How taxpayers’ money is (or isn’t) being spent

How taxpayers’ money is (or isn’t) being spent
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First Published: Mon, Feb 08 2010. 10 22 PM IST

Updated: Mon, Feb 08 2010. 10 22 PM IST
The government’s financial commitments to the Mahatma Gandhi National Rural Employment Guarantee Scheme (NREGS) have grown significantly since its launch in 2006. NREGS, which promises 100 days of work every year to at least one member of every rural household, accounts for 49% of the government’s rural development allocations.
The scale of NREGS is staggering. In 2008-09, it generated 2.16 billion person-days of work across the country, making it the largest such initiative in the world.
How efficiently does NREGS money flow through the system? How have states spent this money, and on what? Given that most social sector programmes in India have a history of both insufficient and inefficient spending, understanding and tracking how these large sums of money make their way from the government’s coffers to the poor labourers’ pockets is critical to our understanding of the effectiveness of NREGS and ensuring accountability.
Government-reported expenditure data tells an interesting story. Overall, while allocations have risen significantly, expenditure has fluctuated and large sums of money remain unspent. In the financial year ended March 2009, 75% of available funds were spent. This was a drop from the previous year, when expenditure was at 82% of available funds.
The story becomes intriguing at the state level, where there are significant differences in spending capacity. Rajasthan tops the list, having spent 89% of its funds last year. Uttar Pradesh is not far behind with a reported expenditure of 78%, while Tamil Nadu, Maharashtra and Jharkhand spent less than 60%.
These variations are not limited to states. There are wide variations in district-level ability to spend funds, too. Orissa is the worst performer with a difference of over 153% between the highest and lowest spending districts. Rajasthan does significantly better with a 15% difference between high- and low-spending districts.
While state-level variations are common in most social sector programmes, variations in NREGS are puzzling because it is a demand-driven scheme. Funds are allocated to states based on proposals submitted to the Centre, which in turn are based on estimates of work demand at the district level. Failure to spend is a clear indicator of poor planning and inefficiency at the state level.
Gram panchayats seem to play a disappointingly limited role in many states. From a governance and accountability perspective, one of the most powerful provisions in NREGS is the mandate that 50% of funds must be implemented by gram panchayats. This offers a unique opportunity to revive and energize our resource-starved local government system.
However, many state governments have been reluctant to devolve the requisite resources. Andhra Pradesh, a state that is nationally recognized for its pioneering social audits in NREGS, has denied panchayats any resources. Even in states where funds do reach the panchayats, little has been to done to enhance their capacity to make plans. Their role thus tends to be restricted to implementing decisions made by the district administration.
Awareness about the programme among potential beneficiaries is also very low. Social audit after audit has highlighted beneficiary entitlement as poor at best. All this has a significant impact on people’s ability to demand accountability and, therefore, implementation efficiency.
How is the money spent? The good news first: Last year, 69% of NREGS’s money was spent on wages, well within the Act’s norms. Interestingly, the average wage provided per person per day has increased since implementation from Rs70 in 2006-07 to Rs87 in 2008-09. But there are significant inter-state variations when it comes to the quantum of employment. Rajasthan topped the list, having generated an average of 76 days of employment per rural household. Gujarat and Bihar, on the other hand, fall way below at 25 and 26 days, respectively.
As these figures suggest, NREGS’s implementation story is a mixed bag. Bureaucratic inefficiencies have contributed, as has the failure to strengthen local-level planning and participation. At the same time, some states have done extremely well and offer valuable lessons for others.
Finally, one of NREGS’s greatest strengths lies in the transparency safeguards that have been built in. The government’s management information system (MIS), from which much of this data has been extracted, is a crucial transparency measure. But the data provided is not always accurate. We came across many anomalies as we put this data set together.
However, it is an important start. The challenge now lies in building on these systems to ensure regular updates and data reliability. Civil society can play an important role by regularly analyzing MIS data, highlighting problems and keeping up the pressure for improvement. There is no doubt that with its many transparency safeguards, NREGS has the potential to be a game changer in our governance systems. But we still have miles to go for this potential to be realized.
Yamini Aiyar is a senior research fellow and director of the Accountability Initiative of the Centre for Policy Research.
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First Published: Mon, Feb 08 2010. 10 22 PM IST