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Evaluation of
Evaluation of MGNREGA: data MGNREGA
envelopment analysis approach
Sarabjeet D. Natesan and Rahul Ratnakar Marathe
Department of Management Studies,
Indian Institute of Technology Madras, Chennai, India
181
Received 4 June 2015
Abstract Revised 12 September 2015
5 November 2015
Purpose – How can efficiency of a welfare scheme be measured? The purpose of this paper is to develop an Accepted 12 November 2015
efficiency evaluation model, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)
implementation efficiency model (MIEM), to evaluate the rural employment guarantee scheme in India.
Design/methodology/approach – MIEM employs data envelopment analysis (DEA) to compare relative
efficiency of MGNREGA implementing states. It uses policy implementation process as a central “black-box”
about which not much can be said, to account for state-wise implementation differences.
Findings – Based on administration, funds, expenditure, employment created, works executed and
completed, women beneficiaries and households completing 100 days of employment, the MIEM captures
current implementation efficiency and provides suggestions to propel inefficient states toward efficiency.
Practical implications – DEA has operationalized MGNREGA evaluation. As a decision support system,
MIEM assists evaluators to develop guidelines from better performing states. It is anticipated that it will
facilitate scaling up MGNREGA in inefficient states.
Social implications – The model developed here can be applied to diverse evaluation conditions thus
leading to better utilization of scarce resources.
Originality/value – This paper is one of few to use DEA to evaluate MGNREGA, and is one of the first to
evaluate all India implementing states on efficiency.
Keywords Governance, Efficiency, DEA, Welfare policy, Policy evaluation, MGNREGA,
Efficiency benchmark
Paper type Research paper

1. Introduction
India, battling the twin problems of poverty and unemployment since the turn of the
twentieth century, has relied heavily on policy directives as a course-correction action.
Successive governments, faced with widening chasms of inequality, have undertaken
welfare schemes to bridge the gaps. The focus of this paper is evaluation of the rural
flagship scheme of the Government of India, the Mahatma Gandhi National Rural
Employment Guarantee Act-2005 (MGNREGA). MGNREGA sharply changed the way
government reached out to the needy. Aiming to give dignity to earn a livelihood to the
beneficiary, it turned entitlements into work. The scheme made it mandatory on the
government to provide upon demand, 100 days of guaranteed unskilled employment in a
year at INR100 ($1.50) a day, to any one adult member of a rural household registered for the
scheme. Along with providing a rural safety net, it also tried to usher in social,
infrastructural and environmental change in rural India. The central government provides
dedicated resources and the implementation rests with the states. Tremendous hope goes
with MGNREGA, “structured as a social safety net [with] the potential to transform rural
India into a more productive and gender equitable society and become the driver of
environmental regeneration” (Kamath, 2010). Rural economies face challenges far removed
from those faced by urban centers and thus require more robust and far sighted
implementation and evaluation methods.
International Journal of Social
That previous visionary schemes with generous budgets have not fully achieved Economics
expected results can be attributed to India’s multi-dimensional nature and differential Vol. 44 No. 2, 2017
pp. 181-194
state-wise implementation capacity. To study this differential, this paper characterizes and © Emerald Publishing Limited
0306-8293
attempts to outline the complex relationship between input and output variables in the DOI 10.1108/IJSE-05-2015-0114
IJSE presence of a “black-box” of implementation process (Thomson and Perry, 2006). With large
44,2 welfare projects being implemented over multiple organizations and networks, state-wise
implementation is also impacted upon by their “collaborative processes” and “networks of
implementation” or perhaps the lack thereof.
This paper looks at the state-level implementation of the MGNREGA, on the basis of the
following criteria: administration, funds utilization rate, expenditure on wages, employment
182 created, number of women beneficiaries, works completed and households completing
100 days of employment (MGNREGA Operational Guidelines, 2014). A state creating the most
person days is automatically hailed as the best, irrespective of the inputs used to achieve this
output ( Jha and Gaiha, 2012). The fundamental rationale of this study is to create a framework
on which to evaluate efficiency of implementing units with differential implementation
abilities to measure input usage over output created. The implementation process at the state
level is characterized as the “black-box” whose antecedents are perhaps not known with
certainty and evaluated using a non-parametric data envelopment analysis (DEA) approach.
The specific research objectives of this study are:
(1) benchmark the MGNREGA implementing states on the basis of efficiency in terms
of ratio of outputs over inputs;
(2) identification of efficient and inefficient states and possible reasons for their
performance; and
(3) for the states lagging behind, suggest ways to scale up implementation to provide
efficient program outcomes.
Focusing on efficiency and target delivery of scarce financial and human resources will help
to achieve resource-use optimization. This paper will explain the efficiency values from the
DEA and aim to derive state-wise policy implications. This research will add to the national-
and state-level implementation literature on MGNREGA. It is also anticipated that it will
provide a decision support system to the MGNREGA implementing agencies and the
necessary policy directions that can enable inefficient states to scale up and achieve greater
implementation success.

