Veena Kulkarni. Raghav Gaiha

The social security measure seems doomed with budgetary cutbacks and frequent wage hikes
If neglected, mild hunger turns into starvation and a slow death.Low `excess’ demand for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has become massive in recent years. That is, the number of households that sought work or registered for it exceeded the number that worked under this scheme.Although not a precise measure of excess demand, it is a quick but intuitive approximation.

Indeed, comparison of funding for MGNREGA and its performance during 2013-15 reveal a slow `kill’.Despite a strong assertion by finance minister Arun Jaitley to the contrary , the budgetary outlay for 2016-17 in real terms is much lower than the amount spent in 2015-16, and way below the peak in 2010-11. If unpaid wages are deducted from the budgetary outlay , the prospects of MGNREGA in relieving agrarian distress in drought-ravaged states seem much grimmer.

Proportion of households participating in MGNREGA plummeted from 32.5% in 2012-13 to 11.80% in 2014-15, a reduction of about 64%.All states recorded sharp reductions regardless of whether they were the best-performing states (Tamil Nadu, Arunachal Pradesh and Chhattisgarh) or the worst (Punjab and Haryana), with participation rates below 5%. As a result, excess demand for MGNREGA shot up.

While 12 of the 22 states analysed here had excess demand in 2012-13, all states had excess demand in 2014-15. Worse, several states that had a few hundred households who sought but didn’t get work in 201213, reported an excess of a few lakhs or more who didn’t get work in 201415. In Karnataka, for example, there was an excess of about 330 households who sought but didn’t get work in 2012-13, which surged to over eight lakh households in 2014-15.

In sharp contrast, the proportion of households participating in MGNREGA for 100 days in a year rose moderately . The average moved up from 8.9% to 13.7%. However, while a few states (Kerala, Jammu & Kashmir, Uttar Pradesh, Maharashtra and Karnataka) improved their pe rformance, some (Andhra Pradesh, Bihar and Tamil Nadu) deteriorated, and others (Punjab and Gujarat) stagnated at low levels.

A worrying feature of MGNREGA is rampant delay in payment of wages. Data from the India Human Development Survey (IHDS) 2011-12 show that about 32% of the participating households had to wait for a month or longer to get paid. Whether Aadhaar-based electronic transfer of wages is more prompt and much less prone to corruption is not self-evident. All that seems to have changed is the format of payment, but without much change in the cast of characters.

How are some of these outcomes affected by cuts in MGNREGA expenditure, and hikes in wages is analysed using data for 2012-13 and 2014-15 (supplemented by data for other years).

A10% cut in MGNREGA expenditure is associated with an 8.2% reduction in the number of participating households. Given the expenditure, a 10% higher MGNREGA wage rate is associated with a 27% reduction in the number of participating households.

For a given expenditure, instead of benefiting the poor, politically motivated -but ill-informed -hikes in MGNREGA wage rates are more likely to `ration’ them out.That such rationing is incompatible with a `demand-driven’ MGNREGA doesn’t require elaboration.

Examining the huge rise in excess demand, we find that a 10% cut in MGNREGA expenditure is associated with a 10.7% higher excess demand, as work opportunities shrink.A10% higher wage rate, on the other hand, is associated with a 35.5% higher excess demand, as a substantially larger number of households seek work under this scheme.Spiralling of excess demand is, thus, attributable to both expenditure cuts and hikes in MGNREGA wage rates, especially the latter.

Not just participation, but also the duration of participation matters. So, we analysed variation in the number of households that worked 100 days in a year. The number was higher in states with higher expenditure and higher MGNREGA wage rates. In fact, the latter effect is considerably larger than the former. Falling back on our earlier research, many of those who worked for 100 days weren’t the poorest, as they got `crowded out’ by the betteroff. Easier access to information and better networking are key .

In sum, even at the risk of exaggeration, MGNREGA seems doomed with budgetary cutbacks and frequent wage hikes.Kulkarni is associate professor of sociology, Arkansas State University, US, and Gaiha is former professor of public policy, University of Delhi.