The Indian Analyst

National Rural Employment Guarantee Scheme Making Panchayat Raj Institutions Effective



 By Dr Amrit Patel


The United Progressive Alliance (UPA) Government has fulfilled one promise that is part of its National Common Minimum Program (CMP). The Bill on National Rural Employment Guarantee Scheme (NEGS) seeks to provide guaranteed employment to one member of every rural household for at least 100 days a year for a minimum wage of Rs.60 per day. 

The underlying objective of the scheme has been to ensure food security in rural households by providing guaranteed employment to increase the purchasing power of the poor rural families. Around 137 million people are expected to benefit under the scheme which will cost Rs.170 billion in the first year covering the most vulnerable 200 districts. From the second year on, the scheme would be expanded to cover all the districts of the country.                       

Dismal Rural Economic Scenario                                            

Out of 260 million poor people in the country, about 200 million poor people are in rural areas. Around 100 districts are under the constant threat of drought & semi-famine like situation every year. Other 90 districts face floods & torrential rains every year. About 25% rural households are landless laborers & bonded labor, and have no income generating assets. About 80 per cent of farmers are small & marginal and have inadequate and poor quality of assets with meager irrigation facilities. Rural artisans do not have access to modern tools/ equipment & marketing. Perpetual & pernicious poverty in rural areas is deeply rooted in large-scale unemployment among rural house- holds during half of the year. Chronic unemployment for a large part of the year is prevalent in hilly, tribal, desert &drought prone areas and the situation is exacerbated when monsoon fails. 

According to National Social Watch, 48% people in 13 States of India viz. Andhra Pradesh, Tamil Nadu, Maharashtra, Gujarat, Arunachal Pradesh, Assam, Bihar, Chhattisgarh, Madhya Pradesh, Orissa, Rajasthan, and Uttar Pradesh do not get two meals a day. People in 45% rural India do not get work for six months in a year & 20% villages do not have work opportunities for people in any form. Even revamped Public Distribution System (PDS) does not reach to 68% villages. Food security is a serious problem for poor people in these 13 States. Therefore, there is compelling need for doing something drastic that would constitutionally guarantee right to work /employment that will ensure food security.


The first objective of this scheme is meant to provide employment to at least one person for 100 days in a year. During the four months lean period in a year, when agriculture does not provide any work to the rural households, the rural poor would earn additional income of Rs. 6000 in a year thereby providing food security. Therefore, the scheme is meant to provide work to these people in their native villages where there is no work for them in agricultural sector. Other than this scheme, there are other government schemes. The federal program Pradhan Mantri Gram Sadak Yojana (PMGSY) with a budget of Rs. 42 billion would be spent and implemented in almost every Panchayat for rural income and subsistence. There are State Government sponsored irrigation projects where irrigations tank, canals, and dams are constructed also providing employment to rural households to help them earn additional income.  

The second objective is to create assets in rural areas. The scheme would employ people in developing infrastructure facilities in villages to accelerate the process of agricultural & rural development in the country and improve the quality of life of rural people. Under the scheme, economic activities such as soil and moisture conservation, watershed management, drought & flood proofing, forestry, reclamation of saline, alkaline, degraded land and development, rural connectivity through arterial roads, etc would be undertaken. All these projects are clearly defined and described in the NREG Act. In addition to this, new State Government desired projects could also be considered.  

Watershed development project is significantly important in almost two-thirds drought-prone districts. Watershed management program to renovate, clean and deepen all old water bodies like ponds, tanks greatly increase local water storage capacity. In this process, groundwater levels can be raised and through this acute drinking water shortages can also be addressed. Similarly, construction of canals & check-dams can improve the irrigation scenario, afforestation can improve water-holding capacity as part of drought and flood proofing program. This can bring dry lands into the agricultural and horticultural ambit. 

The act envisages technical studies to be completed by experts who will then formulate detailed development plans in 150 districts where food-for-work program can be implemented. Technical experts from Agricultural Finance Corporation (AFC), Xavier Labor Relations Institute (XLRI), Indian Institute of Management (IIM) & Institute of Rural Management (IRMA) are drawing plans for individual villages in consultation with local leaders & elected representatives. Comprehensive reports on districts like Aurangabad [Maharashtra], Banswara [Rajasthan] & Banaskhanta [Gujarat] are in the advanced stage of formulation. Such reports would be completed for 150 districts & utilized for implementation under the scheme.  

