Effective Use of Technology for Welfare Schemes

UPSC Prelims Exam 2020 Test Series

Important Topics for UPSC Prelims and Mains Exam 2020

Effective Use of Technology for Welfare Schemes

Today’s workforce programs, especially MGNREGS (NeFMS-Use of Technology for MGNREGS), which are used to alleviate distress and poverty, owe their intellectual origins to “food for work” programs during the rule of Chandragupta Maurya (320 BC to 298 BC), “Food for work” is first referred in Kautilya’s Arthashastra;

 Much later in 1784, but more than a century before Keynes (1909), Nawab Asaf-ud-Daula started a “food for work” programme to help the famine-stricken people of Lucknow. Some workers were employed during daytime to construct the Imambara. Others were hired at night to demolish part of what was constructed during the day time.

The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), which was enacted through an Act of Parliament in 2005, represents the modern version of such “food for work” programmes in India.

The programme was operationalised through the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) with effect from February 2, 2006.

The programme was initiated to ameliorate rural distress by providing at least 100 daysof manual labour at minimum wages to anyone who seeks employment under the program.

Creation of productive assets for prescribed quality and durability, social inclusion, gender parity, social security and equitable growth form the founding pillars of the programme.

The Act states that “the objective of the legislation is to enhance the livelihood security of poor households in rural areas”.

The programme was reviewed in 2015 and the government initiated major reforms using technology and emphasized on bringing in more transparency and accountability, robust planning and creation of durable productive assets.

The scheme was also integrated with the Aadhaar Linked Payments (ALP) system. The ALP leveraged the Jan Dhan, Aadhaar and Mobile (JAM) trinity to provide Direct Benefit Transfers (DBT) to the beneficiary accounts.

As a result, the wage payment system underlying MGNREGS was streamlined, thereby reducing the scope for delays in payment.


Before the implementation of DBT, MGNREGS wages were transferred to the panchayat bank accounts and a significant number of workers had to collect wages in cash from the gram panchayat office. Though attempts were made to implement a system of DBT, two structural constraints limited these attempts.

As per a World Bank report, until 2015, close to 50 per cent of the country’s population did not have bank accounts.

The proportion of unbanked population was significantly higher for rural people who are the target group for MGNREGS.

According to the Reserve Bank of India (RBI)2 ,total banking outlets in villages as of March, 2014 was 1,15,350.This has increased by around five times since then with total banking outlets in villages at 5,69,547 as of March, 2018.

By December, 2015, the total number of Aadhaar enrolments in the country exceeded 100 crore, thereby covering a major portion of the adult population.

In 2015, the Pradhan Mantri Jan Dhan Yojana (PMJDY) was launched to ensure universal access to banking facilities with at least one basic banking account for every household.

National electronic Fund Management System (NeFMS)

In order to streamline the system of fund flow and to ensure timely payment of wages, NeFMS was implemented in the year 2016.

Under the system, the Central Government directly credits the wages of the MGNREGS workers, on a real time basis, to a specific bank account opened by the State Governments.

All the Programme Officers debit this state-level single account for authorization of wage payment.

Currently, NeFMS is implemented in 24 States and 1 Union Territory wherein payment of wages is being credited directly to the bank/post office accounts of MGNREGS workers by the Central Government.

As a result of this initiative, the e-payment under MGNREGS has increased from 77.34 per cent in FY 2014-15 to 99 per cent in FY 2018-19

Perceived Benefits of DBT

 Providing timely release of payments;

 Ensuring correct funds are transferred to correct beneficiaries, reducing corruption & leakages in system.

 Reduction in delays in system for funds transfer (improving programme performance and instilling trust and confidence in system by beneficiaries).

 Strong focus on security, tracking and monitoring of funds (through use of digital sign/signatures and convergence/interoperability), Reconciliation process during payments between intermediate agencies involved in funds transfer (near real time tracking, accountability and transparency).


Timely Payment of Wages: DBT focused on directly transferring funds into the beneficiary bank account. The NREGA Soft monitors generation of payment of wages within 15 days. Sustained efforts and intensive engagement with all stakeholders has enabled vast improvements in the timely payment of wages. In 2014-15, 26.9 per cent of the payments were generated within 15 days, which has now risen to 90.4 per cent in 2018-19.

Demand for MGNREGS Work: However, in blocks that are affected by drought, the persons demanding work increased by 20.7%.

Supply of MGNREGS work: We observe a 20% increase in the supply of work in blocks that are affected by drought. This suggests that the supply of work under MGNREGS also responds to the increase in demand in the blocks affected by drought. It can be inferred that the increased state capacity to implement anti-poverty programmes brought about by ALP can potentially bridge the demand supply gap in MGNREGS. State governments will be able to effectively monitor the implementation of MGNREGS and nudge the officials to provide jobs wherever and whenever they are needed the most.

Work Done under MGNREGS: Muster rolls are a form of attendance register signed by workers. It acts as a preliminary check in the sense that, if demand and supply of work increases, but there is no change in muster rolls filled, then it means that there may be a false reporting of numbers.


While drought is the primary source of rural distress, there is a possibility of some extremely local unobserved distress which is not related to drought such as pest attacks, disease outbreak, sale of land for infrastructure development etc.. Such distress should reduce consumption expenditure of the local areas affected by it. Therefore, monthly consumption expenditure from NSS round 72 survey data can be used as a proxy for distress. The hypothesis is that there should be an increase in demand for MGNREGS work in areas with decline in consumption expenditure.


Highlighting the benefits of using technology in welfare schemes to improve end to end governance, create a robust evidence based implementation framework in partnership with the States, streamline the processes, timely transfer of funds to implementing agencies and beneficiaries, plugging of leakages, optimum utilization of public funds and improving overall performance (outputs/outcomes) of the programmes.

There are some policy implications:

Probable Indicator of distress: Demand for work under MGNREGS may be used to develop a real-time indicator of distress at the granular district/ panchayat level. Distress at the level of a district or panchayat is difficult to identify in real-time using the current datasets. While employment related NSS surveys are carried out once in 5-6 years, district-level GDP is released irregularly. Both these datasets are released with lags. As demand for MGNREGS work is also affected by the governance capacity in the state, this indicator of real-time distress can be constructed after accounting for the effect of the same.

Expansion of ‘works’ under MGNREGS: To further increase the effectiveness of the Scheme, the definition of ‘works’ under the Scheme should be regularly reviewed and amended in light of the requirements

Up-skilling the MGNREGS Workers: The objective of the scheme to enhance livelihoods for households can be reinforced by enabling them to acquire suitable skills, which in turn will help them increase incomes and provide horizontal and vertical mobility to them. The convergence of MGNREGS with Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY) and involvement with women Self-Help Groups needs to be strengthened so that supply for skilled wage labour increases.

Expanding use of JAM to other Welfare Schemes: The adoption of DBT in programmes which involve transfer of cash benefits (scholarships or pensions) and price subsidies (such as those given for kerosene, liquefied petroleum gas (LPG), public distribution system (PDS), fertilizers and other input subsidies needs to be strengthened to minimize exclusion and inclusion errors.

Use of Digital Infrastructure for micro-benefits: A huge digital infrastructure, linking Aadhaar, bank accounts and mobiles has been created and effectively used for MGNREGS – the largest welfare programme. This can be used to expand the reach of the programmes through provision of micro-insurance, micro-pensions and micro-credit to people in every corner of the country

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