MGNREGS allocations could be increased for FY26

MGNREGS guarantees 100 days of wage employment per year to poor rural households.
MGNREGS guarantees 100 days of wage employment per year to poor rural households.

Summary

  • The average number of people seeking work every month under the scheme rose to a four-month high of 25.73 million in December, according to the latest data from the government.

New Delhi: The national rural job guarantee scheme that gives millions of the poorest Indians employment may see a higher budget allocation in FY26, two people aware of the matter said.

While allocations for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS)—considered a lifeline for the rural poor – are unlikely to be increased during FY25, due to a rain-induced improvement in the rural economy this year, they may be slightly higher in FY26, as compared to FY25. 

This is to factor in any challenges to the rural economy. However, the actual spending could be higher than the allocated amount in FY25.

"The allocations to MGNREGS could be higher in FY26 to provide a safety net against potential rural economic challenges," said the first person mentioned above, who spoke under the condition of anonymity.

"While FY25 benefitted from improved rural consumption, the government may prioritize increased funding for the scheme to ensure continued support for the most vulnerable sections of the population," the person added.

The number of people seeking work every month under the scheme rose to a four-month high of 25.73 million in December, according to the latest data from the government.

This occurred despite a recovery in rural consumption during the first two-quarters of the ongoing fiscal, driven by improved rainfall and the government's reliance on increased rural spending to try and offset declining urban consumption.

Also read: Parliamentary panel calls for revising wage rates of MGNREGS workers

"While the rise in MGNREGS job demand during December could be partially attributed to seasonal factors, adequate funding will ensure the addressing of challenges faced by the rural workforce," said the second person.

The parliamentary standing committee on rural development and panchayati raj urged the government to consider increasing wage rates under the MGNREGS in December.

In a report presented in the Lok Sabha, the panel called on the rural development ministry to engage with all stakeholders and reconsider the wage rates, which have not kept pace with inflation.

A rise in allocations will be needed to accommodate the suggestions of the panel. 

Allocation unchanged

On 23 September Mint reported that the scheme is unlikely to see a higher allocation in FY25, as compared with the previous fiscal, with the government hoping for an improvement in the rural economy on the back of better rains.

Initial estimates for MGNREGS stood at  ₹60,000 crore for FY24 and  ₹86,000 crore for FY25.

Also read: MGNREGS funding likely to remain unchanged in FY26 amid rural recovery

However, spending overshot estimates in FY24, indicating high demand for jobs under the scheme, which can be attributed to uneven rainfall impacting rural areas. While the revised FY24 estimate for MGNREGS stood at  ₹86,000 crore, the actual spending touched  ₹1.06 trillion, according to the official data.

Meanwhile, the Union government is banking on sustained capital expenditure and a recovery in rural demand to drive economic growth in the ongoing fiscal after economic growth slowed to 5.4% in the September quarter, the slowest in nearly two years.

The finance ministry expects the economy to grow at 6.5% in FY25, down from 8.2% in FY24.

“The funds for MGNREGS have already been exhausted, and we are still three months away from the end of the current fiscal year. To ensure the scheme's effectiveness, we expect the government to at least double its current budget allocation. Even if all the allocated funds are not spent, they can be carried forward," said Nikhil Dey, founding member of Mazdoor Kisan Shakti Sangathan (MKSS), a Rajasthan-based non-government organisation that campaigns for the rights of workers and farmers. 

"However, insufficient funding directly translates to workers being denied much-needed employment opportunities. This is the grim reality today—workers are being actively discouraged from seeking work under the scheme due to the lack of funds. We strongly urge the government to increase funding to revitalize and enhance the scheme’s impact," Dey added.

Spokespersons for the ministries of finance and rural development didn't respond to emailed queries.

Wage employment guarantee

MGNREGS guarantees 100 days of wage employment per year to poor rural households.

Demand for these jobs typically rises during periods of economic distress, serving as a barometer of rural economic health.

Days under the scheme usually increase when the overall rural economy is weak and people are out of work.

Also read: The dichotomies that define India’s rural jobs promise

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