2. Earlier studies regarding MGNREGA implementation challenges

Extending social protection on equity, empowerment, economic, social and cultural rights as
a transformative social policy (Devereux and Sabates-Wheeler, 2004), MGNREGA has
received critical scrutiny for the promises it made and the extent to which they have and
have not been realized. Being a rural scheme, it faces challenges because both implementers
and beneficiaries confront political and power obstacles (Raabe et al., 2010). The complex
mechanics of the scheme involve the central, state and three tiers of local government.
The three tier rural local administrative divisions of India are a nested hierarchy of
sub-division of districts, blocks and villages. The village (gram) panchayat is an elected
body at the lowest democratic level and controls five or six villages.
MGNREGA has seen coverage increase from 200 districts to the entire country’s
644 districts, yet implementation challenges remain. Studies have focused heavily on its effect
on beneficiary incomes (Ravallion, 2008; Sharma, 2013), migration and wages (Mukherjee and
Sinha, 2011; Gulati et al., 2014), gender equality (Antonopoulos, 2007, 2013), environmental
convergence (Satish et al., 2013), leakages of the scheme and corruption (Anderson et al., 2013),
and targeting and capturing (Imai, 2007) among other issues. The role of proper planning in
ensuring the success of MGNREGA is a common theme in many studies (Hirway, 2004;
Chakraborty, 2007; Raabe et al., 2010). Elite capture and corruption issues have been linked to
implementation failure ( Jha et al., 2009). Kamath (2010) discussed gender bias in the scheme,
reflected in the fact that male and female wage rates have still not equalized. More recent
literature has focused on micro studies and geographic-specific work on gender, wages and Evaluation of
income factors (Ravi and Engler, 2009; Das, 2013; Datta and Singh, 2012, 2014). MGNREGA
Policy implementation often interrupts achieving policy objectives and immediate
impact (Pressman and Wildavsky, 1973) and many well designed policies meet their
nemesis at the implementation stage. Earlier studies on MGNREGA have documented
macro challenges facing its implementation and three issues stand out: governance
(administrative), planning and resource utilization. The governance challenge – defined in 183
terms of administration ability and the role of implementers – is felt in numerous ways, such
as the absence of “sufficiently large number of trained support staff” (Hirway, 2006a;
Raabe et al., 2010). The vacant posts of program officers (districts) who were intended
to helm MGNREGA implementation illustrate this shortfall. Ministry of Rural Development
databases reveal that most of these posts remain open and the work is being done by junior
level block development officer (BDO) (nrega.nic.in). The BDOs are already implementing
multiple state- and center-sponsored welfare schemes and their workload affects program
results. Research has also documented how structural deficiencies and procedural lapses
affect ground level implementation by gram panchayats (village level governance units) and
program outcomes (Chakraborty, 2014). A major implementation hurdle cited in the
literature is the beneficiary demand expectations vs the implementers’ provision of work
(Chopra, 2014). This echoes “major problem cited in implementation is the matching of the
demand for work to supply of work” (Hirway, 2006b; Chakraborty, 2007). The assumption
that “all those who need employment will come forward, get work within fifteen days or
receive an unemployment allowance in lieu of work, [and] will get wages paid every week on
a regular basis” requires “quantum jump in planning and administrative commitment”
(Hirway, 2006a). Low organizational capacity, low funds utilization, low existing
institutional arrangements in smaller poorer low performing states paradoxically get
pushed back even more as the budget outlays are based on planning and implementation
outcomes and low performing states in need of better planning and resources get
significantly less of these (Chakraborty, 2007). States in need of better planning and
resources are caught in a vicious circle because their budgets are determined by their
already low performance and relatively poor implementation outcomes, while better
planned states appropriate a larger share of the MGNREGA funds.
Efficiency evaluation of MGNREGA implementation has been surprisingly limited, given
the usefulness of this analysis in mapping inputs used and outputs created; to map
efficiencies and create benchmarks. Datta and Singh (2012) measured MGNREGA
implementation efficiency through DEA to analyze the issue of women’s participation and
share of employment days influenced by socio-economic factors like education, caste,
religion, alternative income, health-related achievements and fund availability in the context
of “a poor region in India.” Datta and Singh (2014) also used efficiency analysis to evaluate
the impact of mass participation in MGNREGA on rural asset creation in the 19 districts of
West Bengal. Further their study also researched the overall performance efficiency of
MGNREGA on the basis of demand for “job cards” for the districts under review.
This paper uses DEA approach to categorize implementing states. It is a multi-factor
productivity analysis technique that evaluates the relative efficiencies of a set of economic
entities in the presence of multiple inputs and outputs (Charnes et al., 1978). Efficiency in DEA
is defined as the ratio of weighted outputs to weighted inputs. DEA is an effective approach to
assess the efficiency of organizations, where traditional performance measurement either fail
or are difficult to apply. Such situations typically occur especially within public sector or
non-profit organizations, where no strict functional relationships can be inferred between
factors of production, and where relative weights of these inputs and outputs are not
well-defined (Golany and Roll, 1989). DEA generates a large quantity of information to the
decision makers but its main advantages are its ability to handle large number of inputs and
IJSE outputs and combine them to a single comprehensive measure of relative efficiency
44,2 (Djerdjouri, 2005). DEA’s approach of “complex problem-simple solutions,” makes it a more
attractive and appropriate tool than other optimization techniques. In addition to using DEA
to map and benchmark educational development in the states of India, Gourishankar and
Lokachari (2012) also showcased research using DEA to measure efficiency of various
governmental administrative units like railways, banks, healthcare, telecommunications, etc.
184 The stochastic frontier analysis was not considered because of its inability to adequately
handle multiple outputs. Additionally, it relies on “statistical noise and outliers” and “requires
assumed underlying technology and functional form and cannot be directly used for
multi-output production analysis or multi-input cost analysis” (Zhang and Garvey, 2008).
DEA does not require specification of any functional form and nor models the “error” terms.
For this analysis, the non-parametric nature of the DEA approach made it “easy to handle
multiple outputs and multiple inputs” (Djerdjouri, 2005).

