The effect of the Mahatma Gandhi National Rural Employment Guarantee Act on the size of outstanding debts in rural India

ABSTRACT

 MGNREGA was introduced in India in 2005 with the aim to improve the livelihood of rural Indian households. In 2012-13, around 156 million rural Indian households had an outstanding personal debt; 85% of the amount of credit being disbursed was given to those households in the bottom income decile for ‘non-business’ related purposes. This paper uses nationally representative household data from the NSS EUS collected in 2004-05 and 2009-10 to look at the impact MGNREGA has had on the rural households’ ability to repay outstanding debt. Results suggests that MGNREGA reduced the size of the outstanding debts for vulnerable households.

KEYWORDS:

• MGNREGA
• India
• household debt
• household level data

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. Based on the Tendulkar Committee, the Poverty Line is set at INR 27.2 in rural areas in India.

2. For more information on the MGNREGA, refer to the website https://www.nrega.nic.in/netnrega/mgnrega_new/Nrega_home.aspx lastly accessed on 21/10/2020.

3. The conversion from INR to USD relates to the exchange rate on 21/10/2020. For a more up-to-date conversion refer to the website www.oanda.com.

4. A group of historically disadvantaged castes, in both educational and social terms, recognised by the Government of India.

5. For a comprehensive literature review on how women and lower income population are unable to access credit, and on the dyad ‘poor women have too much debt/not enough access to credit’ please refer to Reboul, Guérin, and Nordman (2021).

6. A village panchayat (or a village council) is the basic governing institute in Indian villages.

7. Socially disadvantaged groups of people officially designated by the Constitution of India.

8. The NSS 64^th EUS Round data -done in 2007–08- has not been used as data on the level of indebtedness of rural households had not been collected that year. On the other hand, the level of comparability between the 61^st and the 66^th Round is very high.

Additional information

Notes on contributors

Sharvari Patwardhan

Sharvari Patwardhan is a research analyst at the International Food Policy Research Institute in New Delhi, India. She was previously a research fellow at the University of Manchester. She holds a master in Economics from the School of Oriental and African Studies , London.

Luca Tasciotti

Luca Tasciotti holds a Ph.D. in Economics from the University of Tor Vergata, Rome.He has previously worked for the Food and Agriculture Organization (FAO) of United Nations (Rome), for the International Institute of Social Studies (The Hague) and for the School of Oriental and African Studies (London). He is a heterodox development applied economist with interests ranging from nutrition to health, from fertility to agricultural practices; he is mainly interested in the economics of sub-Saharan Africa and other less developed areas.