The Centre’s ₹73,000 crore allocation for the flagship rural jobs scheme, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), in 2022-23 is 25% lower than the ₹98,000 crore revised estimate for the scheme in the current year, reverting to the same insufficient amount allocated in the last budget. In fact the MGNREGA did not find any mention during the Union Finance Minister’s Budget speech on Tuesday.
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Rural employment activists and non-BJP State governments reacted with outrage, accusing the government of crippling a key safety net during an employment crisis, while some economists said the Centre had missed a critical opportunity to revive consumer demand in the rural economy.
MGNREGA is a demand driven scheme, guaranteeing 100 days of unskilled work to any rural household that wants it. During the first COVID-19 lockdown in 2020, when the scheme was ramped up and given its highest-ever budget of ₹1.11 lakh crore, it provided a critical lifeline for a record 11 crore workers. In the next financial year 2021-22, the budget allocation dropped to ₹73,000 crore, resulting in the scheme running out of funds and putting its balance sheet in negative territory by October.
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Supplementary allocations then pushed up the revised estimates to ₹98,000 crore, but workers say they paid the cost in delayed wage payments and artificial suppression of demand, while some State governments were forced to dip into their own coffers to meet costs.
Crucial lifeline cut
“The cut comes at a time when the country is going through its worst ever employment crisis. MNREGA is crucial because it reaches out to the last person in the line. With the current allocation, we will have a repeat of last year, when the funds ran out midway through the year and many crucial works will have to be stalled,” said Kerala Finance Minister K.N. Balagopal.
“It is a terrible thing to do. But this is the Modi model of development,” added Amit Mitra, the Principal Chief Advisor to the West Bengal Chief Minister and a former Finance Minister of the State.
Pending payments
Grassroots activists said the reduction in funding would have a disastrous impact on workers, especially as pending payments from the current year will also carry over into the next.
“Approximately ₹12,300 crore — ₹1,464 crore as wages and ₹10,900 crore as material — is yet to be paid, which is going to eat up the next year’s budget. So effectively only about ₹60,700 crore is available for next year,” said Debmalya Nandy of the NREGA Sangharsh Morcha.
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“If the government wants to provide employment to all 9.94 crore active job card holding families, they will only be able to provide some 20 days as per the current per person per day average cost of ₹298. However, the wage rates will also increase and therefore, the scope of employment will further reduce,” he added.
“The government is using the budget to kill the law,” said Nikhil Dey, a founder of the Mazdoor Kisan Shakti Sangathan. “This was the only programme that offered employment in a dangerous situation of jobless growth. The allocation does not even keep pace with the rate of inflation,” he added.
“This will hit the rural economy quite badly. Low consumption demand in rural areas is continuing to drag down the economy,” said Himanshu, a rural economist at Jawaharlal Nehru University.
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“Corporates understand this better than the Finance Minister, as many of them are asking for more money to be spent in rural areas to ensure that people have the ability to purchase their consumer goods,” he added.
“MGNREGA had saved the economy during the lockdown. The hope now is that with the economy slowly limping back to normalcy, demand for MGNREGA work may not be as high,” said D.K. Pant, chief economist at India Ratings. “However, rural wage growth is not keeping pace with inflation, and if the demand for work remains high, the government must be quick to provide supplementary funds,” he added.
