This article titled ‘Significance and Critical Analysis of MGNREGA’ is written by Rishabh Kumawat and discusses the MGNREGA and brings out a critical analysis of the act. I. Introduction Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is a job guarantee scheme program for rural Indians. It was enacted on 25 August 2005. This program provides a legal guarantee… Read More »

This article titled ‘Significance and Critical Analysis of MGNREGA’ is written by Rishabh Kumawat and discusses the MGNREGA and brings out a critical analysis of the act.

I. Introduction

Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is a job guarantee scheme program for rural Indians. It was enacted on 25 August 2005. This program provides a legal guarantee of at least 100 days of paid employment annually to senior members of any family who wishes to do unskilled handicrafts related to community service at a minimum wage of RS 120 per day at 2009 rates.

If they fail to do that, the government should pay a salary to their homes. The central government-funded for this program which was RS 4000 billion in the 2010–11 financial year. This initiative was introduced with the aim of improving the purchasing power of illiterate or unskilled rural people, whether they fall into poverty or not.

About one-third of the workforce is female. This law was originally called the National Rural Employment Guarantee Act (NREGA) and was renamed “Mahatma Gandhi” on 2 October 2009, Gandhi’s birthday. In the year 2011, the program was commonly criticized controversy over corrupt authorities, lack of funding as a resource, low quality of resources produced under this program, and unintended negative impact on hardship.

II. Aim and Objectives

  1. To provide social protection in rural India by providing them with job opportunities.
  2. To provide livelihood security – by creating long-lasting assets, improving water security, soil conservation, and increasing land productivity.
  3. Drought and flood management in rural India must be effective.
  4. Empowerment of socially disadvantaged people, particularly women, Scheduled Castes (SCs), and Scheduled Tribes (STs), through rights-based legislation processes.
  5. Increasing decentralized, participatory planning by bringing together various anti-poverty and livelihoods initiatives.
  6. Strengthening Panchayati Raj Institutions to Deepen Democracy at the Ground Level
  7. Increasing transparency and accountability in governance.

As a result of its impact on social protection, livelihood security, and democratic empowerment, MGNREGA is a potent tool for ensuring inclusive growth in rural India.

III. Salient features of the Act

  1. All adult members of a rural household who are willing to do unskilled manual labour have the right to work.
  2. A household in this situation must register with the Gram Panchayat.
  3. Going to follow verification, the Gram Panchayat will issue a Job Card containing a photograph of all adult members of the household who wish to work under the program.
  4. The Job Card must be kept in the possession of the household.
  5. Job Cardholders can apply for work at the Gram Panchayat, which will provide them with a dated receipt of their application.
  6. The Gram Panchayat (local self-governing body) will provide employment within 15 days of receiving a job application, failing which an unemployment allowance will be paid.
  7. Wage payments must be made on a weekly basis and no more than once every two weeks.
  8. Wages will be paid to wage earners through their bank/post office accounts at the wage rate.
  9. An annual shelf of works that must be prepared ahead of time for each year.
  10. At the GP level, a wage-to-material-cost ratio of 60:40 should be maintained.
  11. In the execution of works, no contractors or labour-displacing machinery shall be used.
  12. Panchayati Raj Institutions will play a key role in planning, monitoring, and implementing policies.
  13. Women should make up at least one-third of the workforce.
  14. The State Government has a built-in incentive-disincentive structure for ensuring employment.

IV. Other provisions of the Act

  1. Funding: Central Government -100% of wages for unskilled manual labour, and 75% of the material costs of the schemes, including wage payments to skilled and semi-skilled workers. State Government- 25% of material costs, including wages for skilled and semi-skilled workers. The state government pays the entire unemployment allowance.
  2. Timely Allocation of Work: According to Schedule I, Para 10 of the Mahatma Gandhi NREGA, the PO and the GP have the authority to direct any person who has applied for employment to do work of any type permissible under the Act.
  3. Unemployment Allowance: If an applicant is not hired within fifteen days of submitting his or her application for employment, he or she is entitled to a daily unemployment allowance
  4. Wage-related: section 6(1) of MGNREGA states that, notwithstanding anything in the Minimum Wages Act 1948, the central government may specify the wage rate for the purposes of the Act by notification. Section 6 (2) states that until the central government fixes a wage rate in respect of any area in a State, the minimum wage set by the State Government under Section 3 of the Minimum Wages Act, 1948 for agricultural Labour shall be considered the wage rate applicable to that area.

