Narendra Modi government’s apparent insistence on mandatory linking with Aadhaar may have drawn criticism from various quarters with people raising eyebrows, but the project has given a big boost to rural employment by aiding assured jobs and quicker disbursals of payments under the National Rural Employment Guarantee Scheme (NREGS).
By: FE Online | New Delhi | Published: June 28, 2018 3:22 PM
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Aadhaar linking boosts NREGS
Narendra Modi government’s apparent insistence on mandatory linking with Aadhaar may have drawn criticism from various quarters with people raising eyebrows, but the project has given a big boost to rural employment by aiding assured jobs and quicker disbursals of payments under the National Rural Employment Guarantee Scheme (NREGS). The NREGS benefitted from faster wage transfers and easier allotment of work due to the biometric Aadhaar identification, which nearly 90% of the country’s population has already received, a study by the Indian School of Business shows.
NREGS, previously known as MNREGA, was floated in 2005 for the rural farming population, mainly to help the people tide over any farm distress due to harsh conditions, such as drought. The scheme mandates the state government to offer minimum 100 days of employment for at least one member of each family that asks for it.
“The interesting part of NREGA is that it does not have the biometric authentication requirement because the job card is directly linked to the Aadhaar and the bank account, the wages are paid directly into the bank, so there is no need for biometric authentication,” said professor Ashwini Chhatre, Executive Director, Indian School of Business.
JAM session
“We did not expect such a big effect,” Ashwini Chhatre told FE Online when asked if the researchers had expected this result. “What we thought was that expenditure will go up, because of the efficiency improvement — but not that it will be the opposite of what it was before or the change to be this swift. Even we did not expect this magnitude of difference!” he said.
NREGS was launched to increase employment opportunity during the times of distress, thus making it counter-cyclical. But after studying NREGA data of the Financial Years 2011-2017, it has been found that prior to the advent of JAM trinity of Jan Dhan Yojana, Aadhaar and Mobile linking, the employment scheme used to work in a procyclic manner. That is, average employment decreased with the increase of drought and distress.
The possible reason behind this is the long process of payment reimbursement by the government — which included gram panchayat, mandal, district administration and state government, which meant the workers had to work for days, practically without payment. Thus, many used to back out from availing the scheme or used to opt for schemes that would pay much less.
However, since the Jan Dhan Yojana, which covered 90 per cent of the country’s population under the mainstream banking system, and linking of the biometric identity proof of Aadhaar, the payment reimbursement has become faster and easier, and the scenario has changed. Since the introduction of Aadhaar-linked payment the blocks, where the study was conducted, showed a substantial increase of 19.21% in the number of households applying for the scheme during the time of adverse weather conditions or drought. The increase in the years unaffected by drought was 18.9%.
While the total fund dispersed in FY2015 was Rs 92 billion, it jumped to Rs 140 billion in the consecutive year when Aaadhaar was implemented — a significant jump of nearly 50% in a single year, stated the study. Persons and households working also increased by 12 and 17 per cent, stated the report.
The JAM trinity — linking of Jan Dhan Yojana, Aadhaar Card and Mobile phones — has led to the wages reaching the workers’ bank accounts within estimated 15 days of employment as compared to as long as a month previously, the study shows. Further, the direct transfer of wages to the bank accounts also facilitated into removing any caste-based bias that prevails in various parts of the country while it comes to payments, and even the amount of work done by the backward classes also increased subsequently, said the study.