THE SIGNIFICANCE AND LIMITATIONS

OF INDIA’S NATIONAL RURAL

EMPLOYMENT GUARANTEE ACT IN
ADDRESSING RURAL POVERTY

Smita Gupta
The post-1990s are marked by the pursuit of neo-liberal policies:

Deflationary macroeconomic policies and falling public

development expenditure as pc of GDP on public works,
employment generation, rural infrastructure, social services,
etc.

Trade liberalization with farmers loosing protection against

international price fluctuations

Structural Adjustment Policies resulting in higher input

costs and withdrawal of the state from credit, extension
services, procurement, price support and infrastructure.

An unparalleled and comprehensive crisis took firm root

in rural India, resulting in peasant suicides, starvation
deaths, impoverishment, and hunger.
 RURAL CRISIS
Growing unemployment and underemployment
Falling purchasing power
Declining per capita availability of foodgrains
Reduced farm incomes and real wage growth
Indebtedness and land alienation, esp. for
small and marginal farmers.
Deceleration in agricultural growth, productivity
per worker and rural non-agricultural employment
growth
Slackening pace of poverty reduction and
worsening poverty amongst marginalized social
groups and ethnic minorities
The distress resulted in electoral defeat for the
NDA Government at the Centre, and the UPA
government promised to enact the National Rural
Employment Guarantee Act, which has the potential
of turning around the agrarian distress.

However, forces within the government itself

opposed a full-fledged employment guarantee and
produced various diluted and inadwquate versions
of the Draft Act

Interventions by Left parties and pressure from

mass organizations, social movements, and NGOs
resulted in the successful enactment of an improved
guarantee.
Broadly speaking, three different positions are taken
on NREGS:
1. Left-Keynesian: it is both desirable and feasible
for broad-based equitable growth to revive
agriculture and the rural economy by the creation
of productive assets and the multiplier effects of
demand expansion in a situation of excess
capacity, unemployment and idle resources.
2. Neo-liberal: It is neither desirable nor feasible on
the grounds of non-affordability, corruption, and
preference for human capital and infrastructure-
led growth models.
3. Liberal: it is the ‘human face’ of globalization, a
kind of ‘social safety net’ which is desirable but
feasible only under very restricted conditions of
fiscal discipline.
The Employment Guarantee Act is a step
towards the right to work, as an aspect of
the fundamental right to live with dignity

It is a recognition that the state cannot

retreat from rural development and is
responsible to ensure food and livelihood
security for the masses
The neo-liberal state had begun to intervene more and more aggressively against the poor and rural India. The NREGA is a recognition that the state cannot retreat from pro-
poor development and is responsible to ensure food and livelihood security
The National Rural Employment
Guarantee Act 2005 is a law whereby
any adult who is willing to do unskilled
manual work at the minimum wage is
entitled to being employed on local
public works within 15 days of
applying, with a guarantee of 100
days of unskilled manual work per
household per year
Currently it covers half of rural
India, to be extended to the rest
within 4 years
NREGS is a “demand driven”
programme and employment
is to be provided to eligible
workers on demand, within
15 days.

Step 1 Registration
Step 2 Verification
Step 3 Issuing Job Cards
Step 4 Application
Unemployment allowances
If Employment is not provided within 15 days of receipt of
application, the worker shall be entitled to a daily Unemployment
allowance(7(1))
Rates (7(2))

 For First 30 days

 One fourth of the wage rate.

 For the remaining period of  Not less than one half of the
the Financial year wage rate

 Employment wage +  Equal to the wages for 100

Unemployment days of work in a financial
allowance year (7(3d))
 Minimum Wage
 A person working for 7 hours would normally earn a
wage equal to the wage rate(SchI(8))
 Minimum wage fixed by the state Government under
the minimum wage Act,1948;
 Centre may fix wages, at not less than Sixty rupees
per day (6(1))
 The Act permits productivitylinked wages under piece
rate, with due protection
Mandatory Worksite Facilities for laborers
 Safe drinking water

 Shade for children and periods of rest

 First-aid Box for emergency treatment and minor

injuries

 Depute one woman worker to look after five or more

children below the age of six years of women
laborers at the wage rate
Permissible works in order of priority(SchI(1))
 water conservation;
 drought proofing ;
 irrigation canals including micro and minor irrigation
works;
 provision of irrigation facility to land owned by
households belonging to the SCs and STs or to land of
land reforms and Indira Awas Yojana beneficiaries;
 renovation of traditional water bodies;
 land development;
 flood control and protection works;
 rural connectivity to provide all-weather access; and
 any other work which may be notified by the Central
Government in consultation with the State Government.
 OUTCOMES [field reports]

 Reduction in distress out-migration due to

availability of additional income and work
 creation and repair of rural infrastructure like
roads and water bodies
 Retention of children in school and purchase of
books for them
 Greater interest in local area development due
to flow of funds and village meetings
 Changing local dynamics in many places with the
recognition by workers that they are right
holders
 Expansion in membership and activities of
workers’ and peasant organizations
 NREGA and Poverty Reduction
Potential: NREGA holds a huge promise for poverty reduction
with a supplementary average annual household income of Rs
6000. for this, wages, work days and aggregate expenditure on
the Scheme should be high if the Programme has to make any
significant dent on poverty. Creation of social and economic
infrastructure too would go a long way in reducing poverty.

