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LATEST NEWS UPDATES | MNREGS killing entrepreneurial spirit of rural AP, says study

MNREGS killing entrepreneurial spirit of rural AP, says study

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published Published on Feb 14, 2013   modified Modified on Feb 14, 2013
-The Times of India

HYDERABAD: The UPA government's petprogramme - the Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS) - may have been started with the objective of securing the livelihood of the residents of rural India by providing assured employment for 100 days in a year, but has ended up choking the entrepreneurial spirit in the hinterlands ofAndhra Pradesh.

These are the findings of a study conducted by a faculty of the Indian School of Business (ISB) that was funded by a World Bank arm and Ford Foundation. The study, carried out by ISB's assistant professor Shamika Ravi found that the assurance of paid work to those volunteering for casual labour in the rural areas has over time destroyed micro enterprises as they no longer find it viable to run such small businesses.

This despite the National Sample Survey Organisation (NSSO) data revealing that the real income in rural AP has shot up by 38% between 2004-05 - 2009-10 after MNREGS. "Micro enterprises are being destroyed as costs of running such business have shot up drastically and people prefer to work as casual labour as it provides them hassle-free income. This approach is fine in the short-run, but in the long-run it would not translate into growth of the rural economy as real assets are not being created by work that is done under MNREGA," Ravi said.

The study was carried out over a period of three years 2007-2010 and surveyed 3,485 individuals across 1,066 households and 198 villages. The villages were divided into two categories - 103 as treatment villages and the rest as control villages.

The treatment villages were ones where 426 households were identified and females from these families were provided with capital and resources to begin their entrepreneurial ventures. While 60% of them chose to work with livestock, others selected grocery shops, tailoring, horticulture nursery and the like. Adequate training was imparted and it was assumed that people will be able to run their micro businesses successfully and eventually escape from the poverty trap in the long-run. No interventions were made in the control villages.

But by the end of the three-year period, almost half of them had either abandoned or sold their business to enter the MNREGS pool while the others were struggling to stay afloat. The study found that there was no significant impact on income, consumption or asset accumulation of the group running micro enterprises and their incomes were at par with those residing in the 'control villages'. "It was evident that people were making rational choice of moving towards MNREGS as it ensured easy income," she said.

Stressing that schemes such as MNREGS are necessary in a poor country like ours, she said, "These programmes must be designed in such a way that it does not hinder rural enterprises that have the potential to create regular employment and lead to the growth of the rural economy."

She also criticized the recent move followed by a few state governments to increase the number of days of work under MNREGS from 100 to 150 days saying that growth occurs through enterprise and this programme is neither creating assets nor skills that can boost economic growth in rural areas.

The Times of India, 14 February, 2013, http://timesofindia.indiatimes.com/city/hyderabad/MNREGS-killing-entrepreneurial-spirit-of-rural-AP-says-study/articleshow/18491088.cms


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