Explained | The funding and demand for MGNREGA

How has budget allocation for the rural employment scheme changed over the years? How many people are demanding work under the scheme? What are the challenges facing the scheme’s implementation?

The story so far:

The Economic Survey 2022-23 presented on January 31, a day ahead of the Union Budget, showed that 6.49 crore households demanded work under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). Of these, 6.48 crore households were offered employment by the government and 5.7 crore actually availed it. The survey credited the scheme with having a positive impact on income per household, agricultural productivity, and production-related expenditure. It added that this helped with “income diversification and infusing resilience into rural livelihoods”.

The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) was passed in 2005 and aimed at enhancing the livelihood security of households in rural areas. Under it, the MGNREGS is a demand-driven scheme that guarantees 100 days of unskilled work per year for every rural household that wants it, covering all districts in the country except those with a 100% urban population. There are currently 15.51 crore active workers enrolled under the scheme. The types of projects undertaken for employment generation under MGNREGA include those related to water conservation, land development, construction, agriculture and allied works.

Under the scheme, if work is not provided within 15 days from when it is demanded, the worker has to be given a daily unemployment allowance. Additionally, the wages of unskilled workers also have to be paid within 15 days and in case of a delay, the Centre has to compensate them. Beyond being a form of insurance or safety net for the country’s poorest rural households, the scheme proved to be beneficial not just for rural workers but migrant labourers as well especially during the COVID-19 pandemic which saw large-scale reverse migration.

During the first COVID-19 lockdown in 2020, when the scheme was ramped up, and given its highest-ever budget of ₹1.11 lakh crore, it provided a critical lifeline for a record 11 crore workers. Studies gave empirical evidence that wages earned under MGNREGA helped compensate somewhere between 20% to 80% of the income loss incurred because of the lockdown. This is reflected in the fact that the demand for work under MGNREGA spiked to record-high levels during the pandemic years. About 8.55 crore households demanded MGNREGA work in 2020-21, followed by 8.05 crore in 2021-22, compared to a total of 6.16 core households asking for work in the pre-pandemic year 2019-20.

While Finance Minister Nirmala Sitharaman said in the Lok Sabha during the Winter Session in December 2022 that the demand for jobs under MGNREGA has been declining in the recent past, the new economic survey data revealed that as of January 24 this year, 6.49 crore households had already demanded work under the scheme with two more months till the financial year ends. Notably, this demand-side figure is still larger than pre-pandemic levels, which indicates that despite the lifting of pandemic curbs and changes in migration trends, rural households are still demanding work under the scheme. Besides, the pandemic-induced demand surge notwithstanding, the Ministry of Rural Development informed Parliament in August last year work that demand under MGNREGS has doubled in the last seven years, that is, 3.07 crore households demanded work in May 2022 compared to 1.64 in the same month in 2015.

Budgetary allocations to the flagship scheme has increased successively since 2013 from ₹32,992 crore in the 2013-14 Union Budget to ₹73,000 crore in 2021-22. However, in recent years, the actual expenditure on the scheme has successively been higher than the amount allocated to it at the budget stage. For instance, in 2021-22, while ₹73,000 crore was allocated to MGNREGS, supplementary allocations made later pushed up the revised estimates to ₹98,000 crore, as funds had run out in the middle of the year. Even so, the Central government once again allocated ₹73,000 crore (25% lower than the previous year’s revised estimate) for the scheme in budget 2022-23, then seeking an additional ₹45,000 crore as supplementary grants in the Winter Session in December.