India Economy Watch - Lower MGNREG Work Demand May Be Cyclical In Nature: Motilal Oswal
Lower work demand under MGNREG in Q2 FY23 could be either due to the structural factors reflecting improving labor market.
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Motilal Oswal Report
One of the most significant fall-outs of the first wave of the Covid-19 pandemic was the mass exodus of casual urban workers back to their homeland. Lack of work in urban areas led to increased job demand under Mahatma Gandhi National Rural Employment Guarantee scheme, leading to a 41.9% YoY growth in monthly employment in FY21, followed by a 34.6% growth in FY22 vis-a-vis FY20 levels.
The average daily wage in FY21/22 was at only Rs 219/216 per person. Such a strong demand for job under MGNREG despite a paltry pay indicated a huge stress in India’s labor market.
In this note, we update our analysis with H1 FY23 data (up to Oct 14, 2022) and make a few observations.
First, employment demanded under MGNREG in Q1 FY23 was only slightly lower than in Q1 FY22 (that witnessed the second wave of Covid-19); however, it fell by as much as 38% YoY in Q2 FY23. Only 21.5 million workers per month demanded work under MGNREG in Q2 FY23, compared to 40 million/35 million in Q1 FY23/Q2 FY22 and 20 million in the corresponding quarter in the pre-Covid period (FY18-FY20).
Lower work demand under MGNREG in Q2 FY23 could be either due to the structural factors reflecting improving labor market, leading to a reversal in the reverse migration or the cyclical factors such as sowing season or a combination of both.
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