Demand for work under rural jobs scheme rising amid slowing economic growth

According to the latest government data, the number of people who demanded work under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) reached 26.6 million in February—the second-highest monthly figure for the ongoing fiscal year—after peaking at 27.1 million in January.

Interestingly, this surge in demand for rural jobs comes after signs of rural consumption recovery during the first two quarters of the the current financial year, suggesting that demand momentum could be weakening and vulnerabilities building up in the rural regions.

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MGNREGA provides at least 100 days of guaranteed wage employment to every adult member of a rural household who demands it, in a financial year. The work offered under MGNREGA is unskilled manual labour.

These workdays typically rise when the rural economy weakens and job opportunities shrink.

According to data from the ministry of rural development, the number of people demanding work under the scheme stood at 26.56 million in February, 27.11 million in January, 25.77 million in December, 21.56 million in November, 19.89 million in October and 18.93 million in September, indicating a steady rise.

Spokespersons of the ministry of finance and ministry of rural development didn't respond to Mint's emailed queries.

During the first half of March, 16.77 million people had already demanded work under the scheme.

Seasonal factors

Some experts link the recent rise in MGNREGA job demand to seasonal factors, as people typically rely on the scheme when farm and non-farm activities decline.

Additionally, increased government spending after a slowdown in the first two quarters of the FY25 due to the elections could have also contributed to the surge.

"One key reason could be its convergence with other schemes like the Pradhan Mantri Awas Yojana-Gramin (PMAY-G). If activities under PMAY-G have increased, especially post-elections, it may have led to a complementary rise in MGNREGA demand. The program has an in-built convergence with MGNREGA, particularly by providing employment opportunities to women in beneficiary households, which could be contributing to the surge," said Bhanumurthy N.R., director at the Madras School of Economics.

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"I believe some government schemes that were delayed in the first two quarters were implemented on a larger scale in the latter half of the fiscal year. The rural development ministry’s budget hikes through supplementary demands may have further pushed implementation, particularly in rural infrastructure and capital expenditure," he added.

Slowing growth

To be sure, India's economic growth has slowed in the past few quarters due to both internal and external factors.

India’s economic growth showed signs of a revival in the December quarter, rebounding from a near two-year low in September. Yet, at 6.2%, GDP growth was the slowest since Q4FY23—excluding the previous quarter (Q2), which was revised upwards to 5.6%, from 5.4% estimated earlier.

This leaves significant ground to cover in the final quarter. The economy needs to expand by as much as 7.6% in the January-March quarter to meet the National Statistical Office’s revised full-year growth target of 6.5%.

Even if achieved, FY25’s GDP growth would be significantly lower than last fiscal’s revised pace of 9.2%.

Meanwhile, India's manufacturing growth has been weak in recent months.

India’s manufacturing growth fell in February, as sales and output growth retreated to a 14-month low, according to the HSBC India Manufacturing Purchasing Managers' Index (PMI) survey, compiled by S&P Global.

It declined to 56.3 in February from 57.7 in January, following readings of 56.4 in December and 56.5 in November.

A PMI above 50 signals expansion, while a reading below 50 indicates contraction. The February figure was derived from responses from 400 manufacturers.

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Automotive sales also declined as much as 7% year-on-year in February to 1,899,196 units, hurt by an over 6% fall in two-wheeler purchases to 1,353,280 units, according to Federation of Automobile Dealers Association (FADA) data.

According to a recent SBI Caps report, economic growth in the next 15 months is likely to be driven by a combination of the instant multiplier of revenue expenditure and the delayed impact of yesteryear’s capex acting in resonance.

"Rural consumption will likely remain strong due to favourable monsoons boosting kharif output, promising rabi sowing, and rural welfare schemes," it added.

Interestingly, the Economic Times, earlier this month, reported that the ministry of finance is considering allocating additional funds for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) in FY26, exceeding the revised estimate of ₹86,000 crore, to meet higher-than-anticipated job demand.

Expenditure under MGNREGS has already surpassed 106% of the allocated budget, with ₹82,963 crore disbursed out of the approved ₹86,000 crore.

To be sure, the rural development ministry has requested additional funds in the second batch of supplementary demands for grants for FY25.

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