March 6, 2017

Snapshot of Social Security in times of Demonetisation: MGNREGS & NSAP

In the wake of demonetisation executive order on 8th November 2016, reports of its devastating impact on informal workers, farmers and migrant workers began to pour in from different parts of the country. Seeking evidence on two primary questions; did social security measures work in the face of such an economic shock and did these programmes themselves face disruptions because of demonetisation, we conducted a survey of approximately four hundred individuals, who are either MGNREGS workers or old age pensioners. This was done in the second and third week of January 2017 in fifteen districts across seven states with twenty volunteers from these areas.

There are four important findings; since notebandi, 57% of people, were turned away by the bank, without their wages or pension. On average, people had been to the bank thrice since notebandi, and 30% made more than three visits. After notebandi, 73% of MGNREGS households and about 52% of pensioners said they had a greater need for these entitlements and on notebandi as a whole, the respondents were split half way; between perceiving it as a good and bad move. 

Payment Agencies

In response to the question on the number of visits people had made to the bank since notebandi, we found that 10% of the respondents had not gone to the bank even once, reflecting the non-monetised economy of our poorest citizens. As Phulmani Devi, a brick kiln worker from Bero, Jharkhand said, “hum daily kamaney aur khaney waaley hain. Humein bank jaane ki zaroorat nahi hai” (we are daily workers, who earn and eat, we don’t need a bank). Nevertheless, of those who did go to the bank, 30% were able to receive their pension or wages, and about 57% were denied them on at least one occasion.

Note: survey data collected between 5th and 25th January 2017

Need and Access

On being asked whether the need for these entitlements has increased post notebandi; 73% of MGNREGS households and about 52% of pensioners said they had a greater need.

This is corroborated by official statistics. According to the Ministry of Rural Development’s data, people have worked more on MGNREGS than what was planned for in the past three months, while in the comparable time period in the previous year, it was consistently less than planned. This was perhaps possible due to the enhanced allocation via a second supplementary budget of Rs. 4000 crores to the MGNREGS, which was announced after the demonetisation decision. The Ministry released 43% more funds to states over the last three months, compared to the same time period last year. Comparable information for the NSAP is not available.

Source: Employment Generated versus Planned

Poor Delivery Systems

Being denied cash at the bank may not be entirely due to notebandi, but in fact reflects the weak delivery systems, uncertainty and under resourcing. According to official data, 53% of all MGNREGS wage payments were delayed in FY 2016-17 up to January, and 60% of these were delayed beyond 30 days. This is a conservative estimate that only calculates delays based on the internal processes tracked by the MGNREGS database and does not include delays caused by payment agencies or Central Government fund releases. Pension payments, though comparatively better, are also erratic and delayed. According to survey respondents in Bihar for example, it is not unusual that pensioners have to wait as long as seven months. This may be reflective of the greater uncertainty in wage payments, despite statutory requirements of payments to be made within 15 days of working.

This uncertainty and wage delays translate into high transaction costs; people make multiple trips to the bank to check whether their money had been deposited yet or not. On average, MGNREGS workers made more visits to the bank than pensioners, reflecting greater uncertainty in wage payments. 70% of workers who went to the bank in the past two months returned empty handed, compared to only 30% of pensioners who were denied their pensions.

Payment lying in account
  Don’t know
Denied Cash post demonetisation
Average visits to bank post demonetisation
Note: survey data collected between 5th and 25th January 2017

Perception of Disruptions

On being asked whether demonetisation was a good or bad move, responses was split half way. People view demonetisation as part of a series of disruptive measures they have been subject to, to access their social security. First it was a push move from post office to bank accounts, then to open multiple bank accounts including jan dhan accounts, then to get an aadhaar card which is de facto necessary to access social security entitlements, then to get an ATM card (which only 5% of our sample had ever used), and so on. Standing in line is routine, with trips to the bank invariably setting them back a full working day. To add to all this, there is the mandatory introduction of aadhaar to access MGNREGS work from the next financial year, which has ridden rough shod over the orders of the Supreme Court and is likely to cause massive exclusion. As Mungo Devi of Torpa, Jharkhand bitingly put it “notebandi is the least of our problems.”

Enhanced Need for Social Security

The demographic is clearly one that is used to being inconvenienced, at the very least, if not harassed and treated as second grade citizens. This could only imply the acute need to put up with such inconvenience, for even the limited social security that is available. That the need for MGNREGS work and pensions substantially increased after notebandi reflects that even while these social security measures have barely functioned as they should, people are likely to have been adversely affected in other ways (which was beyond the scope of this survey), resulting in increased demand.

A caveat here is that since MGNREGS is performing well below its potential, unmet demand for employment is always high. The Economic Survey of 2017-18 estimates that 65% of the poor do not get the mandated 100 days of work they need. This is a direct result of the under-resourcing of the programme (a mere 1% increase in the budget for FY 17-18, and a substantial decrease in real terms). The story is much the same with pensions. With the monthly pension remaining unchanged at a miserly Rs 200 and no increase in allocation. Pensioners are an acutely vulnerable demographic; 15% were unaware if there was any money in their bank account or not, and one third of them were unaware that demonetisation had happened at all! Therefore, any conversation on the need for MGNREGS and old age pensions, will not only lead to strong assertions of their significance but also the need for expansion.

In conclusion, did MGNREGS and NSAP provide social security in times of an economic shock? The answer would be yes and no. Yes, because these programmes are in place and have the potential to provide social security, and no because of patchy implementation. On whether the functioning of these programmes was disrupted, the answer would be largely no. This does not however imply that people who access these programmes are not affected by notebandi overall. Other studies show this is indeed the case, and this survey also shows an increase in demand for these social security measures, which is likely to be due to an overall adverse impact.

Instead, notebandi is one in a series of compounding disruptions caused by constant tweaking that has instilled weariness amongst the poor. The split in perception then perhaps shows the success of political rhetoric and coupled with the weariness, may also explain the ominous lack of organised resistance. This makes for a contested future of such reforms (including the mandatory use of Adhaar for service delivery and the proposed Universal Basic Income). This survey reaffirms the need for enhanced social security entitlements and strengthening their systems, precisely to overcome such ill thought out and executed shocks, as demonetisation.


With thanks to: Vishwanath Mahto, Atwa Lohra, Shivnath, Shyam Sunder Singh, Mohammad Mainaz, Naveen Kumar, Richa Singh, Pambetiji, Surbalaji, Prakashji, Sudha N., Bhaskar, Sakina Dhorajiwala, Rajendran Narayan, Prashant Dongerdive, Ashwini Kulkarni, Vineet Bhambhu, Shabeel, Saila Sri Kambhatla, Parth Shrimali, Anogya Parthasarathy, Vikram Srinivas, Rakshita Swamy, Nikhil Dey and Jean Dreze.

A shorter version appeared in the Indian Express here.

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