Earlier/Existing Programs 

While this scheme has a “human face” and its basic concept has received appreciation from everyone, it is important that the policy makers learn from similar previous schemes. To ensure the success of this scheme, they must take corrective actions in the process of planning and implementation. During the post-independence era, the Government has recognized the importance of agriculture & improving the quality of rural life and initiated several programs of which following projects had specific rural component employment: 

  • As an integral part of poverty alleviation objectives, the Government initiated several Self-employment programs. By providing subsidies accompanied with easy and soft bank credit the Government hoped to enable rural poor households to purchase or create income-generating assets to supplement their income. Schemes such as Integrated Rural Development Program, Development of Women & Children in Rural Areas, Supply of Improved Toolkits to Rural Artisans, and Ganga Kalyan Yojana, The Scheme for Training of Rural Youth for Self-Employment, are some of these programs. Most of them aimed to equip rural youths with necessary skills and enhance their capacity to produce and manufacture quality products from rural, cottage, small, and tiny industries in rural areas. These programs were subsequently merged into a single program called “Swarnjayanti Gram Swarozgar Yojana” in April 1991. These programs assumed that rural poor have the necessary abilities. It hoped that giving them the right type of support, rural Indians could be successful producers of goods & services.

  • A wage employment program was also introduced under which poor were provided wage employment on various public works. The Sampoorna Grameen Rozgar Yojana was launched on 25th September 2001 with the objective of ensuring food security, additional wage employment, and creating village infrastructure in rural areas. This program was an amalgamation of Jawahar Gram Samridhi Yojana (JGSY) and Employment Assurance Yojana. JGSY was earlier known as Jawahar Rozgar Yojana, which was introduced in 1989 after merging erstwhile National Rural Employment Program & Rural Landless Employment Guarantee Program.

  • Special Area Development Programs were created to create infrastructure in the backward areas and to give employment to marginalized sections of rural areas. Drought Prone Areas Program, Desert Development Program & Integrated Waste Land Development Program, Hill Area Development Program, Command Area Development Program & Integrated Tribal Development Program are some of them. 

  • Access to basic needs was construed as an integral part of a strategy for eradicating poverty & improving the quality of life of rural population. The conference of Chief Ministers held in 1996, identified seven basic minimum services for the people on priority basis. Primary health care, normalization of primary education, safe drinking water, public housing assistance to all shelter less poor families, nutrition, connectivity of all villages and habitations by roads, and streamlining of the public distribution system with a sharp focus on the poor as the beneficiaries were identified as the basic minimum needs. The Minimum Needs Program focused on these.

These programs were conceptualized very well to meet specific objectives to targeted beneficiary groups in precise geographical locations. However, due to a variety of factors, in relation to the money spent, the objectives achieved & benefits accrued under each of the programs were not as expected. Most significant reasons can be attributed to utter lack of involvement and participation of local people for whom these programs were evolved. There was lack of adequate planning, implementation, monitoring, feedback mechanisms, post-project reviews, and corrective processes to meet local conditions and peoples’ needs. Rather than involving Panchayat Raj Institutions, all programs were planned and implemented by the Government officials and through the creation of special additional bureaucracies like District Rural Development Agency.

The following are some observations and studies that highlight the failure of these schemes:      

  • Late Prime Minister Rajiv Gandhi admitted that out of every one rupee spent under Government sponsored schemes meant for economic and social welfare, only 15 paise reached the targeted audience

  • Recent study of the Rajiv Gandhi Foundation reveals that the benefits of the Indira Gandhi Avas Yojana reached only 15 per cent of intended beneficiaries

  • Economists Ajit Ranade & Mahendra Dev found that 79% of the development fund is being siphoned out before it reaches target groups

  • A team of students from Jawaharlal Nehru University and Delhi University found temporary & permanent muster rolls deliberately maintained to drain large amounts from the National Food for Work Program launched in 150 of the poorest districts. The National Food for Work Program Survey did not reach any intended beneficiary in at least five States

  • The Right to Information Agency found that fictitious names were created, maintained, and supplied systematically under the most popular Maharashtra Employment Guarantee Scheme

  • Mr Jin Drize, an associate of Nobel laureate Amrtya Sen, found that a similar program in Madhya Pradesh, name and attendance lists were created indicating payment for 60 days against actual work for only three days. He had, also, studied such instances in districts of Badwani [ Madhya Pradesh], Purulia [West Bengal], Sonbara [Uttar Pradesh], Surguja [Chhattisgarh], and Dungurpur [Rajasthan]

  • Faulty implementation of Integrated Rural Development Program (IRDP) throughout the country for extended periods of time has resulted in a loss of enormous amount of bank credit & Government subsidy

Panchayat Raj Institutions (PRI) 

