Economic Impact of Mahatma Gandhi National Rural Employment Guarantee Act MGNREGA

Abstract

Public wage employment programs designed to provide employment in times of distress have a long history in India. MGNREGA was launched in February 2006, after the National Rural Employment Guarantee Act was passed in 2005, in the 200 most backward districts of India. The program guarantees 100 days of employment at a stipulated wage rate in rural areas. A static multi sectoral CGE model is used to estimate the economy wide effects of the program The program has the potential to enhance growth, reduce inequality by increasing the income of poor rural households relative to other households, and generate employment in both rural and urban areas. However, the short and long run effects of the program differ considerably. In the short run, one rupee invested in the program increases national income by 0.80 rupee and household consumption by 1.02 newlinerupee, while in the long run it results in increase in national income by 1.07 rupee and in increase in household consumption by 1.16 rupee. newline