MC EXCLUSIVE Budget FY27 may peg MGNREGA outlay at record high, FY26 estimate likely to remain unchanged

In FY26, work demanded by households have stayed lower year-on-year every month since July.

The government is unlikely to allot additional funds for MGNREGA for the remaining fiscal, as an above-normal monsoon has kept the demand for work under the rural employment programme low since July, officials told Moneycontrol. The allocation, however, will likely be higher next year.

A sum of Rs 86,000 crore was earmarked for the Mahatma Gandhi National Rural Employment Guarantee Act scheme in the budget for FY26 and the Centre is unlikely to spend more.

For FY27, however, the government may allocate more than Rs 90,000 crore for MGNREGA, the highest-ever budget estimate (BE), the officials said.

"This is based on an early analysis of the work being demanded under MGNREGS. Household construction (under Pradhan Mantri Awas Yojana-Gramin) and building projects for water conservation and water harvesting are a priority for the government, which would require additional expenditure under the job-guarantee scheme," one of the officials cited above said.

In FY25, Rs 85,640 crore was spent on the scheme that guarantees 100 days of employment in a financial year to every rural household whose adult members do unskilled manual work.

In the current fiscal year, work demand has remained low since July. In October, 8.9 million households demanded work, until October 22, against 17 million in 2024 (for the full month).

In September 11.7 million and in August 11.9 million households sought work, down from 16 million and 16.1 million, respectively, in the year-ago period.

In July, 16.6 million people looked for work, compared to 18.9 million last year.

"There was a better monsoon this year. This in itself is a strong indicator that demand for MGNREGA jobs will come down. The scheme is an automatic stabiliser. When the economy is doing well, you don’t need MGNREGA jobs… so it’s a good sign," said NR Bhanumurthy, director of Madras School of Economics.

In June-September — the period of south-west monsoon — India recorded 8 percent surplus showers. According to the India Meteorological Department (IMD), the north-east monsoon (October-December) is also likely to be 112 percent of the long-period average (LPA). It brings rains to Tamil Nadu, Puducherry, Andhra Pradesh, Kerala and the southern parts of Karnataka.

The Centre’s expenditure is set to rise in the next fiscal, with funds prioritised for finishing houses under the Pradhan Mantri Awas Yojana-Gramin, water-related projects and settling wage liabilities.

A Parliament Standing Committee report, released in August, said as of February 15, the pending liabilities stood at Rs 12,219 crore in wages and Rs 11,227 crore in material components.

"This accounts for 27.26 percent of the current budget (of Rs 86,000 crore), meaning that more than one-fourth of the allocated funds will be used to clear previous years' dues. Consequently, the actual working budget for the current financial year is reduced to Rs 62,553.73 crore, significantly limiting the scheme’s capacity to function effectively and meet its primary objective of preventing rural distress and ensuring livelihood security," the report said.

The Ministry of Rural Development (MoRD), however, said in the report that funds were being released to states/UTs continuously and were a demand-driven process. The Centre remains fully committed to ensuring the timely availability of funds, it said.

The ministry is looking to complete 3.84 crore houses under PMAY-G, which was to be done by April 2025. As many as 2.81 crore houses had been built by August.

"So, that completion would require more manpower under MGNREGA," a second official said. The ministry has set a target of building 4.12 crore houses by FY29 under the scheme to provide assistance to rural households for constructing a permanent house.

Calling for a higher allocation, the Parliament panel report said allocation of funds had remained static at Rs 86,000 crore since the Revised Estimates for 2023-24.