3. Research gap
A thorough scanning of the literature points to the extensive work done on impact of the
MGNREGA. However, there are very few studies on efficiency evaluation of its implementation.
The two efficiency studies enumerated above (Datta and Singh, 2012, 2014), limited their work
to state and district level evaluation. Thus the research gap that this paper hopes to fill is to
evaluate MGNREGA implementing states on the basis of efficiency. In doing so, this paper is
one of the first to provide efficiency evaluation of MGNREGA at the national level.
This paper’s contributions to the current academic work on MGNREGA are: it identifies
the state level efficiency analysis of resource use as a research gap, it benchmarks and
categorizes MGNREGA implementing Indian states on the basis of efficiency numbers
obtained from the DEA, it analyses state specific deficits and surpluses with respect to
inputs and outputs, and it develops state specific recommendations on how to transform an
inefficient state in to an efficient one. This research hopes to strengthen the policy response
of the government to scale up implementation and achieve better resource usage.

4. Methodology for measuring efficiency

This paper has attempted to operationalize policy evaluation by encompassing policy
objectives, policy implementation process and policy outcomes. To do this, it has borrowed
from two sources first, Thomson and Perry’s (2006) “black box” of “collaborative processes”
and second Charnes et al. (1978), non-parametric “data envelopment analysis.”

4.1 Collaborative processes – the central black-box

Drawing from policy implementation literature, this paper defines policy process as a
“tension generating force” between “idealized policy, implementing organizations, target
groups and environmental factors” (Smith, 1973). It also recognizes that policy is
increasingly being implemented through multiple organizations over complex networks
(O’Toole, 1997; Isett and Provan, 2005). This complexity in implementation has brought in
its wake a strong base for viewing it as a “collaborative process” (Huxham and Vangen
2005), through which implementing stakeholders can “constructively explore their
differences and search for solutions that go beyond their limited vision” (Gray, 1989).
The central black-box finds reference in “policy implementation” (Scheirer and Griffith,
1990) and Thomson and Perry’s (2006) “central black-box” in “public administration”
using “antecedents-process-outcomes.” Taking this forward and using the definition of a
black-box model as “one that does not use any prior knowledge of the character or physics
of the relationships involved” (Ljung, 1985), allows this research to equate the process at the
implementing states level with black-box of implementation.
 This paper defines the complex and multi-dimensional relationship between the input Evaluation of
used and output created as corresponding and characterized by the “central black-box” of MGNREGA
implementation process. “Central black- box” as the “implementation process” also finds
mention in Gourishankar and Lokachari’s (2012) study to benchmark Indian states
implementing the SarvaShikshaAbhiyan (2000) – education for all movement based on
expected outcomes. How the outcomes are created and the “forces” that work on them in the
“black box of process” are not known in advance (Thomson and Perry, 2006). MGNREGA’s 185
implementation is a complex process over many organizational structure and stakeholder
(Raabe et al., 2010). Local good governance and the process is critical to good
implementation. They transform inputs into outputs and ensure long run sustainability of
the scheme (Tadlock et al., 2005). The complexity of the “black-box” approach to
implementation is still not understood completely, it is surmised that this “black-box” is the
cause of differentials in implementation.

