Village of 2020! Brought to you by NREGA

Funding: Liberal.
Customer-base: Every rural household.
Scope to customise service: Immense.
Consequences of failing to deliver: Could be served with a court notice.
Overall model: Demand-driven, not target-driven.

It is this unique mandate that could make the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA, the new name for what was till recently known as NREGA) the best social-spending scheme ever.

Sure, the word "best" is a matter of interpretation. NREGA is already the biggest rural development scheme India ever had. The Rs 39,100 crore allocated for it for 2009-10 (an increase of 144 per cent over the 2008-09 Budget estimate) is more than the money spent on any other single social welfare programme in a year.

It's applicable in all the 615 districts of the country. It is not restricted to a gender, geography, age, skill or caste. But what would set apart NREGA is not the size and spread, but the efficiency and effectiveness. Most public welfare schemes in India have been synonymous with public loot: on an average, more than 70 per cent of the money spent does not reach the targeted beneficiary.

Problems of leakages and mismanagement afflict the NREGA, too. But, as Business Today's reporting and research found, there are reasons to believe that it will be more successful than all other schemes and could alter the face of rural India by 2020. How?

Accountability: This is the only scheme that has the backing of an Act of Parliament. Says Jean Drèze, who is regarded as the father of the NREGA: "The fact that NREGA is an Act helps to create accountability, by defining legal obligations that no government functionary can escape from." There are already cases of intended beneficiaries approaching the local courts after being denied work and wages under the scheme.

"I appear in the Karnataka High Court regularly in cases of complaints on NREGA from various farmers of the state," says P.C. Jaffer, Director of the scheme in Karnataka. As the awareness about the redress through legal route spreads, targeting and efficiency will improve further. "The legal framework and rights-based approach make it a paradigm shift from the earlier programmes," says Union Rural Development Secretary Rita Sharma.

At many villages, details of the expenditure under NREGA can be seen painted on prominent walls. Even a state like Uttar Pradesh has become the first in the country to invite applications for the posts of Ombudsmen who will hear NREGA complaints from every village.

Customisation: Unlike most other social schemes, NREGA is attracting the active participation of its beneficiaries, who are coming forward with new ways to use the wages provided under the scheme—other than the work prescribed originally when the scheme was launched (see From NREGA to MNREGA: More Than a Name Change). Such usages vary from helping create assets (e.g. orchards) to skills development to proposals to start a village industry. For example, when villagers in Karnataka's Gulbarga district had a problem with wells going dry, farmer Shivalingappa Basavanappa Chorgasti had this idea of building check dams on a nullah that ran along his property. The NREGA funded Rs 2 lakh for this project; the check dams soon recharged all wells in the area—including Chorgasti's own, which irrigated his two-acre plot. The water table also rose, by 20 feet. Chorgasti planted sugarcane and banana, and did some sericulture. Now, he can expect his income to shoot up from Rs 2.95 lakh to Rs 8.50 lakh a year. Other farmers are also building check dams, while Chorgasti is taking more land on lease.

In Tamil Nadu's Madurai district, around 20 daily labourers at an NREGA worksite, where a pond was being cut, saved up and invested in a kiln. Using the clay dug out, they made toys, baked them and sold them at Rs 20 apiece in nearby markets, increasing their monthly income by Rs 10,000. Now they rarely have to return to the NREGA worksite (For more such examples, see box on the left).

Pull, not push, scheme: The examples mentioned above prove that the scheme is demand-driven, and not target-driven. That is, it is increasingly being pulled by the beneficiaries rather than being pushed by the administrative machinery. The success of most other social schemes is linked via dry targets to the officials implementing them. They have to push, first the awareness, and then reach out to the beneficiaries. "NREGA doesn't just have the archetypical palliative approach to the problems of rural development, it offers cure," says Jaffer, the Karnataka officer. "Since it is a demanddriven scheme rather than being a targetdriven one, it has reached out even where no other public-expenditure scheme had."

Size and profile: The NREGA being a prestige issue for the UPA government, everybody, from ministers and babus in Delhi down to state-level functionaries, is monitoring it a bit better than past schemes. Congress MP Rahul Gandhi is monitoring it on the ground (in all his village visits, he checks on NREGA experiences and has been doing shram dan on NREGA worksites).

State-level bureaucrats in charge of the scheme get calls at least once a week from the officials in the Ministry of Rural Development in Delhi on the progress. They, in turn, keep tabs on their district officials on a daily basis to check for slips. The former Minister for Rural Development Raghuvansh Prasad Singh made surprise inspections of villages and kept in touch with district-level officials.

For all these reasons, the draw for the scheme was clearly evident in the villages that Business Today visited. Despite cases of fund diversions through fake job cards and certificates, the scheme has stemmed the migration of rural labour and enhanced their bargaining power. This is especially true of women. There is clear circumstantial evidence of shortages of farm and construction labour across states as the workers have preferred to stay on in their villages for NREGArelated works. Poor unskilled labour is beginning to get the power to choose who, where and for how much to work for.

The average minimum wage rate has jumped 30 per cent to Rs 84 in three years. Eight states increased their minimum wages substantially in 2007-08. As a result, a National Council of Applied Economic Research (NCAER) review points out the NREGA has been effective in making a dent in rural poverty and "helping (the poor) avoid hunger and migration, allowing them to send their children to school, and helping them cope with illness".

Of course, the scheme can be made much more effective with some more modifications in its charter. There could be better monitoring of village heads. Though delegation of power to village bodies is good, the scheme has led to the rise of a class called "Bolero or JCB sarpanches"—village chiefs flush with ill-gotten cash and driving SUVs (see A Bolero Scheme..., BT, July 26 issue).

Experience in some stray villages suggest that the NREGA can become an omnibus scheme covering a wide range of facilities, bringing together primary healthcare, anganwadis and education for every person who shows up at a work site. The Rural Labour Enquiry of the National Sample Survey confirms that a very high proportion of agricultural labour households in India own land. Such farmers can use the NREGA to improve their farm productivity.

With NREGA, the government has a chance to finally prove that public expenditure can be efficient, too, and there is nothing other than efficient public-spending scheme to achieve high growth with equality—the holy grail of all economic policies.