India recognized the importance of peoples’ participation in the process of planning, decision-making, implementation & delivery system and passed the 73rd Amendment Act, 1992 [which became the Panchayat Raj law on April 24, 1993]. From that time, it is not only desired but also mandatory to involve local people & Panchayat Raj Institutions (PRIs) to implement Government schemes and make them responsible to achieve the underlying objectives. In India, rural local Government comprises 232,278 village Panchayats, 5,905 intermediate Panchayats, and 499 district Panchayats, making a total of 238,682 at all the three levels. Total number of elected representatives of Panchayats at various levels are 2.92 million of which about one million are women and a large majority of them are first-timers. The 73rd Amendment Act required positive reservation for women & disadvantaged sections of the community and has improved women’s awareness and perception. It has created a space for them to be assertive and demand their rightful share in the decision-making at the local level.   

For the first time in the history of post-independence India, and beyond all expectations, Panchayat Raj Institutions are expected to be directly involved in this scheme. Gram Panchayats (GP) and Gram Sabhas (GS) would identify, approve, allocate, supervise, monitor, and be accountable for rural programs.  

While it is laudable that Panchayat Raj Institutions are now roped in the implementation of the scheme, it is important to understand the current status and functioning methodology. It is also crucial to initiate training and evolve a human resources development policy to ensure participation, empowerment, and success in Gram Sabhas & Gram Panchayats. The following studies are indicative of the immediate needs:   

  • In 2002, the World Bank studied rural constituents in six districts of Rajasthan and Madhya Pradesh to assess their preparedness to participate in PRIs. They observed “people participate in the political process but show low level of interest in PRIs as an instrument of democracy and development. People do not participate in the accountability mechanism and in particular in the Gram Sabhas, which on an average are attended by only seven per cent of eligible population. The explanation for lagging participation is that people perceive little benefit from GPs given scarce resources under their control. Elected PRIs representatives at every level feel marginalized”

  • Political decentralization does not mean participation only in the electoral process. It calls for active involvement of elected functionaries such as Gram Sabha women and other marginalized groups in the functioning of rural local self-government institutions. This will ensure a collective decision-making process with its own systems of accountability, responsiveness, and transparent governance.

  • Effective planning at the grassroots level can happen only if a large number of GS members actively participate in the planning process. At present 50 per cent members [women] are virtually outside the GS meetings because they are not allowed to participate by their male family members and another big chunk mostly SC/ST and other weaker sections do not attend due to social compulsions in some areas. These members are less motivated to attend meetings because they do not expect to gain from such meetings and instead lose their one-day wage.

No doubt, 73rd Amendment Act has given a new role and responsibility to the PRIs in India. However, the most crucial and significant drawback or deficiency in the Act has been that, instead of having clearly specified and defined, the functions and powers of PRIs have been left to the discretion of the State Governments. In fact the Article 243G should have been like this “the legislature of a State shall endow the Panchayats with such powers and authority as necessary to enable them to function as institution of self-government and shall contain provisions for the devolution of powers & responsibilities upon Panchayats at the appropriate level with respect to: 

  • The preparation of plans for economic development and social justice

  • The implementation of schemes for economic development and social justice as may be entrusted to them including those in relation to the matters listed in the 11th schedule” 

Thus, the Article 243G of the Constitution should have envisaged Panchayats as “institutions of self-government” and should have given full functional, financial & administrative autonomy in their working. 

Participation & Empowerment 

Participation is an active process by which beneficiaries acquire knowledge, understand their role, and realize their responsibilities. They also understand the functions of various institutions; influence the direction and execution of development projects to ensure benefits reach them. Therefore, to be a complete success, it is absolutely essential that the likely beneficiaries under the NREGS and the rural households of the village must participate in the process. They need to understand its short and long-term advantages, its limitations, the precise role and responsibilities of all the concerned individuals. This will enable the Gram Sabha in particular & Gram Panchayat in general to work together and make the scheme achieve its objectives--guaranteed employment and additional income in a transparent manner, food security, and overall development of the village infrastructure.   .

The process of empowerment is individual, collective, and multi-faceted. It is through involvement in groups that people often become aware and can organize them to make decisions and effect change. Empowerment also becomes effective when resources are pooled to complement manual & technical skills, administrative & managerial capabilities, and planning & analytical abilities of local people. Empowerment of Gram Sabha in particular must include the transfer of these skills, capabilities, and. Only the true empowerment of the Gram Sabha, to locally manage financial resources, collate technical inputs, supervise the execution of various components of the NREG scheme, identify the constraints inhibiting its implementation, and initiate measures to modify the planning process & its implementation will ensure the success of this scheme.     