4.2 Data envelopment analysis: efficiency mapping

DEA (Charnes et al., 1978; Cooper et al., 2007) evaluates the efficiency of the entity called the
decision making units (DMU) on the basis of comparisons of ratios of output to input. DEA
ranks the DMU’s on the scale of global, technical and scale efficiency (SE). DEA defines the
efficiency of each DMU. The outputs are the outcomes (products and or services produced
by the units) and inputs are the resources (factor inputs used to produce the outputs).
A score of 1 (one) is considered as relative efficient and a score of less than 1 indicates
relative inefficiency. Each unit is allowed to select the optimal weights that maximize its
efficiency, subject to the condition that the efficiency of all the units is capped at one. This
input and output weights thus become the decision variables. Utilizing DEA as a
management tool in this discussion helps to identify the “key factors” of the DMU namely
the MGNREGA implementing states and offers answers to “improvements from the best
performers in the peer group” (Ramanathan, 2003; Lee et al., 2006).

5. Measuring MGNREGA implementation efficiency

The paper now presents an efficiency framework to examine the input output ratio between
factors used and output created in implementing the MGNREGA at the state level.
The framework called the MGNREGA Implementation Efficiency Model (MIEM) (Figure 1)
will help to quantify implementation quality and efficiency by measuring the output created
for the inputs used. It also terms the implementation process at the state level as the black-box,
of which not much is known in advance and perhaps leads to differential results in the output
created by MGNREGA implementing states. The MIEM provides existing implementation
quality and delivers efficiency measurement for benchmarking and categorizing the states.
The framework will attempt to offer suggestions for better outcomes.

5.1 Variable selection for DEA

In selecting the variables, the focus was on inputs that define the scheme’s resources and outputs
that define its requirements. Studies have ranked states on the basis of the average person days
of employment, percentage of households completing 100 days of employment, actual
expenditure over planned expenditure and completed works over planned works ( Jha and
Gaiha, 2012). These have become the criteria for variable selection for the MIEM (Figure 1).
Further, as implementation efficiency is to be maximized, the inputs can be either
minimized or the outputs, maximized. For the purpose of this paper the criterion chosen
has been output maximization under variable returns to scale (RTS). This analysis is for
the year 2012-2013; Delhi state (urban center) and the Union Territories of Chandigarh and
Daman and Diu (significant unreported MIS numbers) have been left out of the DEA
IJSE INPUTS
OUTPUTS
44,2 Administration:
Total employment
Gram panchayats provided
Job cards issued
Works completed

Funds Works completed at GP

MGNREGA
186 Total funds available implementation
level

Fund utilization ratio as a process at

state level Women employment
(Black Box)
Figure 1. Households completing
Expenditure on wages 100 days of employment
MGNREGA
implementation
efficiency model

benchmarking analysis. The data have been sourced from the databases provided by the
Ministry of Rural Development on the public domain at MGNREGA Operational
Guidelines (2014).

5.2 Input variables for DEA

An attempt has been made to benchmark the implementing states on the basis of their
capacity for implementation and governance at the village (gram) level, the impact point
in implementation.
The input variables are: administration – measured by the ratio of rural population to
gram panchayat, job cards issued to the number of gram panchayats, the percentage of
funds available to the state over total funds available, state’s fund utilization ratio and
state’s expenditure on wages over total expenditure.
The variable “administration” is consistent with and measures the reach that the state has
on the rural employable population. It captures the ability of the state to assess potential
beneficiaries. Bearing directly on the ability to handle the creation of work under the scheme,
this variable will bring to core the efficiency and ability of the system and its contributory role
in implementation (Raabe et al., 2010). This variable has a direct relevance to the goals of
MGNREGA and surmises that the size of the gram panchayat and its size and ability as the
lowest rung of the three tier rural public administration system has a direct bearing on project
success (Chakraborty, 2014). The “Job Card” records workers’ entitlements under MGNREGA.
It “legally empowers the registered households and its family members to apply for work,
ensures transparency and protects workers against fraud” (MGNREGA Operational Guidelines,
2014). The model’s input variables drawn from policy design and though “inputs” are in general
to be minimized, administration as an “input” has been normalized. The second variable “funds”
affect the gram panchayat ability to plan and organize a shelf of works, as well as its
implementation capacity (Bhadra et al., 2014). However, in choosing the output maximization
model of DEA, this study has minimized funds. The rationale is that there is no paucity of funds
and their disbursal depends upon the state’s ability to create a “shelf of works.” This “shelf of
work” presents the works that have been identified and created for MGNREGA beneficiaries to
work on. This model therefore looks at the ability to create outputs at the lower funds utilization
as a criterion of efficiency. Since MGNREGA is a labor intensive scheme, this variable measures
the percentage of funds spent on labor and its importance follows directly from the policy brief.

