An Empirical Study of the Impact of NREGA Implementation on Rural Poverty Rates in India

Abstract

The National Rural Employment Guarantee Act (NREGA), now known as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), was implemented in India with the objective of enhancing livelihood security in rural areas by providing at least 100 days of wage employment per year to every household willing to do unskilled manual work. This study empirically examines the impact of NREGA on rural poverty rates in India, utilizing a Difference-in-Differences (DID) approach to analyze data from the National Sample Survey (NSS) and Census of India. The findings reveal a significant reduction in rural poverty rates in districts where NREGA was implemented compared to non-NREGA districts. The program has been particularly effective in regions with higher initial poverty levels, indicating successful targeting of the most vulnerable populations. Additionally, the study highlights regional variations in the impact of NREGA, with some areas experiencing greater benefits than others. The results suggest that while NREGA has substantially contributed to poverty reduction, its effectiveness is influenced by local governance and administrative capacities. Policy recommendations include improving administrative efficiency, enhancing the quality and sustainability of created assets, and complementing NREGA with other skill development and capacity-building initiatives. Addressing regional disparities and ensuring robust monitoring and evaluation mechanisms are also crucial for maximizing the program’s impact.