Once Derided by Modi, Boost to MGNREGS Shows it's One of Rural India's Few Safety Nets

The increased allocation is welcome, but experts say the government should also work to solve pending liability issues and other techno-bureaucratic problems that hold back its effectiveness.

New Delhi: On Sunday, while announcing the fifth and final tranche of the Centre’s COVID-19 economic relief package, finance minister Nirmala Sitharaman announced that the government will be allocating an additional Rs 40,000 crore under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).

“It will help generate nearly 300 crore person days in total addressing need for more work including returning migrant workers in the monsoon season as well,” Sitharaman said.

Now, the scheme will have an allocation of a little over Rs 1 lakh crore for 2020-21 – an increase of over 60% compared to the Rs 61,500 crore budgeted for FY’21 earlier this year.

While this boost is welcome, it must be seen in the light of two different contexts. Firstly, the Rs 61,500 crore budgeted this year was a clear underestimate – in FY’20, actual spending for the rural work programme was Rs 71,000 crore. Secondly, pending liabilities continue to plague the scheme. Even from this higher allocation of Rs 1,01,500 crore, almost  Rs 11,000 crore will  have to be be used to clear dues of last year.

Origin story

The MGNREGS was designed and enacted as law by the United Progressive Alliance (UPA) in 2005. The idea of the scheme is to provide livelihood security in rural areas and guarantees 100 days of employment to a household per year at a predetermined wage.

The scheme has been criticised by the Bhartiya Janata Party and Prime Minister Narendra Modi in the past as being a failure in addressing poverty.

“My political acumen tells me that MNREGA should not be shut down. I will not make such a mistake because MNREGA is a living monument of your failures,” Modi had said in 2015, a year after taking over as prime minister.

Since then, however, the Modi-led government has relied heavily on the MGNREGS to reach the most vulnerable in rural India. After consecutive droughts and low farm prices, the government decided to increase allocation under MGNREGS. In fact in 2015-16, few months after Modi’s criticism, his government even increased allocation, mid-year, under the scheme faced by a drought.

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“Who was telling lies, and who was misleading the country? It is the schemes envisaged by the Congress on which the country is functioning today,” Congress spokesperson Ashok Kumar said on Sunday.

Under Modi, the budgetary allocation under the scheme has nearly doubled (without taking into account today’s increase to Rs 1 lakh crore) from Rs 33,000 crore in 2014 to Rs 61,500 crore in 2020-21. In fact, if the revised estimate of 2020-21 is considered – which was Rs 71,000 crore – it has already doubled and almost tripled now with the allocation increase to over Rs 1 lakh crore. 

Politician and social scientist Yogendra Yadav says that if the scheme had not existed, the government would have had to invent something like it to deal with the current crisis.

“The truth is that we have only three schemes which can actually reach the most vulnerable – MGNREGA, the public distribution system and the Integrated Child Development Services. And all this talk about scrapping MGNREGS was just rhetoric. Even the BJP’s local units knew that the scheme is essential,” Yadav said. 

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The scheme, which has been described as the ‘employer of last resort’, assumed particular significance in the last few years as demonetisation led to a decline in wages. In fact, last year the leaked data on household consumption expenditure (2017-18) showed that there had been a 9% decline in household expenditure in rural India between 2011-12 and 2017-18. Expenditure on food among the poorest had declined by almost 10%. 

Given that rural India was already dealing with a crisis, Sudha Narayanan, associate professor at the Indira Gandhi Institute of Development Research, wrote in March – before the lockdown was imposed – that MGNREGS is a “potentially effective, even essential, instrument to address the current economic emergency in rural areas, even if it might be insufficient as a stand-alone intervention.” 

Between then and now, the rural economy has only suffered. According to the Centre for Monitoring Indian Economy (CMIE), the unemployment rate in rural India has jumped from 7% in March to almost 23% now. About 84% of households surveyed by the CMIE reported a decline in income and only 54% of rural households said that they had enough provisions to last a week. As many as 93% of households earning between Rs 3,800 and Rs 5,914 per month reported an income loss in rural India, while 83% of those earning less than Rs 3,800 reported having lost all or part of their income due to the lockdown. 

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In this scenario MGNREGS assumes importance as a provider of employment in rural India. However, so far, in the months of April and May (till May 16) this year the scheme has only provided employment to 42% of the number it provided employment to in the months of April and May last year. 

Only about 17 crore person days have been generated this year compared to the projected cumulative person days for April and May. 

So far, in the month of May, the scheme has provided work to only 30% of the households who have demanded work. While 2.23 crore households have demanded work under the scheme, 66 lakh (as on May 16) have been provided work. 

In large part, this decline is due to the lockdown where states and districts had suspended MGNREGS works at least for part of the duration of the lockdown. Now, as MGNREGS activity picks up, it is important for the government to ease some of the techno-bureaucratic hurdles. 

For instance, Reetika Khera, who is professor at IIM Ahmedabad, suggests that the process of registering for work should be done away with for now. “They have to stop asking to people to demand work. Anyone who shows up for work, should be provided work. That will make a big difference,” she had told The Wire earlier in May. 

Khera had also suggested that the payment system should revert to cash and part payment should be made in the form of food transfers.