5.3 Output variables for DEA

The output variables are: employment created – measured as a percentage of employment
provided over employment demanded, works completed – measured as percentage of work
completion rate of only those works whose completion date is over, work completed at the Evaluation of
gram panchayat level – measured as percentage of works executed at gram panchayat level MGNREGA
to total works executed, women beneficiaries – measured as women beneficiaries over total
beneficiaries and percentage of households completed 100 days of employment-measured as
a percentage of total number of households enrolled in the program.
The model’s output variables are also drawn from policy design (MGNREGA Operational
Guidelines, 2014). Employment created follows directly from “employment demanded” 187
relative to “employment provided.” The democratic nature of the policy allows for a variety of
local works to be handled by the MGNREGA; this research limits itself to analyzing “work
completion rate” as an output. The multitude of work options preclude assuming equal
efficiency in all works and more importantly equalized planned implementation. Similar
considerations guided the third output variable, “percentage of work executed at the gram
panchayat level” as it excludes the assumption of equalized efficiency at completion of
individual projects and looks at the total completion rate at the panchayat level. Gender-wise
employment created is an important variable given that empowerment of rural woman is a
requirement of MGNREGA as is the number of households completing 100 days of
employment as envisioned in the act, the last output variable of the model.

5.4 Transformation of variables for DEA

The inputs and outputs were transformed keeping with the requirements of uniformity of
scales in clarifying variables for DEA; some variables were normalized while others were
converted into percentages. As an illustrative case; ratio of job cards issue to gram
panchayats was normalized while funds utilization rate converted into percentage
(93 percent) for Assam (Table I).

5.5 DEA-technical, pure technical and scale efficiencies

Efficiency is defined as a ratio of weighted sum of outputs to a weighted sum of inputs,
wherein the weights structure is calculated by means of mathematical programming and the
assumption of constant returns to scale (CRS). Global technical efficiency (TE) is obtained
from the basic DEA-Charnes, Cooper and Rhodes (CCR) model developed by Charnes et al.
(1978). It measures the total efficiency, comprising technical and SE of the DMU’s
(Charnes et al., 1978). The CCR model measures the TE and captures the efficiency of
converting inputs to outputs.
Local pure technical efficiency (PTE) is obtained from the Banker, Charnes and Cooper (BCC)
model. The BCC model, a modification of the CCR model, accounting for variable RTS, was
developed by Banker et al. (1984). It measures the variation in efficiency as a result of the scale of
operations. TE gives the reduction in input usage due to reduction in wastage that can be
achieved operating at CRS. PTE reflects excess of inputs for a given level of output.

Original DEA value Projected DEA value Percentage change

DEA Output
Employment created/employment demanded 0.990 0.996 –
Work completion rate 0.500 0.639 21.75
Work completed at the gram panchayat 0.590 0.785 24.84
Women beneficiaries to total beneficiaries 0.260 0.323 19.50
Households completed 100 days of
employment 0.002 0.011 – Table I.
DEA output and input
DEA Input analysis for the
Funds utilization rate 93 89.93 3.4 state of Assam
IJSE A fully efficient DMU (100 percent) with CCR and BCC experiencing CRS is considered
44,2 operating at the most productive scale size. A DMU with BCC efficiency of one and low CCR
efficiency is considered locally efficient but globally inefficient due to its scale size. A unit is said
to be scale efficient when its size of operations is considered optimal such that any change in its
size will render the unit less efficient. The ratio of the CCR scores to BCC score is termed as SE;
the value for SE is obtained by dividing the aggregate TE by PTE (Ramanathan, 2003). PTE is
188 TE from which scale effects have been factored out and represents the cost of operating at an
incorrect scale size. A higher scale inefficiency compared to pure technical inefficiency will
indicate that the total technical inefficiency is due to output (scale) than input (PTE). Societal
standpoint will indicate that DMU’s operating at CRS are more efficient socially.
DEA applications have yielded as inefficient, DMU’s identified as efficient by other methods
(Cooper et al., 2007). DEA efficiency analysis rank the DMU’s on the scale of global efficiency,
cross efficiency and SE using multi-criterion DEA.
In this study, DEAP Software-Version 2.1 was used to run DEA analysis. The model was
run on “output maximization and variable returns to scale”; global TE (TE-CCR), PTE
(PTE-BCC) and SE were computed and the corresponding RTS were obtained.

