MGNREGS: High demand for work reflects economic slump

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November 25, 2020 4:00 AM

The demand for work under the rural employment scheme (MGNREGS) jumped in May as the lockdown was eased, peaked in June, but continued to remain at elevated levels through October, according to official data

The data reflects the high efficacy of the popular scheme to avert a rural distress in the pandemic period that saw tens of thousands of migrant workers returning to their rural homes from cities.

The demand for work under the rural employment scheme (MGNREGS) jumped in May as the lockdown was eased, peaked in June, but continued to remain at elevated levels through October, according to official data (see chart). If as many as 2.76 crore more persons (up 77% on year) demanded MGNREGS work in June 2020 compared with the year-ago month, the annual increase was still very large at 1.49 crore (92%) in October.

The data reflects the high efficacy of the popular scheme to avert a rural distress in the pandemic period that saw tens of thousands of migrant workers returning to their rural homes from cities. That the demand continues to be much higher than the year-ago level bears testimony to the economic sluggishness that is still prevailing in the urban and rural areas, rendering other opportunities for work unavailable.

At the current rate of generation of person days (daily work), the Centre will have to incur an expenditure of around Rs 1.16 lakh crore on the scheme for the whole of FY21, which is at least Rs 12,000 crore more than the funds allocated so far.

There is evidence of a sharp increase in supply (work offered, which is reflected on person days) in June-July, as the government struggled to extend timely relief to the under-privileged. The person days in both these months were double the year-ago levels, a surge which surpassed even the recorded rise in demand for work. Mindful of budget constraints, there has since been a moderate regulation of the release of funds (supply) by the government.

So far this fiscal, 262.12 crore person days have been created under the scheme; at this rate, the person days in the fiscal could be around 420 crore. This is a big jump from 265 crore person days created in 2019-20, and 268 crore in the previous year.

The Centre has been generous with the allocations for the MGNREGS this year (including Rs 10,000 crore provided for rural employment in the latest tranche of stimulus, the scheme’s budget outlay for the current fiscal is now `1.11 lakh crore compared with Rs 68,300 crore in 2019-20). An amount of Rs 73,094 crore has been spent under the scheme so far this year.

Additionally, the state government sought to increase the utility of the scheme for the poor during the pandemic period by cutting the material costs for the scheme and spending a higher-than-usual part of the funds available on wages. I normal times, of every Rs 10 spent under MGNREGS, Rs 6-7 goes to the workers as wages and the balance Rs 3-4 is used for purchase of building materials. However, the wage-materials ratio has turned out to be skewed much more towards the wages side in the current fiscal; in a number of states, the ratio has become 8:2 or higher and some states like Assam and Haryana have used 95% or more of the scheme’s funds for payment of wages.

An average of 40.44 days of employment has been provided to each beneficiary household under MGNREGS so far this year, compared with of 48.4 days in the whole of last year. As part of its relief package under Pradhan Mantri Garib Kalyan Yojana, daily wage rate under MGNREGS was hiked by Rs 20 to Rs 202, effective April 1 this year.

The scheme’s mandate under the MGNREG Act 2005 is to provide at least 100 days of ‘wage employment’ in a financial year to every rural household whose adult member volunteers to do unskilled manual work. This goal has never been met, but the achievement this year could be closer to the threshold.

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