Experience: The poverty reducing potential is severely

undermined through:
non-recognition of eligible persons as right holders;
inability to make claims due to imposition of a host of arbitrary
and discretionary eligibility conditions;
non-fulfilment of entitlements guaranteed under the Act, in
particular days of work and wages;
restrictions on the nature of permissible works;
absence of work in the most food-deficit rainy season due to
focus on manual labour and earth works
CURTAILMENT OF ENTITLEMENTS

A. Definition of Household
On the basis of common kitchen not nuclear family,
number of eligible workers per household >3
This reduces per capita entitlements
Disenfranchises female headed households and
widowed/separated/estranged married daughters in
natal and marital homes

B. Exclusion of Eligible Persons

Elderly
Migrants
Lack of documentary evidence not required by the law
Divorced/widowed/separated women in natal/marital
homes as separate nuclear households
 Percentage

10.00
20.00
30.00
40.00
50.00
60.00

0.00
Andhra Pradesh
Arunachal Pradesh
Assam
Bihar
Chhattisgarh
Gujarat
Haryana
Himachal Pradesh
Jammu & Kashmir
Jharkhand
Karnataka
Kerala
Madhya Pradesh
Maharashtra

States
Manipur
Meghalaya
Mizoram
Nagaland
Orissa
Percentage Rural Households Issued Job cards

Punjab
Rajasthan
Sikkim
Tamil Nadu
Tripura
Uttar Pradesh
Uttaranchal
West Bengal
All India
C. Non-payment Of Minimum Wages 
Workers are earning no more than 40 to 60 per cent
of minimum wage, ranging from Rs 16 to Rs 40 per
day

Due to unrealistically high work norms under

productivity linked piece rates;
Inadequate identification of the component tasks;

No differentiation for the elderly, women and ecology;

Administrative inadequacies in task specification, soil

identification, lift and lead provision, measurement,
both in terms of procedures and adequacy of staff
 D. INADEQUATE WORK
GENERATION DUE TO
RIGIDITIES IN PERMISSIBLE
WORKS AND
ADMINISTRATIVE
INADEQUACIES
 Work Days

0.00
10.00
20.00
30.00
40.00
50.00
60.00
Andhra Pradesh 70.00
Arunachal Pradesh

Assam

Bihar
Chhattisgarh

Gujarat
Haryana

Himachal Pradesh

Jammu &Kashmir

Jharkhand

Karnataka

Kerala

Madhya Pradesh

Maharashtra

States
Manipur

Meghalaya

Mizoram

Nagaland
Work Days Per Registered Household

Orissa

Punjab

Rajasthan

Sikkim

Tamil Nadu

Tripura

Uttar Pradesh

Uttaranchal

West Bengal

All India
E. INADEQUATE WORKSITE FACILITIES

F. NON-PAYMENT OF UNEMPLOYMENT
ALLOWANCE OR COMPENSATION

All these combine to result in

G. UNDERUTILIZATION OF FUNDS AND

LOW EXPENDITURE
 Percentage Expenditure against Total Available Funds

100
120

0
20
40
60
80
Andhra Pradesh
Arunachal Pradesh

Assam

Bihar
Chhattisgarh

Gujarat
Haryana

Himachal Pradesh

Jammu & Kashmir

Jharkhand

Karnataka

Kerala

Madhya Pradesh

Maharashtra

States
Manipur

Meghalaya

Mizoram

Nagaland

Orissa
Financial Performance During 2006-07

Punjab

Rajasthan

Sikkim

Tamil Nadu

Tripura

Uttar Pradesh
Uttaranchal

West Bengal

All India
 CONCLUSION
• Teething trouble apart, the same forces of
fiscal conservatism that earlier tried to dilute
the Act are now trying to curtail entitlements
and minimize expenditure
• However, the NREGA offers an unprecedented
opportunity to initiate broad-based growth
through poverty reducing employment
generation and consequent demand expansion
• Therefore, the recent reports of mobilization
and struggles by rural workers for the full and
proper implementation of the NREGA is good
news!