After the very optimistic GDP numbers released on February 28, there is another good news that unemployment rates have fallen as Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has perked up rural infrastructure. The report by the Economic Research Department of State Bank of India points out that contrary to market perception, India’s unemployment rate declined sharply and consistently from 9.5% in Aug’16 to 4.8% in Feb’17. The states that witnessed major decline in unemployment include Uttar Pradesh (17.1% to 2.9%), Madhya Pradesh (10.0% to 2.7%), Jharkhand (9.5% to 3.1%), Odisha (10.2% to 2.9%) and Bihar (13.0% to 3.7%).
According to the report, this decline is primarily due to government’s effort in providing new employment opportunities in the rural areas. This decline is also explained by household allocated work under MGNREGA, which increased from 83 lakh households in Oct’16 to 167 lakh households in Feb’17. Hence, on the one hand, the unemployment rate has almost halved, on the other hand, the demand for work has almost doubled. Further, the report points out that the number of work completed under the scheme has also increased by a whopping 40% to 50.5 lakh in fy 17 compared to 36.0 lakh in fy 16.
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The most creditworthy increase was seen in Anganwadi work at 166%, drought proofing 158%, rural drinking water at 698% and water conservation and harvesting at 142%. This is a welcome trend and will contribute greatly for developing rural infrastructure as a sine qua non for sustained agriculture growth.
In Union Budget speech, MGNREGA scheme has been allocated a budgetary resource of Rs 48,000 crore. During fy 18, another 5 lakh farm ponds will be taken up, compared to expected 10 lakh farm ponds during fy 17. This single measure will contribute greatly to drought proofing of gram panchayats.
The report that was released on Friday has been authored by Dr. Soumya Kanti Ghosh, Chief Economic Adviser, Economic Research Department, SBI.