Implementation of the National Rural Employment Guarantee Act in India: Spatial Dimensions and Fiscal Implications

Levy Economics Institute Working Paper No. 505

21 Pages Posted: 13 Jul 2007

See all articles by Pinaki Chakraborty

Pinaki Chakraborty

National Institute of Public Finance and Policy; Bard College - The Levy Economics Institute

Date Written: July 12, 2007

Abstract

Since its enactment in 2005, the National Rural Employment Guarantee Act (NREGA) has been implemented in 200 districts in India. Based on state-by-state employment demand-supply data and the use of funds released under NREGA, it is found that, although it is a demand-driven scheme, there are significant interstate differences in the supply of employment. The supply falls far short of demand, particularly in low-income states, where the organizational capacity to implement the scheme is limited. It is also noted that the NREGA-induced fiscal expansion has not contributed to higher fiscal imbalances. The consolidation of other public employment programs into NREGA has actually kept the total allocation of funds by the central government at a level no higher than those reached in the fiscal years 2002-03 to 2005-06. The NREGA fund utilization ratio varies widely across states and is abysmally low in the poorer states. Since the flow of resources to individual states is based on approved plans outlining employment demand, it may turn out to be regressive for the poorer states with low organizational capacity in terms of planning and management of the schemes, especially labor demand forecasting.

Keywords: Employment Guarantee, Rural Employment Program, Budgetary Incidence

JEL Classification: J21, J23, J31, J38

Suggested Citation

Chakraborty, Pinaki, Implementation of the National Rural Employment Guarantee Act in India: Spatial Dimensions and Fiscal Implications (July 12, 2007). Levy Economics Institute Working Paper No. 505. Available at SSRN: https://ssrn.com/abstract=1000215 or http://dx.doi.org/10.2139/ssrn.1000215

Pinaki Chakraborty (Contact Author)

National Institute of Public Finance and Policy ( email )

18/2, Satsang Vihar Marg
New Delhi, 110067
India

Bard College - The Levy Economics Institute ( email )

Blithewood
Annandale-on-Hudson, NY 12504-5000

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