Balancing The Books For MGNREGA
Activities under MGNREGA can have spillover effects on the local economy, creating demand for services and stimulating growth.
While urban areas tend to have strong job markets and thriving economies, rural areas often face greater challenges in terms of limited employment opportunities and lean budgets, making government programmes such as MGNREGA critical to improving their standard of living. The 2023-24 reduction in budget allocation invited criticism and clarifications from all ends, but do these help clarify things?
When the Covid-19 pandemic hit, it had the potential of wiping out decades of gains made in human development, but due to the combined safety net of schemes such as MGNREGS and PDS, rural India saw a mitigating effect. True to its nature, MGNREGA, with the promise of 100 days of guaranteed employment, donned the role of a savior for communities that could have only dreamt of survival otherwise. It generated an all-time high record of 3.89 billion person-days of employment in 2020-21 and 3.63 billion person-days in 2021-22.
While many criticize MGNREGA as a ditch-digging, manual labour, low-skilled programme, its utility is not limited to that. It also includes various activities, including building roads, constructing water bodies, and other rural infrastructure projects. These activities can have important spillover effects on the local economy, creating demand for other services and stimulating growth in other sectors.
Hence, it is only natural for concerns to arise when India cuts down expenditure on this front: from Rs 730 billion (Rs 73,000 crore) in FY23 to Rs 600 billion (Rs 60,000 crore) in FY24, so much so that it has reached a six-year low.
The Government Says The Demand For Labour Has Decreased, But Has It?
In the last seven years, the demand for MGNREGA work has doubled, rising from 1.64 million households in May 2015 to 3.07 million households in May 2022. Accordingly, the budgetary allocation has also consistently increased since 2013: from Rs 32,000 crore in FY14 to Rs 73,000 crore in FY22.
However, the actual expenditure on the programme has consistently been higher than the allocated budget. The 2022-23 budget allotted Rs 73,000 crore for the programme, 25% less than the revised projection for 2021-22, and requested Rs 45,000 crore in supplementary funding. This time, the 2023-24 budget allotted Rs 60,000 crore to the programme, a roughly 32% decline from the revised estimate of 2022-23.
The Economic Survey shows that as of Jan. 24, 2023, 6.49 million households have already requested work through the programme indicating that rural households still need support. This corroborates with the fact that the demand for employment is still oscillating around an all-time high. And now that people need more support from PWPs like MGNREGA to build back better, a slash at expenditure at this time raises a question—is India's decision to reduce its expenditure on MGNREGA a bit premature?
Critique Of Reduction In Expenditure
According to the government, the work demand for MGNREGA has decreased. The labour, which is now not demanding work under MGNREGA, presumably, will be absorbed under programmes such as JJM and PMJAY, the recipients of additional funding this year.
The diversion of funds towards such programmes, capital expenditure, enhancing infrastructure, and promoting growth is being seen as beneficial for the economy in the long-term. Some also argue that slashing the budget is a positive step because it will help curb leakages and bring down corruption.
However, a subset of commentators has hypothesised that the cut is an attempt to thwart social audits, which would have helped root out instances of waste, fraud and abuse.
Moreover, the government's focus has changed from meeting the needs of the rural population to being limited by what it is willing to allocate. Over the last few years, the inclination has moved from rural employment to rural entrepreneurship programmes that create skilled labour to enhance skill-based and market-ready capacities and is further directed towards digital reforms. Therefore, it is not surprising when funds are pulled away from a public works programme that does not speak to the idea of the digital reforms.
While it is encouraging to see the government prioritising growth and infrastructure, a rural development programme that doesn't actually help rural areas flourish defeats the purpose. Ultimately, it is up to the government and policymakers to find a middle ground, strike a balance between these competing priorities and allocate resources in a way that best serves the country's and its citizens' interests.
Manmeet Kaur and Aishwarya Bhatia work with Sambodhi Research–a multidisciplinary research organisation offering data-driven insights to national and global social development organisations.
The views expressed here are those of the author, and do not necessarily represent the views of BQ Prime or its editorial team.
