For the uninitiated, randomised evaluation measures the impact by analysing what would have happened in the absence of the interventions. For this purpose, a counterfactual is constructed by selecting a group that is not affected by the interventions. The randomisation is done at an appropriate level to create a control group that mimics the counterfactual.

For example, in the case of NREGA, many have attributed the low quality of assets created under the programme to the mandatory 60:40 ratio that has been fixed for labour to material costs. It is interesting how many of us in the bureaucracy love these guidelines and ratios. And, it is not just the Indian bureaucracy. Tony Emerson, editor of Newsweek International, while discussing NREGA during an informal conversation, told me about a news story that he covered in Newfoundland, Canada in the 1990s. In a programme similar to NREGA, people who worked 10 weeks were eligible for government-paid unemployment benefits for the rest of the 42 weeks of the year. As the lack of fish resulted in further deterioration of the fishing industry, people complained that getting work for even the mandatory 10 weeks was becoming difficult. The government came up with a programme to construct fishing related structures on the coast so that people got at least 10 weeks of employment, making them eligible for the benefits. The result — redundant fishing structures got created that were of little or no use since the fish were drying up anyway!

Coming back to our 60:40 ratio mandated under NREGA. This stipulation implies that for a project costing Rs 50 lakhs, at least Rs 30 lakhs must be spent as wages. It appears reasonable when the primary objective is to create employment, but has an adverse impact on the quality of output as mostly kuchcha works fit this criterion. As a result, many village works, especially the link roads are vulnerable to medium to heavy rains. Intuitively, one could say that by tweaking the ratio in favour of the material component, this problem could be resolved. But the million dollar question is — will there be any impact, and if at all, what will be its extent, when this ratio is changed to say, 50:50 or even 40:60 (labour:material).

... contd.