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MGNREGS: Rural Jobs Programme Remains Underfunded Despite High Demand | Photo courtesy: Sabir Mallick
The Covid-19 pandemic has had the most impact on jobs and livelihoods in the last five years. Mahatma Gandhi Rural Employment Guarantee Scheme (MGNREGS), the rural jobs programme which guarantees 100 days of work per household, had become a lifeline for millions of rural workers. A majority of the participants in MGNREGS’s demand-driven work are women. As millions of workers returned to the safety of their homes following the lockdown, the number of people demanding work under MGNREGS swelled to a record 133 million in 2020-21.
While economic growth has stabilised since the peak of the pandemic, India’s employment is largely dominated by poor-quality employment in the informal sector and informal employment, said India Employment Report 2024 by the Institute for Human Development and International Labour Organization. During the past decade, there was only a small increase in the real wages of casual workers and a decline in the real earnings of regular salaried workers and self-employed persons, the report found. The Economic Survey of India 2022-23 has said that “growth in real rural wages has been negative due to elevated inflation”.
The Bharatiya Janata Party’s manifesto for the 2024 general election does not mention the Mahatma Gandhi Rural Employment Guarantee Scheme or a specific national minimum wage, but it promises to ensure a review of National Floor Wages from time to time. Meanwhile, the Indian National Congress manifesto stated that the wage under MGNREGS would be increased to 400 per day.
As India elects its 18th Lok Sabha in a seven-phase election lasting more than 40 days, one of the top concerns among voters is unemployment and the availability of jobs. According to the 2024 Lokniti-CSDS pre-poll survey, unemployment was the biggest concern (27%) followed by price rise (23%). More than three in five people felt that getting jobs had become more difficult than it was five years ago. Rural wages have declined, household demand for rural jobs remains higher than five years ago, and the funds allocated remain inadequate to support timely wages, clear arrears, and pay delay compensations, said experts.
‘Puzzling’, ‘Perplexing’ Reduction in Funds
Demand for work under the rural jobs programme--variously referred to as MGNREGA (the ‘A’ standing for the Act passed to codify the programme), MNREGA and NREGA--has fallen compared to the peak of Covid-19, to 93 million people in 2023. But it was 15% more than the average demand between 2014-15 and 2018-19.
Since 2019, the household demand for work has been higher each year compared to any of the years between 2014-15 and 2018-19. The peak Covid-19 years of 2020 and 2021 are exceptional where 83 million households demanded work, on average, compared to 52 million households, on average, demanding work between 2014-15 and 2018.
Despite the high demand, between 2019-20 and 2023-24, the budget allocations each year have been consistently lower than the previous year’s revised estimates. In 2022-23 and 2023-24, the allocated budget was one-fourth and one-third, respectively, of the previous year's revised estimate. The only time exception in the Narendra Modi government’s second term was in the interim budget for 2024-25, where the allocation is the same as last year’s revised estimate.
The 2023-24 budget allocation was less than even the previous year’s budget for the first time in eight years, IndiaSpend reported in February 2023.
The drop in allocation over the years has concerned parliamentary committees as well.
The 2023-24 Lok Sabha Standing Committee report on Rural Employment through Mahatma Gandhi National Rural Employment Guarantee Act, presented in February 2024, said that the reduction in budgetary allocation in 2023-24 was “puzzling and needs to be looked into”.
The committee noted that the pruning of funds at budget estimate stage has a “cascading effect on various important aspects such as timely release of wages, release of material share etc. which have a telling impact on the progress of the scheme”.
This was not the first time the committee was puzzled with the lowering of allocation. Two years earlier, the committee released a report critically evaluating the rural jobs programme which said that it was “quite perplexing as to the rationale behind keeping the BE [budget estimate] for 2021-22 at Rs 73,000 crore while in the previous financial year, the expenditure was to the tune of Rs 111,170.86 crore.”
