Centre weighs higher spending on rural job guarantee scheme as floods deepen distress in some states
The current allocation of ₹86,000 crore for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) may be reassessed as spending trends and calamities like floods indicate a potential need for more resources.
New Delhi: The government is reassessing the budget for its flagship rural job guarantee scheme amid worsening distress following widespread floods across Bihar, Uttar Pradesh, Himachal Pradesh and Punjab, two people familiar with the matter told Mint.
The outlay for the scheme under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has been unchanged at ₹86,000 crore for two consecutive fiscal years. The amount may be revised upward as officials examine whether additional funds are needed to meet surging job demand in flood-affected regions where agricultural work has been disrupted.
“Floods have left large stretches of farmland unusable in some states, pushing labourers in some states to seek fallback employment through MGNREGA," one person said, requesting anonymity. “Expenditure trends and ground-level demand for the scheme are being evaluated before deciding if more funds will be required."
The MGNREGA, one of India’s largest social safety nets, guarantees up to 100 days of paid unskilled work to any adult member of a rural household in a year. Demand typically rises when the broader rural economy weakens or non-farm opportunities dry up.
Spending pressures mount
Although the fiscal year 2026 (FY26) and FY25 allocations remained steady at ₹86,000 crore, spending trends suggest this may not be enough. Actual expenditure on the scheme reached ₹1.06 trillion in FY24, well above its original budget of ₹60,000 crore, prompting the government to seek a supplementary grant of ₹14,524 crore mid-year to meet payment obligations.
Data from the rural development ministry show that 20.12 million households sought employment under MGNREGA in April this year. Demand climbed sharply during the pre-monsoon months, peaking at 28.38 million households in May and 27.56 million in June, before tapering to 16.58 million in July, 11.86 million in August, and 11.69 million in September.
In comparison, job demand in FY25 stood at 21.52 million households in April 2024, 27.18 million in May, 26.4 million in June, 18.9 million in July, 16.06 million in August, 16.02 million in September and 16.97 million in October 2024.
Officials said demand could rise in the coming months as flood-hit regions struggle to recover and agricultural activity remains subdued.
“Spending pressures are beginning to build again," the second person said, requesting anonymity. “With farm operations severely disrupted in several states, we could see another wave of rural job demand and the government may have to respond with additional funds if the trend persists."
The Centre typically reviews its accounts in September-October, midway through the fiscal year, to assess whether key welfare schemes require additional funding.
Spokespersons for the finance and rural development ministries did not respond to emailed queries seeking comment on the matter.
Growth holds steady
India’s gross domestic product grew 7.8% in the June quarter (Q1 of FY26), the fastest pace in five quarters, up from 7.4% in the previous three-month period, according to government data released in August.
Gross value added, considered a more stable gauge of underlying economic activity since it excludes volatile tax and subsidy components, expanded 7.6% in the June quarter compared with 6.8% in the preceding period.
At this pace, India remains among the world’s fastest-growing major economies, even as an increasingly uncertain global environment, exacerbated by US president Donald Trump’s recent tariff hikes, poses fresh risks to its export outlook.
topics
