MNREGS registrations spike, underscoring rural distress

The Mahatma Gandhi National Rural Employment Guarantee Act, 2005, guarantees 100 days of employment in a fiscal to adults in rural households willing to undertake unskilled labour. This is based on the principles of the Keynesian theory that during a downturn, governments can help generate employment and push demand by putting money in people’s hands. The scheme, which aims to generate employment and build infrastructure, ensures that productive economic activities are undertaken. Over the years, governments have interwoven the scheme with technology and increased it’s efficiency.

How does the scheme benefit the economy?

The Indian economy is known to be domestic consumption-led: 80% of the gross domestic product relies upon the domestic market. With nearly 65% of people living in rural areas, increased and continuous demand among the rural population has boosted the economy in times of crisis. During the 2008-09 sub-prime crisis, the economy was insulated from the global financial crisis due to the rural purchasing power brought by the Mahatma Gandhi National Rural Employment Guarantee Scheme. Recovery from the first wave of the pandemic was faster than expected mainly due to a resilient rural economy.

What is the trend in demand for jobs under MGNREGA?

In view of the recent lockdowns, many rating agencies have revised Indian GDP forecasts. Nomura, for instance, rejigged the GDP for FY22 to 11.5% from 12.4%. The first wave saw a spike in demand for jobs in MGNREGS due to reverse migration, touching record highs in May, June 2020. The number of registrations has doubled from the year-ago period in second wave.

What is the economic significance of this?

A rising trend in demand for rural employment is an indicator of proportionate labour shortage in industrial units, both in organized and small-scale sectors. States are working to minimize curbs to ensure continued activity. But the purpose may get defeated if they are not able to retain migrant labourers whose role is crucial for the economy. On the other hand, it is also an opportunity for a long-term developmental strategy by upskilling migrants and facilitating intrastate employment, especially in UP, Bihar and West Bengal.

And how should the society respond?

MGNREGS should continue only as a buffer. The need of the hour is for other stakeholders—especially manufacturing units—to build infrastructure that takes care of migrants during crises. Employers may expand their HR horizon by keeping migrant labourers gainfully employed. This may require housing, healthcare facilities and keeping their kitchens working. The Centre may devise similar job opportunities for the urban poor, thus minimizing reverse migration.

Jagadish Shettigar and Pooja Misra are faculty members at BIMTECH.