Spending on rural job guarantee scheme MGNREGS overshoots FY24 estimates by 23%
Summary
Compared to the ₹1.01 trillion spent on rural jobs in FY23, the increase is only about ₹5,000 crore, but a big part in the subdued increase was played by higher job opportunities in construction and infrastructure, and election-related work.
New Delhi: Spending under the government's flagship rural job guarantee scheme in FY24 has overshot its revised budget estimates by about ₹20,000 crore, or 23%, according to data from the rural development ministry released recently.
The revised FY24 estimate for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) was ₹86,000 crore, and the actual spending has come to ₹1.06 trillion.
However, compared to the ₹1.01 trillion spent on rural jobs in FY23, the increase is only about ₹5,000 crore. And when adjusted for rising cost of materials, it may not signify much change, but the subdued rise had more to do with job opportunities in other areas than a lack of demand.
The MGNREGS provides a legal guarantee of 100 days of employment in a financial year to adult members of a rural household who demand employment and are willing to do unskilled manual work in rural areas.
When contacted, the government's chief economic advisor Anantha Nageswaran didn't provide comments. The secretaries of the rural development ministry and department of economic affairs didn't respond to emailed queries.
Why the increase
The moderate increase in MGNREGS expenditure in FY24 comes in the backdrop of a fall in agriculture growth due to erratic monsoons, which according to the government's second advanced estimates is likely to have slowed down to 0.7% in FY24, from 4.7% in FY23.
Normally, lower conditions like erratic monsoons lead to fall in agricultural jobs in rural areas and, consequently, higher MGNREGS job demand.
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However, last fiscal, a boom in construction and infrastructure sectors and election-related work could have kept the demand for guaranteed rural jobs from seeing a major spike.
The construction sector is projected to grow at a robust 10.7% in FY24, up from 9.4% in the previous year, according to the second advanced estimate of the government.
What experts said
Experts said that the large MGNREGS expenditure shows that there is distress in the rural economy.
"The rural distress during FY24 is due to bad monsoon, and not bad demand, which was the case in the years before when the economy was lingering from post-covid effects," said N.R. Bhanumurthy, vice-chancellor at Dr. B.R. Ambedkar School of Economics University, Bengaluru.
He added that sectors like construction and infrastructure development, a big focus of the government, have increased business activities in rural areas, especially in convergence with other rural development schemes like increase in rural housing, etc.
Of rising wages and employment days
Data from the rural development ministry shows that average wages have seen a gradual rise since FY21, and so have days of employment.
During FY24, the average days of employment provided per household stood at 52.09 days, up from 47.83 days in FY23, 50.07 days in FY22, and 51.53 in FY21.
The average wage per person per day stood at ₹237.59 during FY24, up from ₹217.9 in FY23, ₹208.84 in FY22, and ₹200.71 in FY21.
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Interestingly, the expenditure under the MGNREGS has been historically higher than the budgeted expenditure, especially since the covid-19 pandemic.
During FY21, the budgeted allocation was ₹61,500 crore, but the actual expenditure was ₹1.1 trillion, while the actual expenditure under the scheme stood at ₹98,468 crore in FY22 against the budgeted ₹73,000 crore.
During FY23, the actual expenditure under the scheme stood at ₹1.01 trillion, against the budgeted estimates of ₹73,000 crore.
The budget estimates for MGNREGS stand at ₹60,000 crore and ₹86,000 crore in FY24 and FY25, respectively.
"The government knows that for such demand-driven schemes, provisions will have to be made of whatever is required. And there is no particular utility in providing sufficient amounts right in the beginning," said former chief statistician Pronab Sen.
"Then as demand starts coming in, the government sort of gets more money through supplementary demand for grants, and you can provide for that by looking at expenditure patterns in other heads of expenditure. This is standard," he added.
According to the expenditure profile of the budget, the centre has released ₹90,806 crore towards MGNREGS expenditure in FY23, ₹98,468 crore in FY22, ₹111,170 crore in FY21, and ₹71,687 crore in FY20.