6. Results, analysis and implications

Detailed DEA input and output numbers for Assam are presented in Table I as an illustration.
Detailed analysis of output data indicates that Assam lags on all metrics but could
possibly improve its output and efficiency by: improving its work completion rate by
22 percent, examining ways to increasing the working and contribution of its gram
panchayats (24.84 percent), ensuring improvement in the number of women beneficiaries on
the muster roll (19.5 percent), and scaling up the number of households engaged for 100
days of provided employment. Alternatively, Assam is likely to become efficient by utilizing
fewer funds from the central pool and achieving better returns by reducing its utilization
rate by 3.4 percent, i.e., by doing the same quantum of work on a lower budget.

6.1 Classification and discussion

Table II documents the states benchmarked and categorized as per TE. The numbers were
obtained from the calculations generated by the optimization model and further tabulated as
per the categories formed. It presents category and variable-wise efficiency of MGNREGA
implementing states. States have been grouped in four categories of efficiency. This
efficiency categorization is: Inefficient: (TE o1, PTE o1, SE ≤ 1); Global and local
inefficient and scale efficient (TE o1, PTE o1, SE ¼ 1); Global and scale inefficient and
local efficient: (TE o1, SE o1, PTE ¼ 1); and Global, local and scale efficient; DEA efficient
states (TE, PTE and SE ¼ 1). This classification helps identification of each states’
strengths and areas of improvements.
Five states (Category 1) are completely inefficient; four states (Category 2) are globally
and locally inefficient but scale efficient; six states (Category 3) are locally efficient but
globally and scale inefficient; and 17 states (Category 4) are fully efficient.

6.2 Categorical analysis

Category 1 states, Assam, Chhattisgarh, Jharkhand, Maharashtra and Uttar Pradesh have
mean global efficiency of 0.949, mean local efficiency of 0.917 and mean SE of 0.94. These
states are below the India aggregate mean values (Table II), and are experience decreasing
RTS due to global and higher local inefficiency.
Chhattisgarh could improve its efficiency ranking by improving the overall administration of
implementation by strengthening its gram panchayats. To improve its efficiency rankings
Jharkhand can scale up its work completion rate (20 percent), works executed at the gram
 Category 1 Category 2 Category 3 Category 4 All India
Evaluation of
mean MGNREGA
TEo1, TEo 1, TE o1, TE, PTE, SE ¼ 1
PTE o1, PTEo 1, PTE ¼ 1,
SEo 1 SE ¼ 1 SEo 1
Category-wise efficiency Inefficient Scale Pure technical Efficient
efficient efficient
Category states Assam, Arunachal Andaman and Andhra Pradesh, 189
Chhattisgarh, Pradesh, Nicobar, Dadra and Nagar
Jharkhand, Bihar, Manipur, Haveli, Goa, Gujarat,
Maharashtra Karnataka Meghalaya, Haryana, Himachal
Uttar Pradesh Odisha Mizoram, Pradesh, Jammu and
Punjab, Kashmir, Kerala,
Uttarakhand Lakshadweep,
Madhya Pradesh,
Nagaland,
Puducherry,
Rajasthan, Sikkim,
Tamil Nadu, Tripura,
West Bengal
Mean TE 0.949 0.979 0.969 1 0.97
Mean PTE 0.917 0.979 1 1 0.986
Mean SE 0.94 1 0.969 1 0.984
DRS CRS DRS CRS
Actual mean value of the variables
Output Category 1 Category 2 Category 3 Category 4 Mean
Employment provided/
demanded 0.970 0.883 0.932 0.850 0.909
Work completion rate 0.480 0.293 0.605 0.581 0.490
Work executed at the
GP level 0.726 0.805 0.868 0.869 0.817
Women beneficiaries 0.342 0.355 0.398 0.493 0.397
Households completed
100 days 0.025 0.018 0.004 0.092 0.035
Input Table II.
Rural population per GP 0.85 0.83 0.97 0.76 0.8525 Category and
Job cards per GP 0.87 0.85 0.97 0.86 0.8875 Variable-Wise
Funds available per state 4.28 3.15 0.64 3.54 2.9025 Efficiency of the
Funds utilized per state 81.42 72.12 91.66 77.84 80.76 MGNREGA
Funds spent on labor wage 64.7 61.22 71.63 66.99 66.135 Implementing States

