Why cash can save the rural jobs scheme

  • India is set to spend over 1 tn on the world’s largest rural employment programme. Can it be made to work better?
  • Large work sites should be opened proactively in each panchayat without waiting for applications. Anyone who shows up should be allowed to work and payments should be in cash

Reetika Khera
Updated26 May 2020
Villagers of Kalahandi, Odisha, working on water body restoration under the NREGA scheme.
Villagers of Kalahandi, Odisha, working on water body restoration under the NREGA scheme. (Photo: Mint)

If we get work in the village, why would we go elsewhere? We have worked on NREGA before, but our money gets stuck,” said one inter-state migrant worker on his way back to Garhwa in Jharkhand from Andhra Pradesh.

Such testimonies are common among the many workers who are trudging back home across India currently. Another person heading to Deoghar in Jharkhand from Ahmedabad said: “The problem with NREGA is that you get work for a week, and then nothing for 2-2.5 months. We can’t survive like that.”

With millions of workers returning to rural India, the government has naturally (and belatedly) committed to a major boost in the outlay for the National Rural Employment Guarantee Act (NREGA) this year. But the early testimonies of these returnees summarize all that is wrong with the rural works guarantee programme today.

They are also in sharp contrast to what I had heard in 2003 in Rajasthan from an old, barely literate woman: “If it hadn’t been for (then Rajasthan chief minister) Ashok Gehlot and the drought relief works that he initiated, you would not have been able to find anyone in the village—everyone would have migrated out. He has saved us.”

But what changed in the implementation of these programmes? What can be done today to make the NREGA a reliable buffer against hunger and hardship in rural areas?


In 2002-03, as a PhD student, I was conducting a field study of 400 households to look at the role of the state in helping rural households cope with a drought in Rajasthan.

At that time, a public worksite would be opened in the village, and everyone who showed up was allowed to have their name included on the muster roll (an attendance sheet). At the end of the fortnight, some work measurement (if only notionally) would be done, and the muster roll would be sent to the block office to process payments. The “mate” (a worksite supervisor) or panchayat secretary would collect cash from the block office, and, on the designated day, names would be called out at the worksite for receiving a cash payment and a food coupon.

When the demand for a state employment guarantee Act (based on a state Act in Maharasthra) was raised, Gehlot faltered and passed the buck to the Centre. However, Rajasthan’s success in implementing drought relief works provided the springboard for reviving the demand for a national NREGA.

Work and wages

NREGA 1.0 (2005-2009)

The NREGA, enacted in 2005, was adapted from a similar model which was in place in Maharashtra. Important lessons learnt from grassroots organizations in Rajasthan were incorporated into the NREGA: muster rolls at the worksite and payment of wages publicly at the worksite. They enhanced transparency and kept corruption under control. Attempts to replicate these lessons elsewhere met with mixed success. States like Tamil Nadu and Chhattisgarh were able to do a reasonable job, whereas, in many other states, corruption was a big problem.

In 2008, the central government ordered a transition to bank and post office payments to reduce corruption. Indeed, this had a huge positive impact on corrupt practices initially, though not without a cost to labourers. For a while, they couldn’t get work until they opened accounts; delays in wage payments crept into the system; and workers struggled with bank access issues in rural areas.

NREGA 2.0 (2009-2014)

The main highlight of NREGA 2.0 (during United Progressive Alliance-2) was its takeover by the technocrats. The ministry of rural development (MoRD) became a den of technocrats who believed that real-time everything would solve all problems. From e-muster rolls (eMRs) and e-fund management system (e-FMS) and GPS-enabled biometric attendance to geo-tagged NREGA assets, MoRD became the site of a techno-orgy. The less tech-ready the rural area, the more fanciful the tech-fix that was imagined for it.

Before first-generation issues with NREGA had been resolved, it was loaded on with more objectives and more technocracy. Workers could no longer just show up for work: e-MRs, with pre-printed names of workers who had ostensibly demanded work, became the norm.

NREGA 2.0 was soon burdened with Aadhaar against informed advice. Aadhaar, in its early years, needed readymade databases to boost its enrolment numbers. Workers in the NREGA database were sitting ducks: vulnerable and anxious about losing their entitlements, they flocked to enrol.

In spite of clear instructions from the Supreme Court, MoRD found ingenious ways of making Aadhaar compulsory. For instance, when “demand for work” was entered in the software at the block office, it could only be registered for workers who had submitted their Aadhaar numbers. Job cards without an Aadhaar number linked to it were cancelled. Mind you, all of this was done by politicians, bureaucrats and technocrats who were great supporters of NREGA.

