wl-5890-Enhancing Livelihood Security of the Rural Households during Economic Downturns: An Analysis of MGNREGA

The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) aims to enhance livelihood security by providing guaranteed 100 days of unskilled manual work to rural poor. The present study investigates whether MGNREGA acts as procyclical, countercyclical, or neutral in response to economic fluctuations captured by changes in GDP. Economic cycles are analysed using the Hodrick-Prescott (HP) Filter and X-13 ARIMA-SEATS methodology. A three-staged analysis ranging from composite level variables to detrended model and then to seasonally adjusted cycle, is undertaken to understand the impact of the decomposed quarterly GDP on the corresponding decomposed demand and supply of work series under MGNREGS, which is tested through the application of ARDL Bounds test. Results indicate a significant negative long-term relationship between MGNREGA work supply and GDP across all stages of variable decomposition as well as between trend-excluded and seasonally adjusted demand cycles and GDP from Q1:2013-14 to Q2:2022-23. However, the long-term relation between composite demand and GDP remains indeterminate. Overall, the findings indicate that MGNREGS’ operations improve during economic downturns suggesting a countercyclical operation. GDP forecasts can aid in projecting MGNREGS’s demand and supply, lending more accuracy in budget allocations for the scheme.