panchayat level (8.3 percent) and the percentage of women beneficiaries on the muster rolls
(31 percent). Maharashtra, the state that launched the Maharashtra Rural Employment
Guarantee Scheme in 1977 (Hirway, 2006a) is surprisingly in Category 1. It can become efficient
by improving its work completion rate (44 percent) and by strengthening its gram panchayats
(33 percent) and improve marginally the number of works completed. It can also improve its
efficiency by reducing its use of central funds (46 percent) and by reducing its funds utilization
ratio (15 percent) thereby doing the same quantum of work with a lower budget. Uttar Pradesh
could improve its efficiency indicator by improving the work completion rate (6.5 percent);
raising the output at the gram panchayat level (14 percent), increasing the women beneficiaries
of the scheme (51 percent) and by evolving a mechanism to improve the number of rural
household completing 100 days of employment.
For Category 1 overall, global and local implementation inefficiency is the result of
output bottlenecks, caused primarily by under-performing gram panchayats in
implementing the salient features of the scheme and/or funds mismanagement.
IJSE Category 2 states (Arunachal Pradesh, Bihar, Karnataka and Odisha) have global and local
44,2 mean efficiencies of 0.979, thereby enjoying unitary SE with CRS. The technical and pure
technical efficiencies, although sub-optimal, have resulted in SE, thereby implying a unique size
at which the state is operating. A unit is said to be scale efficient when its size of operations is
optimal to the extent that any modifications on its size will render the unit less efficient.
These states are exhibiting CRS, which implies that inputs to outputs transformation is not
190 affecting efficiencies of operations, and that the states are performing at a unique size.
Controlling implementation will lead to better global and local efficiency.
Arunachal Pradesh could achieve efficiency by improving its work completion rate
(78 percent), strengthening gram panchayat’s ability to execute 50 percent of the works
(15 percent), and increasing the number of women beneficiaries on the muster rolls
(51 percent). Bihar also needs to improve its work completion rate (9 percent), strengthen its
gram panchayats (4 percent), and improve women participation (37.5 percent) under
MGNREGA. Karnataka can attempt to boost its performance by improving and
strengthening the works executed at the gram panchayat level (10 percent) or by
reducing its funds allocation (8.3 percent). Odisha can work toward achieving peer efficiency
by organizing its work better, focusing on its work completion rate (16 percent), improving
gram panchayat participation (36 percent) and increasing the participation of women
(14.69 percent).
Category 3 states (Andaman and Nicobar, Manipur, Meghalaya, Mizoram, Punjab and
Uttarakhand) are global and scale inefficient but enjoy PTE, experiencing CRS. They can
continue to operate this way; monitoring outputs closely and minimizing inputs.
The decreasing RTS indicate that these states can possibly improve their efficiency and
scale of operations by decreasing their inputs.
Category 4 states (Andhra Pradesh, Dadra and Nagar Haveli, Goa, Gujarat, Haryana,
Himachal Pradesh, Jammu and Kashmir, Kerala, Lakshadweep, Madhya Pradesh,
Nagaland, Puducherry, Rajasthan, Sikkim, Tamil Nadu, Tripura and West Bengal) are
globally, locally and scale efficient states. These states have achieved aggregate and PTE
and are on the frontier of the efficiency analysis. These states form the peer-states of the
DEA analysis and other states aspire, through a combination of input reduction and output
maximization, to achieve similar results.
In the states where SE is greater than PTE (Table II), inefficiency is due to outputs, not
inputs. Category 3 states face inefficiency because of the wrong scale of operations, brought
about by their inability to convert inputs into outputs.

6.3 Aggregate analysis

Further analysis of Table II yields results that confirm that only Category 4 states (efficient
on aggregate) outperform all India mean values. Scale and TE of Category 2 states are below
the national average and they are inefficient as they underperform on both, input and output
parameters. Decreasing RTS imply that the implementing state has increased its production
such that generated output is not commensurate with inputs. As the scale of operations
increases, the states are not reaping the economies of scale usually associated with increased
production. Analyzing the outputs generated and inputs utilized confirms that scale
inefficiencies have occurred. The model suggests that the factors responsible for the reduced
outputs point toward the increasing inefficiency of factor inputs. Increasing outputs by
focusing on better utilization of inputs seems to be the way toward better implementation of
the MGNREGA. Similarly, Category 3 states can likely achieve better SE by increasing the
funds available to them from central government, perhaps by improving their work
planning. Category 4 states are clearly technically and scale efficient, transforming inputs
into outputs at the lowest input levels. States in Category 4 are reaping CRS and the other
states have stepped into diminishing returns to scale. Their ability and will to improve
implementation is the fulcrum on which the efficiency of the states rests. Overall, all states Evaluation of
fall short of providing 100 days of employment, an important metric of the MGNREGA. It is MGNREGA
this job guarantee that stems migration from the rural areas (Mukherjee and Sinha, 2011).
Assam, Bihar, Chhattisgarh, Jharkhand, Karnataka, Mizoram, Nagaland and West Bengal
must make all efforts to scale up the employment provided to women beneficiaries.
In addition, many states are failing to achieve the 60:40 ratios of labor and administration
expenses. However, despite the bottlenecks, employment created over employment 191
demanded has consistently reached 70 percent. At the same time, high levels of employment
created within inefficient Category 1 states (Table II) tend to highlight the importance of
efforts to popularize the scheme at the grass roots level.

