MGNREGA in Recent Times

The Mahatma Gandhi National Rural Employment Guarantee Act (2005) provides 100 days of unskilled employment at a minimum wage rate to an adult volunteer from each household within 5 kms of residence, every year in rural areas. When the government is unable to provide such employment, applicants must be imbursed with an allowance. It is a poverty alleviation programme that grew to a massive scale of 61.34 million households in 2020 – 21, during the reverse migration of the pandemic. Apart from its mandate to provide a minimum standard of living for the poor, the construction activities supplement other sectors of the economy. To illustrate, the construction of a school through MGNREGA provides new jobs for school employees, in addition to human capital formation (education for the students). Furthermore, there are job reservations based on caste and gender to ensure a minimum economic security for marginalised sections of the society. In rural areas, MGNREGA is beneficial in agriculture sector related production activities, through the construction of assets for minor irrigation, soil regeneration, watershed development, etc.

In theory, the intentions of the policy are beneficial to many. Nevertheless, questions have been raised on the ground – root impact of the scheme. For Example, there are two components of the MGNREGA fund — wage for labourers and materials used in production. A major chunk of the material funding is diverted to contractual payments and often embezzled by middlemen. Similarly, according to Saswati Das’s paper (2016), “Only about 43% of those getting work in India in MGNREGA were labouring households which means about 57% were selected from outside the target households.”

Even so, corruption has decreased over the years, due to the Right to Information (RTI) Act (2009) by which muster rolls were placed in the public domain and direct bank transfers of wages. While the MGNREGA might not fully cater to its beneficiaries, the policy in itself is not unimportant. There is a moral obligation to improve the programme rather than discard or diminish it. The intentions of the act are as a guarantee of minimum wage and not a complete substitute for employment generation.

In the budget for FY 2020 - 21, MGNREGA funding was increased by Rs. 40,000 crores. This had been immensely useful to the victims of the lockdown who had reverse migrated. Subsequently, budgetary allocation for MGNREGA in Financial Year (FY) 2022 – 23 is reduced by 25% as compared to FY 2021 – 22. This is in tandem with an overall decrease in the allocation outlay for the Ministry of Rural Development. According to Debmalya Nandy of the NREGA Sangharsh Morcha, “Approximately ₹12,300 crore — ₹1,464 crore as wages and ₹10,900 crore as material — is yet to be paid, which is going to eat up the next year’s budget. So effectively only about ₹60,700 crore is available for next year.” However, the overall health of the Indian economy might not yet be ready for such a measure.

The current economic scene appears to have accelerating inflation and deceleration in growth — leading to a Stagflation. During the peak in the number of COVID cases, unemployment levels rose to as high as 23.5% and 11.8%. Although the numbers are down to pre - pandemic levels, the approximately 7.5% unemployment rate is an important issue. Economies over the globe have suffered a financial crisis during the pandemic and are predicted to take some time in coming back. Disruptive supply chains and the current rising prices of oil due to the Ukrainian war and otherwise cause much uncertainty in the economy.

Most significantly, since 2015 – 16, there has been overwhelming demand for MGNREGA. Every year, 80 – 90 percent of the budget is exhausted within six months of the year. Thus, MGNREGA being an important social security net that is demanded by the people, must be well implemented and sufficiently funded, especially during the pandemic. In fact, MGNREGA can be channelised to build upon the vulnerabilities in the health and sanitation sectors that were exposed by the pandemic.

As concluded by D.K. Pant, chief economist at India Ratings, “MGNREGA had saved the economy during the lockdown. The hope now is that with the economy slowly limping back to normalcy, demand for MGNREGA work may not be as high. However, rural wage growth is not keeping pace with inflation, and if the demand for work remains high, the government must be quick to provide supplementary funds.”