India’s largest social protection program, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), guarantees households 100 days of work per year, typically in unskilled manual labor on infrastructure projects. For MGNREGS, the central government disburses funds to local governments based on projected spending, a system that has extensive delays and leakages. In fiscal year 2016-17, the Indian government spent over US$6 billion on the program and reached 74 million beneficiaries. In Bihar, J-PAL affiliates tested the impact of an information technology reform that linked the flow of funds to actual expenditures and reduced the number of officials involved in the process. The reform led to a 24 percent decline in expenditure without a detectable decline in employment or assets created, and there is direct evidence that at least part of the decline was due to reduction in fund leakage.

[…] Informed by the results of the randomized evaluation, India’s Union Cabinet approved a national reform of MGNREGS fund-flow.

The reform allows beneficiary payments across all Indian states to be made through a newly-established National Electronic Fund Management System (Ne-FMS). As detailed below, in the Bihar study MGNREGS funds flowed directly from a state government account to village councils (called panchayats), which in turn then paid the beneficiaries. […] The Cabinet note cites J-PAL’s evaluation as part of the rationale for this decision. […]

The evaluation, conducted between September 2012 and March 2013, spanned twelve districts in Bihar, covering a rural population of 33 million.

Abdul Latif Jameel Poverty Action Lab (J-PAL), Fund-flow reforms for improved social program delivery in India

Added to diary 21 March 2018