The next victim was the payment system. Payments were held up if Aadhaar numbers were not linked to the job card and/or bank account. MoRD surreptitiously made it compulsory to link NREGA bank accounts with Aadhaar numbers.

Instead of deploying technology to make things easier for labourers, technocrats started using it to make their own lives easier by centralizing control. Administrators no longer needed to visit villages to monitor its implementation: they merely peered at the NREGA real-time portal, where all was well.

NREGA 2014 onwards

In 2014, a government with the Bharatiya Janata Party at the helm was formed. It first tried to amend the Act to restrict the guarantee of employment to the “poorest” districts. Yet, in almost every budget speech since, finance ministers have been at pains to point out that they are making “the highest-ever” allocation to NREGA.

In spite of all the difficulties and impediments through the UPA years, NREGA had the effect of putting a slight upward pressure on rural wages, especially for women. This is not true for the National Democratic Alliance (NDA) years, and at least some of the seeds of the decay were sown during UPA-2 years.

Distinctive features of the NREGA through the NDA years have been (a) stagnating real wages, so that wages in the private labour market are now much higher than NREGA; (b) the phenomenon of transaction failures in wage payments, and (c) a continuation of delayed wage payments. These three have ensured that NREGA becomes less and less attractive for labourers. If, in spite of this, NREGA employment has not gone down, it is either because of the desperation of labourers or because “ghost” workers are populating eMRs.

When the transition to bank payments for NREGA wages was made, we had observed that while they provide a protection against corruption, three channels of corruption remain open: extortion, collusion and fraud. There is anecdotal evidence that collusion (between NREGA functionaries and “ghost” workers) is on the rise. Ghost workers are non-workers whose names are entered on eMRs by NREGA functionaries for a cut without them actually working.

NREGA in times of covid

The first covid relief package announced on 26 March provided double rations for three months for public distribution system (PDS) ration cardholders, a one-off payment of 1,000 for social security pensioners and 1,500 in three instalments for female Jan Dhan Yojana account holders.

For NREGA, initially, there was nothing. Many NREGA households would have lost remittance income that came from migrant family members. The crash in employment in April 2020 due to the lockdown hurt them further. On 17 May, the central government allotted additional funding of 40,000 crore, bringing the total NREGA budget to nearly 1 trillion for this financial year. This is a welcome move. Yet, it is worth recalling that to make good on the legal guarantee of 100 days of work for the 140 million job card holding families in the country, one would require 2.8 trillion.

The decision to keep NREGA works remain open during the monsoon is also a good move. This is not usually the case and is done to prevent competition between NREGA and agricultural employment.

However, as the testimonies at the beginning highlight, for workers to benefit from NREGA, it needs urgent (if only temporary) fixes. For all its faults—perceived and real—reviving some features of NREGA 1.0 will help.

One, large worksites should be opened proactively in each gram panchayat without waiting for anyone to apply for work. Such worksites should remain open for the coming months.

Two, anyone who shows up to work should be allowed to work. The requirement of demanding work formally must be relaxed. For this, uniquely numbered muster rolls issued to sarpanches and panchayat secretaries, without pre-printed names, can also be considered.

Three, states could be allowed to pay wages as cash-in-hand, bypassing the banking system. Many are horrified at the suggestion that we revert to cash payments (it has been projected as the main cause of corruption), but there are important reasons to consider it now.

The payment system for many welfare schemes, including NREGA, is beginning to resemble a popular visual trope from India—a tangled web of electricity wires. Instead of simply linking each job card to a bank account to transfer wages, today, four numbers might be needed: job cards, Aadhaar, bank accounts and mobile numbers. As a result, transaction failures are high.

It is worth recalling that in NREGA 1.0, when cash payments were the norm, some states were able to check corruption. This included Rajasthan, Tamil Nadu, Andhra Pradesh and Himachal Pradesh. Further, other states where corruption levels were high to start with (e.g. Chhattisgarh) had begun to put those safeguards in place that had helped elsewhere: MRs at the worksite and payment of cash in a public place in the presence of all workers.

For years now, Odisha has been paying pensions as cash-in-hand at the gram panchayat, and the scheme is known to have low/no corruption. More recently, Odisha, Andhra Pradesh and Tamil Nadu have resorted to cash-in-hand to PDS ration cardholders without any major complaints.

Withdrawing cash right now in rural areas is an ordeal for poor people. After a decade of zealous brainwashing by technocrats, most have forgotten that a middle path between technocratic evangelism and clunky bureaucratic control can be found. Some states had managed to achieve a reasonable balance between worker-centric implementation and the smart use of technology. The pandemic is a good opportunity to strive for regaining that balance again.

Reetika Khera is an associate professor (economics) at IIT Delhi

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