6.4 Variables analysis

This section presents a comparison between the input-output values of categories 1 and
4 states. Category 1 states have a higher ratio of rural population per gram panchayat (0.85)
and accordingly issues more job cards (0.87). The Category 1 states, on the basis of their
bigger size, are allocated more funds (4.78) yet spend lesser on wages (64.7) as compared to
Category 4 states (66.99). The employment provided is also high (0.97) and perhaps
underlines the efforts of the administrative mechanism to popularize the scheme at the grass
root level. On the output side, Category 1 states have lower work completion rates (0.48),
lower work completion rates at the gram panchayat level (0.726), lower number of women
beneficiaries (0.342) and number for households completing 100 days of employment
compared to Category 4 states.

7. Conclusions
The MGNREGA has been the biggest rural employment initiative of the Indian government
and has generated 19,010.1 million person days at an implementation expenditure of
$40,219.74 million (MGNREGA Operational Guidelines, 2014). Our analytical framework has
benchmarked and categorized the states and presented factors contributing to
implementation variation. This study argues that using the salient features of the
MGNREGA as variables to evaluate efficiency will improve analysis and comparison, and
prevent discrimination against any state with a downward bias in certain parameters.
Public policy in recent years has relied on welfare through work rather than promoting
access to entitlements for the masses through unconditional transfers. But no matter how
good the policy design maybe, faulty implementation has become the bête noire of program
designers and managers. A critical issue still, is the will to become efficient. Typically, with
state owned monopolies or with welfare schemes, the implementers do not have an incentive
to cut costs. This can lead to “x-inefficiency,” as seen in Islamic banks (Hassan, 2006).
Incentives to strengthen program implementation and thereby achieve desired social and
economic outcomes collide with the welfare benevolence of the government. This limits the
scaling down required to achieve better efficiency. Amending the salient features as
prescribed in the statute of the program seems even more difficult to achieve.
This however, further reinforces the applicability of the MIEM model. Although each
state has to be evaluated independent of others and context-specific policies designed for
them, the MIEM model helps to identify efficient peer states. In addition to presenting an
opportunity to study how these states became efficient, it also suggests ways in which the
less efficient states can improve. This information in the hands of the policy implementers
can strengthen implementation and help to achieve efficiency of resource use in countries
battling huge fiscal deficits and competition for funds earmarked for welfare schemes.
A micro analysis in such situations can help in improving allocation efficiency of resources.
For example, even states enjoying economies of scale can double their output without
doubling budgetary outlays when they control implementation efficiency and focus on
IJSE better allocation. An important finding of this analysis is that the administrative size of the
44,2 village administrative unit, the gram panchayat has a direct bearing on the quality of
administration and controlling for its can lead to better implementation.
The MIEM model through the use of DEA has helped operationalize policy evaluation
and has thus taken research on MGNREGA from an aggregate analysis to an input – output
driven one. It lends itself to evaluate the efficiency within individual states – district, block
192 and village-wise efficiency markings can be done to reflect prevailing local conditions.
The MIEM model can help planners and decision makers to provide guidelines for states to
consider in their implementing process. Implementers of the MGNREGA at the state level
can learn from their better performing peer states and inculcate lessons into their own
practices. Future research can apply longitudinal data to analyze and track productivity
changes in implementation. Additionally, in-depth study of the central black-box in the three
tier Indian rural governance system is an important area of future research.

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by data envelopment analysis”, International Journal of Educational Management, Vol. 23 No. 1,
pp. 34-50.

About the authors

Dr Sarabjeet D. Natesan is an Associate Professor at the SP Jain Institute of Management and
Research, Mumbai, India. She obtained her PhD from Indian Institute of Technology Madras, Chennai
India. Her research interests are in the broad areas of public policy and its implementation.
Dr Rahul Ratnakar Marathe, is an Associate Professor at the Department of Management Studies,
IIT-M. He has a PhD from the Iowa State University, USA. His research interests are in the field of
stochastic processes, mathematical and statistical modeling, and data analytics. He has worked on
statistical analyses of advertising effectiveness and public policies.

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