Need to understand what is happening on ground on MNREGA: FM Nirmala Sitharaman

New Delhi: The patterns of job demand in rural areas under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) show significant variations, highlighting a need for a deeper understanding of the scheme's implementation to effectively monitor rural activities, finance minister Nirmala Sitharaman said in an interview with Mint.

“Demand for MGNREGA is not increasing everywhere. At the same time, it will increase because there are always seasons when rural area activities will be at a low and names get added…But equally, we'll also have to note that in some states, it has been targeted as one of the resources coming from the Centre. Nevertheless, CAG has pointed out that if you understand the rough estimate of the amount which is likely to come to your state, demand matches or exceeds that. What does that say?” Sitharaman said. 

Sitharaman emphasized the importance of grasping the realities of MGNREGA's operations on the ground, stating, “We need to understand what is happening on the ground on MGNREGA. We will never deny even one penny. If it is required, yes, you will get it. But who explains the malpractice? Who explains to you that people who don't even exist are getting onto the job card?”

The remarks follow a recent announcement by the rural development ministry, noting that in fiscal year 2022-23, more than 5.48 crore job cards were purged from the system due to fraudulent activities, errors, among other issues, marking a substantial rise compared to the previous year. This move underscores the continuous commitment to rectifying and preventing malpractices within the scheme.

Additionally, the Comptroller and Auditor General of India's in its latest report highlighted regions where state governments need course corrections. 

The central government halted MGNREGA funding to West Bengal in March 2022, citing corruption issues. The state has claimed it is owed ₹6,900 crore for the scheme. 

MGNREGA operates as a demand-driven wage employment initiative, with the central government disbursing funds based on various criteria, including work demand and performance metrics, to ensure the scheme's responsiveness to the need for employment on the ground.

“So, we need to be clear if we're using these as indicators to measure economic activity. “You can't equally tell me that MGNREGA demand is going up, at the same time tell me that rural demand is in some cases increasing, in some cases not increasing. Do you measure this? Do you measure that?”

“If you're looking at the corollary of cause and effect, it's not always working out. Then how do agricultural equipment manufacturers' books show that there's demand? My business is flourishing because there's demand there. Business would not flourish for an agricultural equipment manufacturer if the agricultural activity had come down to its lowest. So, if fast-moving consumer durable goods are one indicator of rural demand, I want to know if it is an indicator or not,” Sitharaman said.

Rural income stress has reportedly cast its shadow on demand for fast-moving consumer goods. According to large FMCG (fast-moving consumer goods) companies, rural consumption has failed to recover from the crisis triggered by the pandemic, and its effects continue to be felt. 

In November, however, market researcher NielsenIQ had said that rural markets were showing signs of recovery, with consumption picking up during the quarter from the year-ago period. 

In volume terms, FMCG sales gained 8.6% in the second quarter after dropping 0.6% in the year-ago period, NielsenIQ said recently. Rural markets reported a 6.4% jump in quarterly volumes after reporting a 3.6% decline in the year earlier. Fast-moving consumer goods volumes in urban markets increased 10.2% from a year earlier.

“I think we are at a wonderful stage of a big shift in how agriculture, the rural economy, operates with the help of their people, but with machines coming from urban areas,” the finance minister said. “Modernization is happening. It requires more people to even mechanize the place. Mechanization's first assumption would be coming from the socialist era. All of us would think it will throw away workers. Now the workers are there. They are doing things on the farm with machines. So, mechanization does not result in throwing away, which partly explains why there are more people now reporting to agriculture.”

Rural demand refers to the consumption of goods and services by residents living in rural areas or villages. It encompasses the buying behaviour and spending patterns of people in rural regions, including their purchases of essential and non-essential items.

As such, the interim budget for FY25 saw an increase in MGNREGA's budgetary allocation to ₹86,000 crore, up from the previous year's initial allocation of 60,000 crore, later revised to ₹80,000 crore, underscoring the government's commitment to supporting rural employment and addressing the evolving needs of India's rural economy.