MGNREGS not working effectively in poorer states: World Bank

Rural poverty rate stood at 50% in 2009-10 in Bihar

Under ideal conditions, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) should have reduced poverty in the villages of Bihar by 14 percentage points in 2009-10. A World Bank study, however, finds the reduction was only one percentage point.

Rinku Murgai, lead economist at the World Bank, told reporters ideal conditions meant that everyone who wanted work should get it up to 100 days a year at stipulated wages under the MGNREGS, without having to give up any other employment opportunity to take up the work.

Reduction in poverty rate was esimated as compared with what would have been the rate without MGNREGS, Murgai said.

Rural poverty rate stood at 50 per cent in 2009-10 in Bihar.

In Bihar, more than two-thirds -- about 10 percentage points-- of the gap between potential and actual impacts is attributable to the ways in which the scheme is not fulfilling the provisions of the Act, the World Bank said in its "India Development Report'.

The rest is due to the foregone income-- an opportunity cost to the worker from giving up alternative employment in order to take up MGNREGS work.

"Forgone incomes are hard to avoid,but are important to the calculus when evaluating the net income gains from NGREGS participation and its cost-effectiveness against other alternatives."

If MGNREGS worked in practice the way it is designed, there would be no unment demand for work. At an all-India level, 2009-10 national sample survey (NSS) data showed a great deal of unmet demand-- 46 per cent of households report that one or more members of their household would have liked to work on the scheme, only 25 pr cent secured any work over the course of the year."

Participation rates in the scheme are not, as a rule, any higher in poorer states. There is greater demand for work on the scheme in poorer states, but also a lower capacity to meet that demand, the Bank said.

"As a result, the degree of unmet demand or rationing--the fraction of people who wanted work but did not get it, is bigger in the poorer states," it said.

However, the Bank praised the scheme as it is better targeted than any cash transfer scheme would be and has multiplier effect on economic activity. Ironically, the scheme has worked well in well-to-do states such as Andhra Pradesh on a range of outcomes--from consumption and nutrition, to quality assets and productivity

World Bank country director for India Onno Ruhl said it is a best bet in rural parts of the country, hit by unseasonal rains.

To a query whether the Bank would recommend the scheme for other countries, he said,"Before we recommend it to many countries, say Africa, we have to show that it can work in states like Bihar, Jharkhand, Chhattisgarh and Odisha."