme has killed the development of micro enterprises in villages. High agricultural wage rate, that is a result of the scheme, has negated the benefits of micro enterprises in rural areas," said Shamika Ravi, professor with ISB and author of the research paper.

While rural areas have not warmed up to a transition from last resort employment benefits as given under MGNREGA to more sustainable asset based sources of livelihood, the study has found that the scheme has resulted in 40% increase in monthly expenditure in food consumption.

The finding of the study are based on a survey of 1,066 households over a two year period from 2007-2009. The increase is measured by comparing households that were provided under the scheme with those that demanded employment but were not provided work due to unavailability of projects.

The survey further states that the impact of the scheme increases with the vulnerability of a household. MGNREGA has also reduced migration of labour by around 70% in households that were provided work compared to those who were not.