In an interview with Mint in February, Jairam Ramesh, minister for rural development, was asked whether the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) would be rolled back in the upcoming budget as part of a plan to reduce the fiscal deficit. “How can we roll back a demand-driven programme?” Ramesh had replied.
But that is precisely what seems to have happened. On Friday, finance minister Pranab Mukherjee announced a budget that cut spending on this controversial scheme that legally guarantees every one adult in every rural family 100 days of work a year. The outlay for MGNREGS was reduced by Rs 7,000 crore. In contrast, the government hiked allocations to other social programmes such as the Sarva Shiksha Abhiyan.
One popular interpretation of the cutback is that the flagship scheme of the United Progressive Alliance (UPA) has lost out after criticism about corruption as well as fears that it has led to a labour shortage in the rural areas, especially at harvest time. That the import duties on several types of farm equipment have been slashed is perhaps also an indication that the government wants to encourage farm mechanization in response to the labour shortages.
But the point Ramesh made is still a valid one. The MGNREGS mandates that the government has to provide work to anybody who demands it. So the government will have to spend more than budgeted in case the demand for work increases in the course of this year. There is no escape clause.
Two other issues are also important. One, many states send inflated estimates for job-related spending that they do not later use. Two states—Jharkhand and West Bengal—have been specifically mentioned in reports about this problem. Two, the demand for work has actually declined in rural India thanks to good harvests. If that is indeed the case, then more research is needed to understand whether MGNREGS has become a counter-cyclical automatic stabilizer in the rural economy, with spending and rural output moving in opposite directions. For either or both of these two reasons, MGNREGS spending was just 62.74% of total funds available this year till February, or at least 10 percentage points lower than in previous years.
There are many flaws in MGNREGS, as Mint has often argued. In fact, Ramesh even reminded us in February: “I know your newspaper has been at the forefront of this campaign to paint MGNREGA in such a light, saying that this whole thing is a digging exercise and a ditch-filling exercise. This is a completely bogus argument.”
Yet, it is still too early to speculate about its waning popularity in the UPA government.
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