MGNREGA allocation in 2024 likely to see a rise as demand stays high

Interim Budget: MGNREGA is a demand driven employment generating social protection scheme, which was passed by the Parliament in August 2005 and was implemented in February 2006.

With the economic growth over the last 10 years, boost to upskilling and self-employment, some social security in the form of free food grains and Ayushman Bharat schemes, many question if the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is still relevant. However, the central government’s rural employment guarantee scheme does work as a safety net for the most vulnerable sections during the most crucial times such as COVID-19 and is hailed as a powerful instrument for inclusive growth in the rural sector.

Thus, whether with a more reformed approach to plug leakages or a targeted approach with an Aadhaar-based payment system, the upcoming Union Budget is likely to allocate a substantial amount under the MGNREGA scheme for 2024-25.

The law governing the flagship rural job programme provides guaranteed wage employment of 100 days in a financial year to a rural household whose adult members are willing to take up manual work. MGNREGA is a demand driven employment generating social protection scheme, which was passed by the Parliament in August 2005 and was implemented in February 2006 in the country’s poorest districts. Later, the scheme was extended to pan-India in 2008.

MGNREGA was initiated as a safety measure to provide jobs between sowing and harvesting when there is a lean period.

Budget allocations

From 2014-15 when it was at Rs 34,000 crore, MGNREGA allocation rose consistently to Rs 34,699 crore in 2015-16, Rs 38,500 crore in 2016-17, Rs 48,000 crore in 2017-18, Rs 55,000 crore in 2018-19 and Rs 60,000 crore in 2019-20.

MGNREGA Budget Allocation

The Budget allocation for MGNREGA was reduced by 13 percent to Rs 61,500 crore in 2020-21 as compared to the actual expenditure of Rs 71,002 crore in 2019-20. The demand under the scheme rose drastically during the COVID-19 pandemic. Recognising the scheme as a potential source of employment during this crisis, its allocation was increased to Rs 1.11 lakh crore under the Atmanirbhar Bharat stimulus package.

From the revised estimate of Budget allocation at Rs 89,400 crore towards MGNREGA in 2022-23, it saw a steep cut of 33 percent to Rs 60,000 crore for 2023-24.

The demand for MGNREGA has surged in the current fiscal according to government data, owing to monsoon uncertainty also signaling a crunch in the urban jobs.

Under the scheme, the central government provides 100 percent funding for wages for manual work.

Top 5 MGNREGA hits 

1. Livelihood security: The scheme leads to an increase in rural consumption, enhances food security and nutrition, reduces poverty and has a positive impact on health and education.
2. MGNREGA hitsWomen empowerment: Helps marginalised sections. Women's participation under MGNREGA has seen a consistent increase than men. From 2015-16 to 2021-22 the women's participation in MGNREGA every year has stood at 53 percent. It has now gone up to 57.8 percent in 2022-23.
3. Positive impact on agricultural wages: The employment opportunities available under MGNREGA have kept the wages in rural areas relatively high.
4. Reduction in distress migration: Reliance on money lenders has declined. MGNREGA has reduced migration by providing work closer to home with decent working conditions.
5. Financial Inclusion: Despite some leakages, there is a positive impact on rural household income.

1. Bogus demands: There are irregularities under MNREGA, for which complaints have been received. Some states are sending bogus demands, a top finance ministry source had alleged. The Aadhaar-based payment system has been in existence since 2016 but only in January 2023, it was made mandatory for receiving payment under the MGNREGA. The focus should be on plugging leaks in the rural job scheme to ensure that the benefits are only provided to deserving individuals.
2. MGNREGA missesReforms in MGNREGA: The nine-member panel headed by former rural development secretary Amarjeet Sinha was set up in October 2022 and tasked with making the rural job guarantee scheme more effective. According to media reports, the committee has suggested an overhaul of the scheme by linking employment generation with asset creation. It also suggested increasing the budgetary allocation for the scheme and reassessment of wages every five years. But the finance ministry is not in favour of revamping the MGNREGA by increasing spending as recommended by the government appointed committee.
3. Gap between allocation and expenditure: Budgeted funds under MGNREGA fail to keep up with expenditure incurred. They get exhausted before the end of the financial year. There is a gap between employment demand and employment provided.
4. Lower days of employment: The MGNREGA guarantees 100 days of employment, but the actual average has been lower in most of the states.

“The Budget allocation for MGNREGA has seen an increase over the years, reflecting a commitment to rural employment generation. MGNREGA has contributed to asset creation in rural areas, including the construction of infrastructure like roads, water conservation structures, and public assets. However, just like any other schemes, there have been opportunities for improvements specifically with reference to timely wage payments, improving transparency and improvement in the management of the schemes,” Ramendra Verma, Partner, Grant Thornton Bharat told Moneycontrol.

There are a few suggestions which can make MGNREGA relevant in the future as well. The government can consider incorporating skill development programs within MGNREGA that can enhance the employability of workers beyond the program's duration. Also, MGNREGA can explore diversification in the types of work offered, ensuring a more sustainable and varied source of employment like forestation, tourism related works, women empowerment, climate resilient projects, etc. Collaborative efforts involving central and state governments, local bodies, and NGOs can help address implementation challenges and ensure effective programme delivery, he said.

“While MGNREGA has contributed significantly to rural employment and asset creation, addressing challenges related to payment delays, skill development, and program implementation is crucial. A forward-looking approach involving technological innovation, skill enhancement, and a commitment to transparency can help MGNREGA remain a vital tool for rural development in India,” Verma added.