V. Significance of the Act

  1. MGNREGA has developed the largest recruitment system in human history and is unlike any other payroll system, be it its composition, or thrust. Its people-centred, driven by search, selection, rights-based structure is unique and has never been more.
  2. MGNREGA provides a formal guarantee of salary hiring. It is a demand-driven system where the provision of employment is due to the need for employment by those who want money.
  3. There are legal provisions for benefits and compensation in both cases where it fails to provide the employee with necessities and delays in paying the employee.
  4. MGNREGA overcomes the problems of identification through its targeted payees, that is, a large proportion of the poor and most exposed are the ones who seek employment under this particular Scheme. The law encourages countries to provide employment, as it is 100% of the cost of unskilled labour and 75% of the program costs incurred by the Institute.
  5. Unlike the previous wage plans based on the allocation, MGNREGA is driven by demand and the transfer of resources from institutional to internationally based on the need for service in each government. This provides an additional incentive for States to use this Act to meet the employment needs of the poor. There is also inconvenience associated with failure to provide timely employment, as governments bear the cost of unemployment benefits. Gram Panchayats (GPs) uses at least 50 % of jobs in terms of cost.
  6. This mandate devolution of financial resources to GPs has never existed before. Plans and decisions about the type and choice of tasks to be performed, how each task should be started, domain selection etc. all must be done at open Gram Sabha (GS), open meetings and approved by the GP. Services listed at the Intermediate Panchayat (IP) and District Panchayat (DP) levels must be approved and prioritized by the GS before administrative approval can be granted. GS can accept, amend or reject.
  7. These choices cannot be overturned by the higher authorities, except for the degree to which they have complied with the provisions of the Act and its operational guidelines. This down-to-earth, people-centred, demand-driven structure also means that a large part of MGNREGA’s success responsibility lies with salary seekers, GSs and GPs.
  8. MGNREGA also marks a break from past aid schemes to focus on integrated natural resource management and the idea of ​​producing livelihoods.
  9. Social research is a new feature that is a significant part of MGNREGA. Most likely, this creates an unpredictability of performance in an unprecedented way, especially for those who participate immediately. The Annual Report prepared by the Central Employment Guarantee Council (CEGC), on the results of the MGNREGA, needs to be presented annually by the Central Government in Parliament.
  10. Accordingly, the annual reports prepared by the State Employment Equity Councils (SEGC) will be presented to the State Legislatures through the State Government, directing oversight by elected representatives. The new scenario of this program requires new ways to use it effectively. This will ensure that the novel elements of MGNREGA are properly located in the ground; at the highest level of its implementation. These Terms of Use have been issued to facilitate compliance.

VI. Analysis

Before we can analyse the MNREGA act, firstly we need to understand what poverty is and what rural household development is?

Poverty is defined as a situation in which various factors such as low income, poor health, low-calorie consumption, lack of education, lack of skills, employment, and job opportunities form an endless loop.

World Bank has defined poverty as “pronounced deprivation in well-being” and also it has emphasized that poverty has many other different aspects such as “low income, limited access to education and health care, voicelessness, powerlessness, vulnerability, and exposure to risk”[1]which determine poverty.

Developmental Assistance Committee of the OECD defines poverty as the “inability of the people to meet economic, social and other standards of well-being.”[2]

Rural household development may mean different things to different people; for some, it may mean better financial standing, while for others, it may mean better access to amenities like health care and education. However, the researcher in this paper takes a different approach to development. For the purposes of this paper, the development of the rural household entails income, access to education, health care, job opportunities, and access to basic amenities such as clean water, shelter, and sufficient food.

The MNREGA initiative has been running for ten years and is now in its eleventh year. This initiative’s reach has grown year after year since its inception, and it has provided nearly 90 crore rural households with job cards since 2006. Of those 90 crore households, nearly 35% have requested employment, and nearly 98 % of those who requested employment have received one.

From 2006-07 to 2014-15, an average of 40 crore households were provided with employment, with around 4.5 crore households receiving a job per year, accounting for nearly 30 % of the rural household population in the country. Six states have promoted this programme – Rajasthan, Tamil Nadu, Uttar Pradesh, West Bengal Andhra Pradesh and Madhya Pradesh have provided employment to more than 4 crore households from the inception of this initiative till the year i.e., 2015-16.

Also, Karnataka, Assam, Bihar, Jharkhand, Odisha and Chhattisgarh, each state, has provided employment to 2-3 crores households until now and all other states, each state individually, have provided employment to less than 1.5 crores households until now.

The available data show that the MNREGA programme has had a tremendous impact, reaching nearly 35% of rural households each year. However, another issue that must be investigated is how many person-days of employment have been generated on average for the 35 % of rural households that have been provided with employment. The number of days of employment received by each household is very disappointing.

According to the data available so far, each rural household receives approximately 40-55 days of work on average, as opposed to the 100 days of guaranteed employment provided by the statute[3]. The current figure is less than half of what the statute guarantees.

To determine the impact of the MNREGA on rural household income, data from a sample survey conducted by the Agriculture Development and Rural Transformation Centre, ISEC, was used for their study. A rural family participating in the MNREGA programme has an average household size of 4.5-4.7 people, an average number of earners in each household of 2.2-2.6 people, and a literacy rate of less than one-third.

In comparison to non-participating households, the average number of earners and literacy rate was much higher among participants. Wage rates under the MNREGA range from Rs. 80 per day to Rs. 150 per day, with an average wage rate of Rs. 100.16 provided under the MNREGA[4].

