Economists Expect Extra Funds For MGNREGA As Poor Rains Dampen Rural Job Prospects

Amid reports of an emergency fund release of Rs 10,000 crore for the Mahatma Gandhi Rural Employment Guarantee Scheme, economists expect an additional allocation of Rs 25,000-30,000 crore.

The allocation for the scheme in the Union budget 2023 was Rs 60,000 crore.

Tamil Nadu, Uttar Pradesh, Rajasthan, Andhra Pradesh and Bihar are among the top states exhibiting the highest person days demand, indicating unemployment stress.

The MGNREGA 2005 tries to provide 100 days of wage employment in a particular fiscal to at least one member of every household whose adult members seek manual work.

According to data from the MGNREGA dashboard, the total expenditure on the scheme as of date stands at Rs 72,461 crore, while fund availability is at 71,329 crore, showing a deficit.

A PTI report from last month which quoted unnamed persons, noted that additional funds of Rs 28,000 crore have been sanctioned for the MGNREGA, which would be cleared in the next Parliament session.

The talks of additional funds comes at a time when Libtech estimates the fund deficit to be around Rs 9,429 crore.

Based on trends of person days generated in the first seven months, the projected person days from November 2023 to March 2024 would be at 117.84 crore, calculations provided by Chakradhar Buddha, a senior researcher at Libtech India—a non-profit organisation engaged in ground research—showed.

The average cost per person per day as per official data is Rs 321. This would result in the requirement of an additional budget of Rs 37,826.6 crore, according to Buddha.

The winter session of Parliament is likely to begin in the second week of December, and would feature the supplementary demand for grants for additional expenditure beyond budgeted estimates for FY24.  

The government has always maintained that fund releases to the States/UTs is a continuous process and as per the demand for work on the ground.

ICRA’s Chief Economist Aditi Nayar told BQ Prime that she expects the additional demand to be around Rs 25,000-30,000 crore, adding that a change in the festive calendar could have led to a change in the MGNREGA work demanded.

Gaura Sen Gupta, economist at IDFC First Bank Ltd., also expects the expenditure to increase by Rs 30,000 crore.

“The employment provided (number of households) under the scheme has already reached 83% of full year FY23. Our estimate assumes that some of the expenditure is carried over to next year,” she told BQ Prime.

Some of the factors inching up the demand for the employment guarantee scheme, according to her, include the poor monsoon impacting agricultural activity. However, she expects rural wage growth to be slowly picking up which could turn the tide for the rest of the year.

“Rural growth indicators have remained mixed, reflecting uneven monsoon performance. This is also reflected in higher demand for work on NREGA. On the positive front, rural wage growth has picked up, turning mildly positive in real terms. The impact of which is reflected in FMCG sales volume growth, which has continued to improve in the second quarter of FY24,” Gupta said.

Data released earlier this month from the Centre for Monitoring Indian Economy Ltd. showed that rural unemployment jumped to 10.82% from 6.2%, while the urban rate eased slightly to 8.44%.

Buddha concurred that one of the key factors leading to an increase in demand for work under the scheme was the bad monsoon. Uneven rains tends to leave agricultural operations to suffer and this has a bearing on rural workers who use NREGA as a fallback option, he told BQ Prime.

Another reason for the higher number of people is the leeway to use both account-based and Aadhaar-based payments systems, he said. "Last year, there was lot of confusion as the option of Aadhaar-based payments system was mandated. That also contributed to the large-scale deletion in the last 18 months. Many who did not have eligibility for Aadhaar-based payment were denied and that's not the case this time," he said.

In January, a circular from the Ministry of Rural Development mandated the nationwide implementation of the Aadhaar-Based Payment System in MGNREGA programmes. On Aug. 30, the ministry extended the mandatory ABPS deadline for MGNREGA to Dec. 31.

"...despite multiple deadline extensions, a significant proportion of workers still do not meet the eligibility criteria for ABPS... Currently, 62.6% of all workers and 86.1% of active workers are eligible for ABPS," Libtech India, in its FY24 implementation status report for the first six months of this year stated.