The Ministry of Rural Development’s (MoRD) reply in an August 2022 action-taken report on the issue said that the Mahatma Gandhi Rural Employment Guarantee Scheme is a demand-driven wage employment programme and the funds release to states “is a continuous process and Central Government is committed in making funds available keeping in view the demand for work on the ground”. In the following budget, allocations were 33% below the 2022 revised estimate.
When IndiaSpend asked about the reduction, in February 2023, the MoRD said that the upward revisions each year show that “the actual releases to the states have been much higher than that provided for at the BE level”.
In a 2023-24 pre-budget analysis, Peoples' Action for Employment Guarantee (PAEG), a MGNREGS research and advocacy group, had said that Rs 2.72 lakh crore was needed to guarantee 100 days of work per household. In 2023-24, each household was provided 52 days of work on average, which was as much as in 2020-21.
“MGNREGA is caught today in a deadly pincer,” economist Jean Drèze told IndiaSpend in a February 2023 interview. “On one side, the budget has been drastically cut, not only vis-à-vis last year's revised estimates but also vis-à-vis budget estimates in any of the last five years.”
IndiaSpend has written to the secretary of the rural development ministry for comments on underallocation of funds, arrears to states, and issues of delay compensation, and the government’s response to the standing committee’s recommendations. We will update this story when we receive a response.
Low Wages and Large Arrears
The highest Mahatma Gandhi Rural Employment Guarantee Scheme daily wage rate notified for 2024-25 was Rs 374 in Haryana and three panchayats in Sikkim, which was Rs 1 lower than national minimum wage recommended in 2019 by the Anoop Satpathy committee to review and recommend methodology for fixation of national minimum wage.
In 2024, on average, notified Mahatma Gandhi Rural Employment Guarantee Scheme wages increased 7% nationally since the previous year, our analysis of wage data shows. According to the scheme's 2023-24 data, average wages that were paid out in 13 states (excluding West Bengal due to stalling funds) were less than the wage rate notified for that year. Further, they were less even than the average wages for farm work in 19 states the previous year, our analysis showed.
Two years earlier, in February 2022, the standing committee report recommended that the government address wage disparity and devise a “mechanism for notifying a unified wage rate across the entire country”.
If MGNREGA is implemented properly it will reduce poverty, increase the floor wage and improve incomes, said Anuradha Talwar, trade unionist with Paschim Banga Khet Majoor Samity, and added that Mahatma Gandhi Rural Employment Guarantee Scheme wages should be Rs 800 taking into account inflation and other factors. “We face criticism on allocations and affordability if we demand that the wages are to be Rs 800,” said Talwar. “It may be unrealistic in terms of the present budget, but it is only such a large significant step that will transform the poverty situation.”
The 2024 standing committee report said that considering agricultural workers and other labourers were getting more wages, the scheme may attract more workers if remuneration was better. It asked the rural development department to take a “considered view on the pertinent issue of suitable increase in the wage rates” and increase them at the earliest.
Chakradhar Buddha, senior researcher, LibTech India, said although Rs 400 (promised by the Congress) is less as wage rate, it can be provided. “The wages alone come to Rs 1.25 lakh crore, and then there is administrative and material expenditure and arrears,” he said. “Total allocation for the programme must increase significantly.”
In addition to low wages, by the end of March 2024, states had a negative balance of Rs 22,563 crore ($2.7 billion), an amount that was more than a quarter of the 2024-25 MGNREGS budget, including pending liabilities for wages, material and administrative expenses to the tune of Rs 20,232 crore. Of this, 93% was for material and 3.5% for wages. On average, 17% of the budget is spent to clear pending liabilities, an analysis of Mahatma Gandhi Rural Employment Guarantee Scheme finances over nine years by PAEG shows.
While it is accurate to say that a significant portion of the dues for 2023-24 are related solely to material payments, “history has shown that a substantial portion of the dues could also be attributed solely to wages”, said Chakradhar. This inconsistency in dues allocation has been a recurring issue with NREGA where sometimes the majority consists of wage dues, while other times it is material dues, he said.
