MGNREGA could have been the lifeline to revive the rural economy as it has pushed up rural wages. However, it has been unable to provide a lasting stimulus to the rural economy because funds allocation has not kept pace with rising inflation
The Union Budget for the flagship scheme of poverty alleviation, Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has sharply reduced the outlay for MGNREGA in 2023-24 to Rs 60,000 crore. This provision for the flagship rural employment programme is the lowest in six years — as against the record Rs 1,11,170 crore in 2020-21, Rs 98,468 crore in 2021-22 and Rs 89,400 crore in 2022-23.
Persuasive though the Modi government’s arguments are, they fundamentally rest on the assumption of normalcy returning or having returned already. However, the PM-Kisan scheme, under which over 11 crore farm households receive Rs 6,000 annual income support, the outlay has been retained at the 2022-23 level of Rs 60,000 crore.
Surprisingly, there was a drastic cut in the allocation for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) in Budget 2023-24 – bringing it down by over 32% from the revised estimate for the programme in the current financial year. The government slashed the budgetary allocation for the MGNREGS even as the rural employment rate stood at 6.5% on January 31, 2023.
Admittedly, there are gains in incomes of individuals but in view of more expenditure in comparison to budget allocation, at least 15 states have negative balance currently. The highest negative balance is in the case of Rajasthan at 620 crores, followed by Uttar Pradesh with a negative balance of 323 crores. Rajasthan Chief Minister Ashok Gehlot had recently written to the Prime Minister Narendra Modi, demanding immediate release of funds to clear outstanding dues of about 2000 crores. The letter mentioned that there was an outstanding liability of 848 crores for payment of wages and 1102 crores for materials.
Indeed, MGNREGA has pushed up rural wages and incomes and has also created rural infrastructure and provided much-needed employment to the country’s rural population. However, it has been unable to provide a stimulus to the rural economy because funds allocation has not kept pace with rising inflation and growing demand because labour migration has come down resulting in more funds to provide guaranteed employment.
The MGNREGS – mandated by Mahatma Gandhi National Rural Employment Guarantee Act – is a demand-driven programme designed to guarantee at least 100 days of wage employment in a financial year to every rural household having adults ready to do unskilled manual work. The scheme was launched on February 2, 2006 and was often highlighted by the erstwhile United Progressive Alliance (UPA) Government as a programme, which legally guaranteed minimum livelihood security to rural population, contributed to bringing up rural wages, lessened distress migration and empowered weaker sections.
Nearly 6.49 crore households so far demanded work under the MGNREGS in 2022-23, while 6.48 crore were offered the same and 5.76 crore of them availed it. During 2019-20, MGNREGS was allocated 60,000 crores. While it was expected that there would be a reasonable increase in funds allocation, there was actually a decline in allocation. During 2018-19, the flagship programme of the Union government had got 61,084 crores (revised estimate).
The budgetary allocation for MGNREGA had increased to Rs 61,084 crore in 2018-19 from Rs 34,000 crore in 2014-15. Except for 2014-15, in all years since then, actual expenditure has been more than the approved budgetary allocation. According to the non-profit Centre for Budget and Governance accountability, “The allocations have actually declined when adjusted for inflation.”
Little doubt that the Centre had always run out of funds for the MGNREGA scheme because by January 2020, more than 96 per cent of the allocated funds had already been exhausted by the States. The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) had for the first time in five years been allocated less budget than the previous year’s actual expenditure. In the Budget 2019-20, MGNREGS was allocated 60,000 crores as against 61,084 crores during the previous year.
Since its inception, the actual expenditure has been more than the approved budgetary allocation for this scheme for all states and union territories. For instance for 2011-12, the budget allocation for all states and union territories was Rs 31,000.00 crores but actual expenditure was Rs 37,072.82 crores. Similarly for 2012-13, the allocation was Rs 30,387.00 crores but expenditure was Rs 39,778.29 crores. During 2013-14, the scheme was allocated Rs 33,000.00 crores but expenditure was Rs 38,511.10 crores.
The allocation remained static at Rs 33,000.00 crores for 2014-15 as against expenditure later at Rs 36,025.04 crores. For 2016-17, the budget for this scheme was raised to Rs 48,220.26 crores but actual expenditure went up to Rs 57,946.72 crores. A year later in 2017-18, the allocation came down to Rs 48,000.00 crores. In 2018-19, budget allocation was raised to Rs 61,084 crores (revised estimates). The expenditure statement is yet not available for these years but the fact that the majority of funds have already been exhausted shows that fund crunch has hit the scheme hard.
Actually the allocations have actually declined when adjusted for inflation. The fact remains that its share in the total Budget had been decreasing. It is said that at times, the figures don’t tell the story. Mahatma Gandhi NREGA is transforming rural India into a more productive, equitable and connected society. It has provided nearly 235 crore person days in the last three years, each year. This year as well, it will be around the same making it four years of consistent high performance on wage employment with durable assets for sustainable livelihoods.
The first and foremost requirement is now to ensure full transparency in wage payments, asset creation, and payment for materials. It is for this reason that efforts were started for a 100 per cent of geo-tagging of assets, AADHAAR linking of Bank Accounts, IT/DBT transfers for all wages, and material payments and Geographic Information System (GIS) based planning of works. The intention was that work should be visible in the public domain and beneficiaries receive payments in their verified accounts.
The issue of creation of durable assets was very important. The 60:40 ratio was mandated at Gram Panchayat level often leading to non-productive assets being created simply because 60 per cent had to be spent on unskilled wage labour in that Gram Panchayat. Without diluting 60:40 principle, the first big reform was to allow 60:40 at the District level rather than at the Gram Panchayat level. In spite of this reform, the ratio of expenditure on unskilled wage labour to overall expenditure remains higher than 65 per cent. This has enabled a new thrust on durable assets that generate incomes. It allows the flexibility to undertake only those assets that are productive.
Over 60 per cent of the resources are spent on Natural Resource Management focused on ensuring higher incomes to farmers by improving both the area under cultivation and yield of crops. This is done by improving the productivity of land and increasing the water availability. The major works taken up under NRM include check dam, ponds, renovation of traditional water bodies, land development, embankment, field bunds, field channels, plantations, contour trenches etc. During the last 4 years 143 lakh hectares of land benefitted through these interventions. Large scale water conservation, river rejuvenation, and irrigation works have been taken up and completed under MGNREGS.
The ambitious MGNREGA could have been the lifeline to revive the rural economy as it has pushed up rural wages, created rural infrastructure and provided much-needed employment to the country’s rural population. However, it has been unable to provide a lasting stimulus to the rural economy because funds allocation has not kept pace with rising inflation.