The wage rate provided under the MNREGA programme in many states was less than the minimum stipulated in the Minimum Wages Act of 1948. However, while the wages provided under MNREGA were lower than those provided under the Minimum Wage Act, they were higher than the prevailing wage rate for unskilled labour in agriculture and other activities. According to the survey, the MNREGA was successful in increasing rural households’ annual income by providing guaranteed wage employment.

More than 60% of the households participating in the survey admitted that the wages from the MNREGA initiative had contributed to their annual income in the range of Rs.5000 – Rs.10000, and nearly 8% of the households reported an increase of more than Rs.10000 in their family’s annual income, while the rest reported only an increase of up to Rs.5000[5].

Nearly 98 % of households agreed that the wages earned through the MNREGA scheme were beneficial to them and provided them with additional support. The survey gathered information on wage utilization among rural households who received additional funds through MNREGA.

It was discovered that the majority of households prioritized a better food basket after an increase in income, with the education of their children and health coming in second and third, respectively. According to the survey findings, the money is being used to improve the quality of life and to address human development issues.

The additional income earned by rural households through MNREGA has significantly increased their purchasing power, and the rural households have spent the additional income effectively by spending on better quality of life and human development issues, which is a positive sign for a better society and people.

The MNREGS programme also provides an incentive for rural households to demand higher wages in the open market through the provision of additional bargaining power. Women opting into the MNREGA programme has also had a positive impact, as it provides women with their own economic independence and freedom, empowering them, and the MNREGA does not discriminate between a man and a woman in terms of wages, the wages of both men and women are the same, which has given women more confidence.

The MNREGA program’s impact can be measured in terms of how far it has influenced the state’s ranking in the Human Development Index (HDI). Evidence suggests that MNREGA has had a positive impact on the four major HDI indicators, namely income generation, economic self-reliance, women’s empowerment (including gender mainstreaming), and quality of life.

The survey recorded the information regarding the wage utilization among the rural household with additional money they got through MNREGA. It was found that the majority of the household opted for a better food basket after the increase in their income, the second most prioritised was the education of their children and health[6].

Utilization Pattern No. of families Percentage (%)
Good Food 141 81
Children’s Education 126 72
Health-related Expenditure 112 64
Household Things 61 35
Agriculture 49 28
Renovation of the house 25 14
Irrigation of work 14 8
Paid back debts 11 6.3
New Insurance Policy 7 4

VII. Suggestion

The MNREGA’s goal is to improve rural people’s livelihood security by providing 100 days of guaranteed employment. However, statistics show that state governments are not providing 100 days of guaranteed employment, and the average number of employment days is very low when compared to the statutory provision.

If state governments take adequate measures to ensure that the rural household receives 100 days of guaranteed employment, it will result in additional income for the rural household, which will have a positive impact on their development.

New provision for providing free lunch for the workers at the worksite must be included in the legislation, doing this will enhance the food security of the rural household and it will save the additional cost which was incurred for their lunch, therefore leading to additional income at their disposal, and increased purchasing power.

VIII. Conclusion

The National Rural Employment Guarantee Act (MGNREGA) 2005 is a milestone in India’s history of post-independence social security laws. Made after a successful legal struggle to secure employment, it is a partial victory for the full right of employment in any developing country. An important aspect of this law that distinguishes it from any other public service delivery system is its defeat by the Indian parliament.

This law has been bringing about a peaceful transformation in the rural areas of the country. The MGNREGA Act for the first time introduces the role of the state as a livelihood provider in the access of the participants/beneficiaries themselves. By design, it is different from any other productive work plan ever used.

It requires a different approach to employment creation programs and the involvement of the Government as a whole in providing employment rights to the majority of its members (Center for Humanities Science and Human Development Center). As a result, we must go a long way to improve the rural people’s quality of life.

Thus, the MNREGA programme has definitely brought about development in rural households, allowing them to access many facilities and improve the quality of their lives. life, but this development is limited; MNREGA has not completely developed rural households, and it is not sustainable.

It is possible for MNREGA to completely develop the rural household on its own. This complete development is possible. only occur when the federal and state governments implement policies and initiatives that promote growth and development household development in rural areas


[1] World Bank (2001): Attacking Poverty. World Development Report 2000/01, Washington.

[2] OECD (2001): The DAC Guidelines. “Poverty Reduction”, Paris.

[3] Preamble, The Mahatma Gandhi National Rural Employment Guarantee Act, 2005.

[4] R.K.A Subramanya, Social Protection of the Workers in the Unorganized Sector, Indian Journal of Industrial Relations, 48(3), 2013.

[5] Raghav Gaiha, Does the Employment Guarantee Scheme Benefit the Rural Poor in India? Some Recent Evidence, 45(6), University of California Press, 2015

[6] Anil Ganeriwala, An Impact Assessment Study of usefulness and sustainability of the assets created under MGNREGA in Sikkim, IRMA, 2010

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Updated On 27 Dec 2021 2:27 AM GMT
Rishabh Kumawat

Rishabh Kumawat

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