The 2024 standing committee report noted that there are delays in material payment and the rural development department was trying to devise systems to remove or minimise delays. The Committee recommended that the department “spruce up their financial mechanisms” so that beneficiaries and the scheme's works do not suffer.
Wage Payments Routinely Delayed, but Compensation Paid has Reduced
If the workers are not paid their wages within 15 days, the beneficiary is entitled to delay payment at the rate of 0.05% of unpaid wages per day of delay beyond the 16th day of closure of muster roll.
In a decade since 2014-15, the approved amount for delay compensation has never been paid fully. In 2014-15, 93% of the approved amount was paid, the most in the last decade. Further, 82% of the approved compensations were paid in 2021-22, the highest In the Modi government’s second term. In the following two years, only 64% and 25% of the approved amounts were paid.
In its May 2018 judgement, the Supreme Court directed the Union government through the MoRD, in consultation with the states and UTs, to “prepare an urgent time bound mandatory program to make the payment of wages and compensation to the workers”.
Recent technological interventions like the National Mobile Monitoring System (NMMS) app that the Union government made mandatory from January 1, 2023 were creating issues on ground for workers in registering their attendance, which earlier used to be done physically. This was adding to delays, IndiaSpend reported in May 2023.
While the delay compensation may not serve as a significant incentive for workers due to its low amount, it still holds substantial value as a right, said Chakradhar. “The delay in wage payments continues to be the most significant issue in MNREGA, and ensuring prompt and just payment of delay compensation is crucial to establish the rights of the workers and also preventing further discouragement among workers from participating in the programme,” he said
No MGNREGS Funds for Two Years in West Bengal
In addition to technological interventions, in West Bengal, works have stalled because of a deadlock between the state and Union governments for two years now.
Since March 2022, Mahatma Gandhi Rural Employment Guarantee Scheme funds have been stopped after the Union government invoked Section 27 of the Mahatma Gandhi National Rural Employment Guarantee Act, 2005 for “non-compliance of directives of [the] Central Government”, according to a December 2023 Parliament response. It said that despite several communications to West Bengal, the rural development ministry “did not find any noticeable improvement against different indicators of implementation of the scheme”.
In 2020-21, the year which recorded most work following Covid-19 lockdown, West Bengal reported 13 million people demanding work, one-tenth of total demand in India. In 2023-24, since the stalling of funds, 11,817 people demanded work.
The continuing denial of the right to work by the Union government is occurring at a time when the country is going through a “depressing scenario of unemployment, stagnation of wages in real terms, poor working conditions for millions of workers, and extreme inadequacy of job opportunities, especially among the youth and women”, said a February 2024 press statement by NREGA Sangharsh Morcha.
Talwar, who works in West Bengal with the scheme's workers, said that the stoppage of funds was creating distress, was unfair on workers particularly because many women supplement their income through MGNREGS works, and affects the federal system. “... Section 27, which has been used to stop funds, centralises power. This is taxpayers’ money,” she said. “It has been two years and it is unfair on workers and the federal system. The state government has agreed to pay, but it could impact state finances.”
Until December 2023, the Union government owed more than Rs 5,500 crore in dues to the state government. In February 2024, Chief Minister Mamta Banerjee is reported to have said that the state would clear payment of 2.1 million workers. In its 2024 election manifesto, the All India Trinamool Congress announced that all job card holders would receive 100 days of work and a minimum wage of Rs 400.
The programme is still a lifeline like it was during Covid-19, said Talwar. “Covid and stalling of MGNREGA funds in West Bengal has made it clear to me that MNREGA is vital,” she said. “Despite wage delays, low wage rates, almost no delay compensation, people still want MGNREGA work because their situation is so desperate.”
Shreehari Paliath has reported on public policy around labour and employment, agriculture, water, and elections. He received a special mention at the 2019 Red Ink Awards. He has a post-graduate diploma from the Asian College of Journalism, Chennai, and a master's degree in development from Azim Premji University.
This story was first published on IndiaSpend, a data-driven, public-interest journalism non-profit.
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