If there is genuine demand in rural India for jobs, the outlay for the MGNREGS should be enhanced.
By all appearances, the demand for work under the Mahatma Gandhi National Rural Employment Scheme (MGNREGS) has been sliding since July this year; in October, at 2.6 crore persons, it fell to its lowest in 21 months. This is not all bad news, for it could mean there are more jobs available in urban India now that the economy has opened up. However, if there is indeed genuine demand in rural India for jobs, the outlay for the rural employment scheme should be enhanced; the allocation for the year of Rs 73,000 crore, which was smaller than the Rs 1.1 lakh crore for FY21, has been used up. The rural development ministry has already sought an additional outlay of Rs 25,000 crore in the supplementary budget for 2021-22.
To be sure, the revised October data may reflect a better picture, but the conditions in rural India are somewhat worrisome. An analysis by the Bank of America reveals the increase in rural wages has been slowing, averaging 2.7% year-on-year in the April-July period compared with a much better rise of 7.4% yoy in the same period last year. Also, the deceleration has been steeper for non-agri wages rather than agri-wages; BofA analysts point out activities such as weaving and handicraft are severely stressed. Some of the deceleration could be attributed to the waning effect of the enhanced MGNREGS outlay.
Again, increases in the minimum support price (MSP) of both kharif and the rabi crops have been relatively small; these have been raised by just about 3% yoy for key crops compared with an average increase of 6.5% in the previous five years. Thankfully, the normal monsoon and stable yield will ensure a good harvest. Also, while volumes may increase by an estimated at 0.5% in F22 compared with 0.8% in FY21, high wholesale prices of key kharif crops point to more income; BofA analysts see this rising nearly 14% compared with just 7.6% in FY21. However, unfortunately, costs have risen sharply. Farm costs, imputed from WPI, were up 13.7% in the April-August period compared with an average annual increase of 1.3% in the previous five years. Going by the trend in the WPI, which rose 12.5% in October—a five -month high—farm costs could further increase. That, sadly, could offset the gains from better incomes and hurt the nascent recovery in rural demand.
The relatively poor terms of trade, reflected in the sluggish sales of two-wheelers and tractors, warrants some additional support from the Centre. Credit flow to the agricultural sector in the six months to September grew at a slightly better 4% yoy as compared to 3.4% in the same period in FY21 but more needs to be done so that rural demand is stimulated.
The mandate of the MGNREGS 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. The decrease in the number of persons demanding work between July and September may be the fallout of the monsoon. However, it would help to know the aggregate person days of employment demanded, rather than only the number of persons who demanded work. That would make it easier to estimate unmet demand. The data shows that while an average of 51.52 days of work was provided in FY21, the number so far this year is just 37.09. Also, the arrears of some Rs 8,800 crore need to be cleared soon; there is, reportedly, some backlog in payments relating to previous periods, which by one estimate are Rs 17,000 crore. Meanwhile, those in charge could make sure the scheme is run efficiently so as to minimise fraud and leakages.