Capacity Building 

PRIs knowledge, skills, and capabilities need to be substantially improved to empower them to resolve issues arising from fiscal & administrative decentralization. For this purpose, suitable capacity building measures need to be created so finance, functions and functionaries are transferred smoothly. Effective capacity building requires the interaction of learning-by-doing, access to resources, facilitation, mediation, and training.

Capacity building measures for Gram Sabhas include the creation of appropriate policy and legal framework, institution building, human resource development, and strengthening of managerial capability. Capacity building measures also refer to developing community audit skills, formulating common vision, demonstrating the prioritizing and setting realistic objectives consistent with local values, facilitating a strategic plan and phased operational measures, and encouraging the monitoring and evaluation of progress. Under the NREG scheme the capacity building should result into 

  • Effective participation of all rural house-holds, more importantly women & other marginalized groups in GS meetings & discussion leading to decision making process

  • Elimination of caste, class, and gender divide in the constitution of GP

  • Evolution of result oriented plan of activities, strategic execution and monitoring system in line with the objectives of the NREG scheme

  • Efficient mobilization of local physical, natural and human resources for the development of village economy

  • Better understanding of local self-governance and democratic values while taking decision

  • Effective coordination and communication between GP and GS to resolve issues and misunderstandings

  • Better networking & coordination between voluntary organizations and the GS/GP to share experiences for mutual benefit

  • Effective implementation of development program to meet stated objectives of an initiative

  • Adequate transparency in implementation including selection of targeted beneficiary, use of funds and resources, and accountability of planners and implementers to GS

Where is the Gap? 

For the emergence of GS as a body to whom the GPs are accountable, there is critical need to spell out the powers and functions of GS in great detail--articulating its role as planner, decision-maker and auditor. Further, a massive awareness-creation program is required to inform GS & GP about their role in planning, implementation, managing financial resources, accounting, audit, and accountability of any NREG initiative.  

In this context following measures need immediate attention. 

  • The NREG scheme calls for significant involvement of local people, GS, and GP right from the stage of planning. Therefore, it is absolutely essential to impart comprehensive training for transferring various skills for both the GS & GP members. National Institute of Rural Development can be assigned the responsibility to design training syllabus focusing sharply on all aspects of planning, implementing, managing financial resources, accounting, audit, monitoring, evaluation, and post project assessment. Involvement of private institutes in such training and monitoring their performance will be very effective way to deliver these skills.

  • Training based on this syllabus must be imparted at block level by State Rural Development Institutes on a systematic and urgent basis. Besides, it is necessary to organize Workshop on Implementation of NREG scheme at block levels for the benefit of GPs & selected members of GS to identify critical issues. GS & GP can be taken through case studies that will walk them through the process of planning to impact evaluation.

  • PRIs need to be trained in all aspects of implementing schemes of farm and rural development in near future. For this purpose, the 1978 Dantwala Committee’s recommendation to create a process to formulate block level plans and position-planning machinery at district level should be adopted. While formulating block level plans, all infrastructure facilities pointed out by District Development Managers of NABARD may need to be considered for inclusion.     

  • Information Technology intervention is necessary to create a database as well as ensuring transparency. Progress of work, future plans, and actions for all initiatives should be available thereby allowing access of the GS. This will increase the effectiveness and efficiency of services provided by various agencies and will also enhance coordination within the different segments of the functional departments.

  • Monitoring and concurrent evaluation of the scheme on a continual basis should be entrusted to independent professional institutions and deficiencies noticed must be corrected in a timely manner

  • Review & monitoring of the implementation progress may need to be done on a monthly basis at PRI level. It should also be done quarterly at the State level and half yearly at the national level by a High Power Committee chaired by the cabinet Minister for Rural Development concerned. Factors inhibiting progress and deficiencies pointed out by monitoring and concurrent evaluation authority should be resolved through policy changes as necessary.

  • On a half-yearly basis, Minister for Rural Development must present the data in the Parliament and attached MPs to his/her Ministry.

  • Local & national print and electronic media must be give rights to release full report on a quarterly basis providing scope for constructive criticism.

  • The current year’s implementation in 200 districts would provide critical information on experiences, which may be documented as case studies by Management experts to improve future policy and strategy of implementation.


This scheme is unique in its concept and implementation and, therefore, the roles of PRIs, State and Union Government need to be well defined to avoid ambiguity. This will make each institution understand its responsibilities and accept accountability for initiatives. A comprehensive training syllabus, plan, and program must be designed for GS & GP. Its implementation must be continually monitored at various levels.       


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